2: Define outcomes & needs
Purpose
The purpose of this step is to clearly define both organizational and customer needs, establish desired outcomes, and determine whether outsourcing or insourcing logistics activities can best meet these needs. By setting specific goals and understanding the desired future state, your organization can evaluate if outsourcing will help achieve these outcomes more effectively than insourcing, or vice versa. This process is critical in deciding where the organization wants to be in the future and assessing the capabilities of the market to meet those needs better than internal resources.
Key activities
The key activities for this step include:
Define outcomes: Establish specific, measurable outcomes that logistics outsourcing or insourcing should achieve
Identify organizational needs: Assess both current and future logistics needs, focusing on core competencies, customer service, and risk management
Determine performance requirements: Establish performance metrics and standards that align with the organizational goals
Assess technology & innovation needs: Identify technology solutions and innovative practices to enhance logistics operations
Engage with stakeholders: Gather input from key stakeholders to ensure alignment with organizational priorities
See detailed activity descriptions at the bottom of this page.
Key output
By completing Step 2, your organization will have clearly defined logistics outcomes and a thorough understanding of current and future needs. This clarity ensures that logistics outsourcing or insourcing aligns with your strategic goals and enhances operational efficiency. Additionally, by engaging stakeholders and leveraging technology and data, you can make informed decisions that support continuous improvement and long-term success in your logistics operations.
Supporting resources
Detailed activity descriptions
Define outcomes
Start by defining the specific outcomes you want to achieve through logistics outsourcing or insourcing. These outcomes should be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) to provide clear direction and accountability. For example, you might aim to reduce the distribution time to rural health clinics by 30% or improve inventory accuracy by 20% within the first year. Clearly defined outcomes help align logistics activities with both organizational and customer objectives, ensuring that efforts contribute to the broader goals of the organization and meet customer expectations.
Identify organizational needs
Assess your organization’s current and future logistics needs to determine which activities are best suited for outsourcing or insourcing. Focus on identifying the following needs:
Core competencies: Identify areas where the organization excels and should retain control. For example, if your expertise is in providing health services, outsourcing logistics can free up resources that would otherwise detract from core functions
Improved customer service: Enhance reliability and information accuracy, such as upgrading track-and-trace systems to provide precise delivery timelines to clients
Distribution channel segmentation: Segment your network by customer characteristics, geographic locations, or product types to improve logistics performance tailored to specific needs
Improve logistics performance: Focus on improving efficiency and cost-effectiveness across your logistics operations, from warehousing to last-mile delivery. For example, improving the distribution in remote areas to expedite emergency orders
Optimize logistics spend: Identify opportunities to reduce costs without sacrificing service quality. This may include analyzing total cost-to-serve or minimizing unnecessary expenditures
Reduce asset capital: Evaluate whether outsourcing can reduce capital investments in logistics assets, such as transportation fleets or warehousing infrastructure
Reduce risks: Assess how outsourcing can mitigate risks in logistics operations, especially when handling sensitive health products like vaccines or lab samples
Improve visibility: Increasing visibility into logistics operations can enhance monitoring and real-time adjustments, enabling proactive decision-making during disruptions or service failures
Enhance flexibility: Focus on improving your ability to adapt to changes. This could involve scaling up logistics operations during a sudden increase in demand for critical health products
Build resilience: Ensure that your logistics operations can handle unexpected disruptions, such as outbreaks affecting the movement of lab samples
Embrace innovation & new technology: Explore how Internet of Things (IoT) devices or predictive analytics can improve logistics operations and decision-making processes
Acquire additional expertise: If your team lacks the expertise for advanced logistics management, outsourcing can fill these gaps by bringing in specialized knowledge
Determine performance requirements
Utilize the performance metrics evaluated in the previous step (or expand / establish them) and set targets that align with your desired outcomes and organizational goals. These metrics should include Key Performance Indicators (KPIs) and other operational metrics, and focus on the broad spectrum of logistics performance, including service performance (e.g., delivery timelines, on-time, in-full targets), product quality (e.g., product loss targets), asset utilization (e.g., inventory turnover, inventory accuracy targets), and cost. Performance requirements must be clear to ensure continuous improvement and the ability to hold providers accountable through objective data
Assess technology & innovation needs
Evaluate the role of technology in enhancing logistics operations. Consider solutions like warehouse management systems (WMS), transportation management systems (TMS), and IoT devices to support real-time tracking of shipments and inventory. Identify opportunities to integrate innovative practices, such as predictive analytics to forecast demand and optimize transportation routes
Engage with Stakeholders
Engage with key stakeholders, including internal teams and external partners, to gather and validate insights and ensure alignment with organizational priorities. Conduct stakeholder meetings and workshops to discuss logistics needs, expectations, and potential challenges. Document stakeholder feedback and use it to refine your logistics strategy, ensuring that all perspectives are incorporated and that your approach aligns with both organizational goals and customer expectations