To own or not to own? Supply chain model changes bring new players to the forefront.

March 3, 2021

5 Min Read
Depiction of a supply chain

By Michal Staněk


Michal Staněk

Companies such as Apple and Tesla have popularised the idea of owning every aspect of their supply chain. This “full-stack” approach has become the ideal for many companies who strive for complete control of their entire product. However, Apple and Tesla both have one major downside in common: massively expensive products that price them out of the reach of many people.

It begs the question, is owning every single aspect of your company’s supply chain necessary for exerting maximum control over your product? Is there any other way to achieve outstanding levels of quality control, while retaining some degree of agility and cost-effectiveness for clients?

It turns out there is. As a matter of fact, not owning the entire supply chain also brings numerous benefits to companies and their clients. In the information and communications technology (ICT) service provision environment, a shift away from full-stack models is revolutionising the industry and catapulting new players to the forefront.

You Don’t Have to Own It to Manage It

Many companies are still clinging to the dream of full-stack ownership. They find it appealing to own a factory that makes all their hardware, which they then ship via their own distribution channels, to their own warehouses, so that it can be installed by engineers whom they employ. They believe that all the excessive overhead they will be paying will pay for itself in the increase in quality they’re able to provide.

But let’s consider the alternative. Let’s say you source the best hardware from the most cutting-edge leading technology vendors. You establish mutually beneficial relationships with them and earn their trust, resulting in advantageous purchasing and procurement conditions. Instead of physically owning shipping services, you employ a team of specialists who are dedicated to evaluating and leveraging whatever delivery channels are most optimal for a given country or region. Instead of purchasing or building warehouses everywhere you might possibly need one, you direct your efforts toward sourcing the best local storage facilities available. And instead of employing thousands of field engineers around the globe, you focus your attention on systematically evaluating the quality of local resource providers and building a network of the most consistently reliable engineers.

Reduce Overhead Without Sacrificing Service Quality

Already, we’ve eliminated a huge amount of unnecessary overhead. However, many companies might be worry that outsourcing so much of the supply chain results in a loss of control and a sacrifice in quality. If implemented correctly, this type of model doesn’t sacrifice anything. Starting with the technology vendors, focusing on establishing long-term relationships with leading manufacturers and creating fine-tuned vendor onboarding procedures gives a degree of flexibility which we would totally lack in a full-stack model. The costs are much lower for both the company and their clients, and they always have access to the best technologies, even as new ones emerge. Vendors who fail to keep up with the times or fall out of favour with clients or the company get pushed to the back of the line, and up-and-coming manufacturers can be quickly onboarded to start providing their products.

With delivery channels, the benefits become even more apparent. For remote and hard-to-access regions, it’s almost inconceivable if not downright impossible to …

… maintain private transportation channels. It’s also focusing on the wrong thing. Hardware distribution is about solving problems, finding new solutions to new challenges. Having a dedicated team more than pays for itself with how much efficiency is gained in the process. Suddenly we’re able to consider how to get routers to remote polar archipelagos at the spur of the moment, as a one-time shipment, without being bogged down by the logistics of how much it will cost us to get our own guys there.

Maintaining a high level of quality control for both warehousing and field services is also greatly optimised without the burden of full-stack ownership. Instead of investing money and effort into physically constructing warehouses everywhere, local facilities can be sourced and evaluated, with periodic re-evaluation multiple times a year. Local resource providers can be utilised for field services and systematically evaluated based on the results of completed activities. After a short initial “learning curve,” a network of trusted and reliable suppliers starts to flesh itself out.

For globally consistent service quality, companies must implement uniform policies and criteria and focus a great deal of effort on ensuring adherence to them. The organic development of the supplier network then plays itself out and self-optimises, and companies are left with a much more agile network of reliable and high-quality suppliers than they would ever be able to create from scratch themselves.

Over the next decade, there will be a continued shift away from full-stack models of ICT service provision. Companies that have already made this shift have been able to successfully establish themselves globally as formidable opponents to the significantly less agile and lumbering full-stack behemoths of yesterday. As they pry more market share out of their predecessors’ hands, even these established companies will have to change the way they do business if they wish to stay relevant in the rapidly shifting ICT landscape.

Michal Staněk is global supply chain manager at Neeco Global ICT Services, where he focuses on solutions in the fields of supplier management, logistics and global warehousing. With over a decade of experience in supply chain management in multinational organisations such as Foxconn, CMI and BASF, Michal has honed his expertise in supply chain development strategy, management and validation. You may follow him on LinkedIn or @NeecoICT on Twitter.

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