Top ten: Successful outsourcing tips
Written by Charlie Wijsman, Client Director for Telco, Media & Technology at transformation consultancy Moorhouse
Without innovation, services will become stale and the cost will cease to be competitive. There is only so far cost reduction can go before it starts impacting on performance. It’s important for both the client and the supplier to help drive innovation in the relationship and to have a true partnership approach. The right level of innovation and risk appetite needs to be agreed on and organisations need to establish a culture of innovation. Are there workplace incentives to put forward ideas? Review these incentives and what happens to ideas within the organisation and take remedial action as necessary.
Assess the alignment between strategy, culture and expectations. Try to determine how well the organisation’s strategic drivers and goals are aligned with each other. If the parties to the deal are not aligned, this needs to be addressed through governance and longer-term initiatives.
Our 2013 Barometer on Change research across £4.4bn of change programmes and over 200 UK senior leaders highlighted that most organisations do not manage change well. Assess the success of the transformation by evaluating staff engagement and the level of enthusiasm for participation in further change programmes. If people are not on board with a programme you need to find out why and what can be done to address this.
Don’t resort to contractual mechanisms and escalations. If there are relationship problems or sudden service changes it is important to work together to find a solution quickly if either side thinks there is an issue. External mediation can also help provide an independent perspective on the problem.
There are two important indicators you can use to assess the strength of the relationships between key stakeholders. The first is how much time and money both parties invest in informal time together. The second is the extent to which the staff are co-located – whether on short-term projects or on a more permanent basis.
Use meaningful SLAs to assess the programme but don’t build too many measures into the contract. SLAs are not the primary mechanism to drive the required outcomes. Instead they should be thought of as an insurance policy to ensure a minimum level of service.
Assess the quantity and quality of the ‘service management’ resource in the buyer organisation as this resource is a critical part of a successful initiative. A good way to measure quality is through proxy measures, like HR ratings and internal customer confidence in the service and service managers. Quantity can be measured more easily via headcount and budget.
Organisations often assess whether the parties to the contract would work together again. However, evaluating if both parties would recommend each other as an outsourcing partner may be a better test of the quality of the relationship and ultimately a good indicator of success of the outsourcing arrangement.
An influential think tank - the Institute for Government - recently called for the Government to pause the planned large-scale programme to outsource public services. One of the major problems they identified was the failure to measure the outcomes of the programme against the original objectives. Organisations should start by clearly defining the benefits case and ensure that the commercial arrangements with supplier(s) incentivise delivery of those benefits.
Top 10 air freight carriers
10. Cargolux Group
The Luxembourgish freight carrier Cargolux Group (comprised of Cargolux Airlines and Cargolux Italia, established in 2008) remained in the number 10 spot, with a total reported FTK (Freight Tonne Kilometer) equaling 7.45 bn, which represents a 7.7% expansion year-over-year. The carrier group currently operates a fleet of 30 aircraft (26 through Cargolux Airlines and an addition four through Cargolux Italia), primarily variants of the Boeing 747.
9. Korean Air
Headquartered in Seoul, Korean Air provides cargo and passenger services to over 100 destinations in 44 countries. The carrier fell from eighth place in the previous year’s rankings, with a total FTK of 7.66 bn, representing a 7.1% decrease year-over-year. Korean Air reported a net revenue of $10.7bn in 2017, also reporting a return to profitability for the first time in five years, according to Forbes.
8. Air France-KLM
The Air France-KLM freight carrier group was founded in 1947. The group is comprised of Air France, KLM, and Martinair, and is based in Paris, France. Falling from seventh place in the Freight 50 rankings, the carrier reported a total FTK of 8.13 bn, which represents a 9.2% decrease in traffic year-over-year. The group reported a net revenue of $29.08bn at the end of 2017 and is ranked #28 on Forbes Magazine’s list of Best Employers.
7. Qatar Airways
Qatar Airways, the nationally owned airline of the Kingdom of Qatar is based in Doha, and ascended two places in the Freight 50 rankings, with a total FTK of 9.22 bn, representing a 19.6% increase in comparison to the previous financial year. The carrier’s Cargo division recently launched facilities at its hub in Doha to provide a “Seamless Cool Chain”, comprised of a “2,470 square metres Climate Control Centre situated at the airside… equipped with segregated temperature-controlled sections for storing pharmaceuticals and perishables.” This end-to-end supply chain control is expected to further improve Qatar’s standing as a leader of Middle Eastern air freight.
6. Lufthansa Group
Based in Cologne, Germany, the Lufthansa Group (comprised of Lufthansa, Swiss, Austrian, and Brussels Airlines) fell from the fourth position in the Freight 50, with a combined FTK of 9.46 bn. While this represents a 1.6% increase in traffic, year-over-year, the carrier was forced down the list by drastic growth from other German freight company, DHL. According to Forbes, Lufthansa’s revenue and net profits ($41.5 bn and $2.78 bn, respectively) in 2017 are both the highest reported by the company over a ten-year period.
5. Cathay Group
The Cathay Group (composed of Cathay Pacific Airlines and Dragonair) is headquartered in Hong Kong and its Cargo division accounts for 21% of the airline’s total revenue. The company’s first dedicated cargo flight between Hong Kong, Frankfurt, and London, was established in 1981, according to the official site. Now, Cathay Pacific’s Cargo Division services over 47 destinations worldwide. The carrier fell from the fourth position on the Freight 50 ranking, as its total FTK fell by 3.6%, to 10.21 bn. According to Forbes, Cathay Pacific experienced a second year of unprofitability, although the airline’s asset portfolio reached a record high in 2017, with a net value of $24.1bn.
4. DHL Express Group
Operating as the largest European carrier group, DHL Express Group (composed of DHL Air, DHL International, Air Hong Kong, Polar Air Cargo, ABX Air, Southern Air, Aerologic, and EAT Leipzig) rose two positions in the Freight 50 rankings. The carrier reported a total FTK of 10.56 bn, which represents an increase of 15.1% year-over-year. In 2018, at the Farnborough Air Show, DHL Express announced the purchase of 14 Boeing 777s, part of a new strategy to modernise its fleet.
3. UPS Airlines
Headquartered in Atlanta, Georgia, UPS Airlines is part of United Parcel Service, Inc. Founded in 1908, UPS is the oldest company in the Top Ten, and retained third place in the Freight 50 rankings, with a total FTK of 11.26 bn. This represents a 3.9% increase year-over-year. The Company as a whole reported a net revenue of $67.7 bn, according to Forbes, representing a continuation of a ten-year trend of continuous growth. Forbes also ranks UPS among the world’s top 100 most-innovative companies, and the world’s top 50 most-valuable brands.
2. Emirates Skycargo
The state-owned air freight carrier for the UAE, Emirates Skycargo remains in second place on the Freight 50, with a total FTK of 12.27 bn, representing a 0.4% decrease year-over-year. The carrier’s central hub in Dubai allows its 259-strong fleet to reach over 1.5 bn consumers in under eight hours. Current purchasing plans are underway for Emirates Skycargo to almost double its fleet size. According to Albawaba, “In response to increasing demand from its customers, Emirates SkyCargo introduced a range of air transport solutions specific to industry verticals including Emirates Pharma, Emirates Wheels and Emirates Fresh.” Emirates Wheels has transported close to 150 cars per month since the program’s inception.
1. FedEx Express
Founded in 1998, FedEx Express is both the youngest and largest air freight carrier worldwide, with a total FTK of 15.71 bn. Haulage decreased by 0.9% year-over-year, while revenue increased to $60.5 bn in 2016, and again to $63.8 bn in 2017, continuing an eight-year growth trend. FedEx employs 395,000 members of staff, with FedEx Express operating across twelve transport hubs globally. The carrier purchased an additional 24 Boeing 777 variants in 2018, maintaining their company’s position as the largest airline in terms of cargo haulage.