Why do some companies shed noncore functions to their supply chains?

Some companies choose to shed noncore functions to their supply chains primarily to access supplier and customer competencies that they do not possess in-house. This strategic approach allows companies to leverage the strengths and expertise of specialized suppliers or partners, enhancing overall efficiency and effectiveness in the supply chain. By outsourcing certain functions, companies can tap into advanced technologies, specialized skills, or innovative practices that they might lack internally, which can lead to improved product quality, reduced time-to-market, and better alignment with customer needs.

Accessing these competencies enables companies to focus on their core activities—those functions that provide them with a competitive advantage—while relying on external partners for other areas. This not only improves operational agility but also allows firms to innovate and adapt to changing market conditions more swiftly without being bogged down by functions that do not align with their strategic vision.