Outsourcing is often defined as the delegation of non-core operations from internal production to an external entity that specializes in that operation. Outsourcing is a business decision that is often made to facilitate focus on core competencies.

Outsourcing of logistics activities has a long tradition in the European petrochemical industry. Virtually all major producers decided to outsource product handling and freight forwarding activities to specialized service providers. These logistics companies either provide such services in-house or act as a 4th party service provider where they handle several subcontractors on behalf of the producer.
  
Logistics facilities in the GCC were previously typically managed by the producer and operated by a combination of own staff and low-cost manpower suppliers. The approach of ALJABR TALKE varies from this traditional concept as we propose to provide the entire organisation to manage and operate onsite supply chain activities. Further down the line further activities in the outsourcing of other elements of the supply chain can be developed.
 
What are the advantages of outsourcing compared to in-house operations?

1. Concentration on core competencies

With the decision to outsource the logistics activities to a specialised company, our clients decide to concentrate on their own core competency: the production of world-class petrochemicals. ALJABR TALKE concentrates on its core competency: Safe, careful and efficient handling of the products.

As an example, packaging operations require specialised know-how to ensure:

• highest safety standards (by established procedures)
• maximum productivity (by defined machine settings and team targets)
• excellent quality standards (by known industry practice and machine settings)
• long service life of machines (by proven preventive maintenance knowledge)

Through a network of multi-discipline associates and the close partnership with the customer, ALJABR TALKE will be able to identify and materialize opportunities with regards to

• Long-term process optimisation
• Constant transfer of know-how
• Assurance of flexibility 
• Improvement of forecasting & planning
• Reduction of scrap
• Optimization of packaging material
• Improvement of safety levels

2. Cost reduction

The reduction of costs is the second main driver in the decision to outsource. A number of reasons will provide costs advantages that can be shared with the client.

Economies of scale

By having a network of facilities in the region, ALJABR TALKE is able to reduce overhead costs. The economies of scale effect will be supported by a strong buying power.

Lean Organisation

Years of experience in the business ensure that the organisation will be kept very lean. As clients organisations tend to involve various departments in logistics activities (procurement, safety, finance, human resources etc.) we concentrate such tasks in a lean management structure, thus reducing overhead costs.

Client Organisation

Very limited resources are required from our clients. One key interface between us is sufficient for the alignment of planning, organisational and operational requirements.

Fix costs become at least partially variable

The principle of activity-based remuneration pursues the concept that producers are interested in converting fixed costs to variable. We take a certain element of risk by providing our services on a tonnage based payment. In times of low production (e.g. shut down) the producer pays only the agreed fixed fees.

Contractor salaries

Generally the level of salaries in the industry is higher than the salaries in the service sectors. As our operations are purely service oriented, the lower salaries will result in lower personnel costs and finally in lower costs per ton.

Reduction of capital commitment

Investments require capital commitments. Our customers’ commitment of capital is reduced by the amount that the bidder will invest in material handling equipment.