Capgemini Q&A on IT Outsourcing
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Supply Chain Digital caught up with Ben Pivar and Rick Tober of Capgemini, one of the world’s largest outsourcing firms with over 100,000 employees in 39 countries worldwide.
WHY DO COMPANIES CHOOSE TO OUTSOURCE?
Pivar: Cost is typically obviously one of the big reasons, but from a more strategic perspective, I see clients looking for a method that allows them to focus on their core business, freeing them up to not be as distracted as they were before.
Tober: A lot of times it addresses things way beyond cost. There are several firms that are looking to round out capabilities that they’re missing, or looking to instill a level of discipline they haven’t been able to achieve themselves around standards and operations. Many of them look for a means to align with a partner to access the innovation and intellectual capital that are part of a large firm like Capgemini.
AN INTRODUCTION TO CAPGEMINI'S OUTSOURCING SERVICES
WHICH COUNTRIES ARE GROWING THE FASTEST IN TERMS OF OUTSOURCING?
Tober: We’ve dramatically expanded our presence in South America. We have a significant presence in Eastern Europe, Asia, India and Latin America, and we’re seeing more and more interest in Africa. There are a variety of drivers that come into play in terms of leveraging the organization. Really, it’s a network of capability factories that we can drive volumes of work into. Some look for proximity to their global footprint, and the strength of delivery capability. Others are focused on cost and some are focused on aligning capabilities from a time zone perspective. We combine all the above and often deliver things in a 24/7, follow-the-sun delivery model.
WITH INFLATION AFFECTING OUTSOURCING HUBS IN CHINA AND INDIA, HOW DOES CAPGEMINI COMBAT RISING OUTSOURCING COSTS?
Pivar: It creates issues for us from a turnover perspective in the industry. We have to be proactive in it, because it creates pricing pressures for us. As one country becomes more expensive, you’ll see a shift to another country as an economic development path. Yes, we are seeing inflation of rates; we’re still a long ways away from equalizing pricing in developed countries. As outsourcing capabilities have matured, we’re seeing increasing quality of deliverables in terms of what outsourcing can do. There’s such a big gap in outsourcing versus doing things in North America, so we still have a ways to go to equalize.
WHICH NEW FORMS OF OUTSOURCING ARE STARTING TO EMERGE IN THE GLOBAL MARKET?
Pivar: We’ve seen a growing demand to leverage social media, so we’re continuing to deploy capabilities that can be outsourced, to try to figure out how to optimize top-line growth. Staying on top of emerging technologies and providing it in an outsourcing fashion is one of our biggest challenges moving forward.
CAPGEMINI'S INTERACTIVE PROJECT PORTFOLIO
WHAT ARE SOME PARTICULAR WAYS TO LOWER IT OUTSOURCING COSTS?
Pivar: One of the things we’ve been talking quite a bit about that’s particularly relevant to supply chain is the use of cloud as an add-on to an outsourcing operation. Supply chain applications tend to run in batch windows that are relatively small and require quite a bit of hardware. Companies tend to have a pretty big capital outlay to buy the hardware to run these applications, and if you can combine outsourcing and the use of cloud computing, you can rent the computer processing capabilities and only use them when you need them, and significantly save cost.
Tober: There’s a tremendous opportunity to simplify the technology environment. There’s a degree of complexity in the systems environment that many enterprises don’t understand, and we offer the capability to come in and assess the big picture of things and make recommendations on how to streamline those operations to get maximum value out of their overall technology architecture.
WHAT DOES CAPGEMINI SEE AS THE FUTURE OF OUTSOURCING
Pivar: Cheap is relative. With increasing quality comes the opportunity to continue to cut cost. As we get better at outsourcing, even if it becomes more expensive on an hourly basis, we may become more productive. We expect some stabilization, but over a 100-year period we could see costs equalizing. Costs will go up over the next 10 years, but we have a long way to go before we’re near parity.
Tober: We need to continue to add value to our clients in the field we’re operating in. In India, we have to diversify our location base, because there are different economic factors in regions there that we need to capitalize on. It’s on us to continue to figure out how to do things that deliver value to the client.
Ben Pivar is Capgemini’s Vice President of North American Supply Chain Technologies Lead, while Rick Tober is the Vice President of North American Sales and Accounts, Application Management Services for Capgemini
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”