How to Benefit from Business Process Outsourcing
Business Process Outsourcing, known as BPO for short, is a growth market in Western countries. Companies turn to BPO as a means of achieving consistent...
Business Process Outsourcing, known as BPO for short, is a growth market in Western countries. Companies turn to BPO as a means of achieving consistent quality in certain areas of their business which, in turn, allows them to focus on growth throughout the rest of their operations.
Today, organizations outsource back office and front office functions, including call center operations, finance and accounting, and human resources in order to turn their attentions to the core functions.
WORKING IN CLOSE PARTNERSHIP
Sandeep Aggarwal, executive vice president, sales, solutions and transitioning at Intelenet Global Services, the BPO service provider, says that by outsourcing some functions to BPO companies as an organization acquires scale, there is more time to devote to quality and strategy.
“The BPO industry has grown from a sunrise to a sunshine industry in recent years,” acknowledges Aggarwal. “The drivers for this have been a steady increase in scale and depth of existing service lines, the addition of newer vertical-specific and emerging niche business services and continued expansion of service portfolios and higher value processes.
“BPOs have emerged as an effective means of entrusting specialists with the task of consistently delivering the desired high levels of quality – leaving the client organizations to focus on their core businesses,” he adds.
Of course, achieving such consistently high levels of quality through outsourcing can be risky, as Supply Chain Digital has reported previously. However, assuming your suppliers deliver to the required standards, then BPO can be a highly efficient system.
Kamini Bhawnani, head of financial services UK & Ireland at BPO specialists MphasiS, told Supply Chain Digital that transparency, governance and mutual respect “are the foundation to a good relationship between outsourcer and customer”.
In fact, the services companies expect from their suppliers have changed over the years. Aggarwal acknowledges that while most companies outsource in order to reduce costs, they now expect more than simply monetary returns.
“Customers view and want BPO partners who would own the entire process, consult on various aspects of the business and provide a holistic perspective,” he explains. “Cost containment strategy and sharing risk in the evolved business scenario is an example of this.”
REGIONAL OUTSOURCING HUBS
In October this year, the Philippines won the Outsourcing Destination of the Year Award 2010. The National Outsourcing Association (NOA) recognized its contribution to the global outsourcing industry for the third time; the Philippines having received the same award in 2007 and 2009 respectively. It beat other nominees including Egypt, Sri Lanka and the Ukraine.
So why have these regions, and others, emerged as outsourcing hot spots?
"With its abundant graduate workforce, the Philippines is becoming a veritable offshore giant for the UK BPO market," the NOA said at the awards ceremony. The country’s 450,000 graduates who leave university each year are highly qualified and have the ability to not only understand English, but also speak the language with a neutral accent.
Of those 450,000 graduates, at least 100,000 leave with finance and accounting degrees or qualifications.
The country has also positioned itself competitively within the outsourcing market, offering a flat 5 percent income tax rate on gross income for locators’ office buildings and installations accredited as Philippine IT economic zones, after the initial four to six years of Income Tax Holiday has passed.
Last year, the Philippines’ BPO industry reported revenues of $7.2 billion, up an impressive 18 percent from 2008’s $6.06 billion. Growth is expected again this year, with anticipated revenues of $9.5 billion.
Much of its success can be attributed to the fact that the Philippines has become the location of choice across a number of fields: legal and medical transcription; customer service; backroom operations for finance, logistics and accounting; software development and animation.
SPEAKING THE LANGUAGE
Similarly, Latin America is emerging as an important region to outsource to. U.S. companies in particular have turned to it in the last few years for their nearshore outsourcing needs. Not only is its proximity to America the reason for such growth, but many countries in Latin America are Spanish-speaking. This has also seen European companies outsource call center operations to countries like Colombia, Mexico and Chile.
“Outsourcing vendors are scouting business beyond English-speaking regions,” says Aggarwal. “There is a marked increase in offering multi-lingual solutions, which essentially means acquiring business in newer geographies and setting up new capabilities.”
The BPO market shows no sign of declining. Countries like the Philippines are actually upping the competition in the outsourcing industry, leading where others are sure to follow. Demands from companies are also becoming increasingly diverse and the relationship between businesses and suppliers forms the basis for the success of any outsourced contract.
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.”