May 17, 2020

How Latin America became an Outsourcing Hub

industry-focus/outsourcing/how-latin-america-became-outsourc
Freddie Pierce
4 min
Latin America has become an outsourcing hub

Latin Americas emergence as an outsourcing hub has occurred over the last few years as U.S. companies turn to their closest neighbor. There are several...

Latin America’s emergence as an outsourcing hub has occurred over the last few years as U.S. companies turn to their closest neighbor. There are several reasons why American organizations, and European businesses too, are relying on Latin America for many of their offshore outsourcing needs. Proximity is one reason why U.S. firms in particular have outsourced closer to home, but value, skills and resources are all significant factors as well.

From a European perspective, the Latin American population has the advantage of being mainly Spanish-speaking. This means the lines of communication are often better than those between European or American and Asian countries.

LATIN AMERICAN WORKFORCE

Communication is the key to a successful outsourcing, so speaking the same language is an invaluable advantage. There is also a growing number of the Latin American workforce who are English-speaking. From a call center perspective, that is yet another benefit. In fact, Colombia’s call center and outsourcing industry is today considered one of the fastest growing industries in the country, according to a report by TMC.net. The Contact Center and BPO Colombian Association (ACDECC) revealed that in 2009, the income generated by the industry was nearly $1.2 billion, up 18 percent on 2008. It estimates that by 2012, income from the sector will reach $2 billion, opening up the number of employment opportunities to an additional 150,000 positions.

With a total population of 566.1 million in Latin America (World Bank, 2009), there is a large skills base readily available. Even those countries within the region that have a smaller population, such as Costa Rica, can provide sufficient outsourcing resources. In a study by A. T. Kearney, Costa Rica was reported to be one of the region’s “nearshoring pioneers”. Christian Callieri, Principal, A. T. Kearney, referred to it as an “attractive market”, despite its relatively small population. In contrast, Brazil is the continent’s most populated country, supported by solid infrastructure, which means it is highly appealing for IT outsourcing in particular.

In another report by A. T. Kearney, entitled ‘Destination Latin America: A Near-Shore Alternative’, the percentage of the population in the 15-29 age group is recognized as an indicator of the available workforce for ITO and BPO global service centers. In a population of 43,593, Colombia has 20,520 people in the 15-39 age range. Meanwhile, Argentina has 15,340 people in that age bracket out of a total population of 39,922.

Argentina also benefits from offering the lowest costs for outsourcing out of the region’s four largest economies. However, the report points out that the country does have a record of instability. So far though, this has not proved much of a deterrent for companies.

ECONOMIC INSTABILITY

In fact, India’s own volatility has been more of an issue. Following the attacks in Mumbai in 2008, there has been concern about the country’s safety. Distance has also gone against Asia as an outsourcing hub. For some companies, it is proving difficult to manage operations and workers as far afield as India and China. Again, it comes back to proximity.

Asia’s popularity has not worked in its favor as the region has been increasing workers’ wages over the last couple of years. In India, wage inflation reached 15 percent for IT services in 2006, A. T. Kearney reported. Latin America, however, has been able to keep costs down, meaning that companies can achieve better cost savings. A. T. Kearney’s report found that U.S. and European companies have typically achieved cost savings of between 20 and 40 percent in a Latin American location.

Mexico is one of the countries in the region that remains an attraction due to cost, as is Chile. Like India, could Latin America’s wages be subject to rising inflation in the future?

As with any region that becomes a hub for outsourced services, there is always the risk that this will force prices up, driving American and European organizations away and onto an alternative low cost region. At the moment, there is no indication of this trend in Latin America. It is currently revelling in its status as an outsourcing hotspot and ensuring it remains an attraction to corporations large and small from Europe and the U.S.

Supply Chain Digital will certainly be keeping a close eye on this fast-moving continent and its relationship with the Western world.

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

NTTDATA
supplychain
Supplychainriskmanagement
Procurement
6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

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.

The Challenges

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.”

 

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