In the News | Clippings from the Week Ending 8 July 2011
Posted by Guy Strafford on Fri, Jul 08, 2011 @ 10:18 AM
 |
The rise of near-shoring and procurement as a competitive differentiator.
|
Labour Arbitrage Losing its Lustre (Part 2): Rise of Near-shoring
A recent article in the BBC has advised that Santander has brought its call centres back to the UK from India following complaints coupled with rising costs of property, salaries and accommodation.
Following on from part one on this topic, we initially forecasted that this trend would unveil over the next 5 years however, we have personally (very recently) experienced the start of this seismic shift working alongside a global Media company who has decided to move its AP Help Desk operations from India to our Support Services Operation in Wales (more to come on this over the coming weeks).
The article, combined with our experiences and discussions in the market, further reinforce my closing line in which I wish to amend slightly:
Over the next 18 – 24 months we can expect to see global businesses, who have traditionally capitalized on running their back office operations out of low cost labour locations, to instead turn their sites towards right-sourcing and near-shoring, focusing on delivering their offering better than their competitors rather than cheaper.
Read the original article here: Santander brings call centres back to UK
Right to the Core
Deep in my archives was an article published in 2010 by advisory firm TPI, which discussed whether procurement should be seen as core to the business or simply important.
Gianni Giacomelli, head of BPO strategy and marketing at SAP is quoted in saying "Core function is something that brings distinctive competitive edge to a corporation and is something the corporation does distinctively better than the next guy".
As leaders begin to understand the implications of supply risk, fluctuating commodity prices and sustainable supply, direct procurement is getting noticed more and more as an enabler of core business activity (outside of the traditional manufacturing environment). Indirect procurement on the other hand is having a tough time to get noticed at all, let alone being seen as important – but why?
Indirect Procurement in the Music biz
The primary objective of music companies is to sell music via CDs, Vinyl, Digital tracks, merchandise, tours, concerts, videos and various promotional activities. The core activities within a music company are:
Although there is quite a blurry line between the two, direct procurement is done by talent scouts who are constantly in the market, focused on particular genres and sounds. Indirect procurement (CD cases, printing inserts etc) is done by dispersed buyers throughout the company or very small indirect procurement teams who are in the market intermittently though out the year, usually covering several categories and stakeholders within the business.
There is no way any one person looking after these indirect expenditures can know every facet of the market they operate in – let alone go back to their stakeholder and challenge specification. In fact every individual within the same business can potentially commit the organisation to external expenditure which could lead to proliferation of specification and commercial standards, ultimately driving higher total cost of ownership across the goods and services that are procured.
Would you be surprised if I told you by applying smart sourcing principals coupled with a deep stakeholder engagement program to the indirect expenditure of a major music distributor, we have seen significant monetary and operational benefits (including a re-engineering of the way album versions are released) which were then re-invested back into the sales and marketing budget for further activities in distributing an album.
Indirect procurement should be helping internal functions innovate and changing thinking around specifications, what it is they are really trying to achieve and ultimately is this the best way to achieve it. And this in turn can drive competitive advantage.
So reinforcing the underlying message of the TPI article through our music industry example - do you need someone in the market all year round sourcing CD cases, YES (you want the best deal right?!), should you try to maintain this capability internally given your core activity is Marketing and Selling talent, NO (find a partner who understands your business and can accommodate your demand peaks and troughs, bringing with them market knowledge and expertise from constant exposure across various categories).
Read the original article here: The Great Procurement Outsourcing Debate: Important or Core Business Function?