“Bangalore to Buffalo”, is the new message from President Barak Obama to US Industries. This message was discussed in great deal during his presidential campaign and now he is living up to his promise. Many critics says its more of a political move then economical and if you see some of the facts around it looks more the same.
India has been the forefront of BPO revolution since 1990s. US Companies have opened there offices in Bangalore to cash in on the phenomenon and they invariably achieved the cost saving objectives by doing so. Is it possible for Barak Obama or US administration to reverse this tide and especially if you look into the supply chain and procurement prospective.
Procurement BPO industry has been growing a lot since 2000s and India has cashed in from the opportunity. India controls almost 69% of the business sphere as highlighted by a study conducted by AMR Research in 2009. This has been highlighted in his article India's back-office dominates procurement outsourcing by Phil Fersht of AMR Research.
Another study published by AMR Research (i.e. Supplier Management BPO breaks a billion) in terms of value of business handled by Supplier Management BPO sector has crossed $1 Billion mark.
Phil highlighted the key factors for this phenomenonal shift as:
· Service providers have successfully shifted their delivery resources to India.
· The onshore vs offshore mix for procurement is successfully materializing.
· Procurement BPO is being taken on by new industry sectors.
The study highlights the fact that business model of outsourcing is still strong and the overall business is growing in this field.
Can the current scenario of protectionism change the tide of Procurement and Supply Chain outsourcing? Many experts say the overall impact will be minimal. However the industry as a whole need to continuously innovate with new business model and take newer avenues of growth to survive the wave of recession and protectionism. The outsourcing has started from simple transactional works of issuance of contracts and managing data. It progressed towards handling low value spend buy and now with new procurement techniques like spend management, e sourcing the offshore concept has now become a strong part of procurement function of all major organizations.
Organizations needs to add more and more value to their products and try to innovate in order to manage not only low value spend but strategic spend also independently. This will be the next phase of evolution of Procurement and Supply Chain Outsourcing industry that will not only enable them to tide over the current scenario but will help them retain their global leadership in the field.
Thursday, May 7, 2009
Monday, May 4, 2009
Paradigm Shift towards Supplier Management in Global Purchasing
The current scenario of recession has renewed the focus on supplier risk management. Organizations are focusing great deal to understand different parameters which are helpful in determining the health of the supplier base. The best strategy to ensure smooth functioning of supply chain is to have an eye on the current supplier base while be proactive to have an additional supplier ready in case of any disruption due to failure of any key supplier base.
However increasing your supplier base and distributing the share of business between them does effect the spend management of the organization. Instead of focusing on few supplier and consolidating your spend between them is suppose to be the best way forward until few months back.
So many supply chain professionals are facing this dilemma of having to choose from two different scenarios:
1 Consolidating your spend between key supplier base and work with these key suppliers to achieve better productivity, more knowledge as well as expertise inputs and achieving cost savings targets.
2 Make a broad supplier network and distribute the spend between the supplier such that in case of failure of any supplier the impact on supply chain is minimal.
The answer to the problem is not simple. There are numerous factors involved in the decision making like amount of total spend, economic health of supplier base, the supplier base location, the technological resources available at supplier, suppliers willingness to be the major supplier, suppliers spare capacity.
The final solution could be much closer to Point 1 i.e consolidating spend but the current economic scenario has introduced a very dynamic picture into the idea of supplier and spend consolidation. The drive in the first decade of 21st century is for a push towards best cost from any location possible. The idea was great till everybody was making money and there were no disruptions but now the idea of best cost from any location has changed to best cost from best location.
Consolidation will remain the key focus for everybody but supplier selection and its continuous monitoring and its continuous management will be the focus now. The mad rush for lowest cost will abate and more factors like supplier capabilities and suppliers economic health will add a new dimension to Global Purchasing and Supply Chain.
However increasing your supplier base and distributing the share of business between them does effect the spend management of the organization. Instead of focusing on few supplier and consolidating your spend between them is suppose to be the best way forward until few months back.
So many supply chain professionals are facing this dilemma of having to choose from two different scenarios:
1 Consolidating your spend between key supplier base and work with these key suppliers to achieve better productivity, more knowledge as well as expertise inputs and achieving cost savings targets.
2 Make a broad supplier network and distribute the spend between the supplier such that in case of failure of any supplier the impact on supply chain is minimal.
The answer to the problem is not simple. There are numerous factors involved in the decision making like amount of total spend, economic health of supplier base, the supplier base location, the technological resources available at supplier, suppliers willingness to be the major supplier, suppliers spare capacity.
The final solution could be much closer to Point 1 i.e consolidating spend but the current economic scenario has introduced a very dynamic picture into the idea of supplier and spend consolidation. The drive in the first decade of 21st century is for a push towards best cost from any location possible. The idea was great till everybody was making money and there were no disruptions but now the idea of best cost from any location has changed to best cost from best location.
Consolidation will remain the key focus for everybody but supplier selection and its continuous monitoring and its continuous management will be the focus now. The mad rush for lowest cost will abate and more factors like supplier capabilities and suppliers economic health will add a new dimension to Global Purchasing and Supply Chain.
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