I just had the distinct pleasure of spending a couple days in Guadalajara experiencing first hand the talent, passion and capabilities of the region. Nearshore Executive Alliance held the Immercio conference there for about 80 people with a mix of buy-side, sell-side, regional experts and advisors in attendance. The sessions I attended and stories I heard convinced me that if I had any doubts about outsourcing to Mexico, it was time to see the light. I was able to hear first hand from companies like HP and United Healthcare who have opened captives with amazing success and while it is more expensive than their Indian locations, they would never consider moving out due to the unique talent, as well as time zone and cultural affinity. I met people representing companies like Softtek with 10,000 employees as well as companies like Unosquare who have 102 and growing rapidly. I met a company called Vesta that outsources all of their high-end work to Unosquare with incredible results. I toured the Institute of Technology of Jalisco and saw hundreds of "20-somethings" doing work for a dozen or so outsourcing companies located there. I met with iTexico, a start up that had eight people working for them two years ago and have 80 now, with plans for 150 by next year. I found that these companies are taking on higher end-work, not commodity type coding. They are creating apps, websites, software and interfaces for companies in North America. They are working for Open Table, Uber, and similar companies. In addition they are serving Fortune 500 companies with their corporate identities and marketing platforms and social media. Why? Well, for one, they will soon be graduating more engineers than the United States on an annual basis. Their English skills are amazing and they are recruiting from all over the world. One center I visited was like the United Nations. I met people who came from India, the UK, Australia and Michigan.
I recently heard someone say that sourcing was boring. "Really?" I said with a hint of incredulity in my voice. In response the person said, "all you do is deal with incumbents and execute contracts." Well, that my friend is a person who doesn't really understand sourcing. Sourcing can be one of the most interesting jobs around. You must find a creative outlet for the category you are sourcing and discover new sources of supply as well as uncover new sources of information that will make your sourcing execution successful. When someone says sourcing is boring I often think that they are very simple-minded. Every single morning when I read the paper or watch the news, I think about the opportunities/issues facing companies when they have a supplier at the precipice of a disaster. Think about the last time we had a hurricane, a tsunami, a terrorist event or something of that magnitude. Those natural disasters have far-reaching impact, including call centers that were shut down, data centers that were closed, and goods and services that were trapped at our borders unable to enter a country due to issues happening around the world. Every time we have the political unrest, we face the reality that sourcing may change our near-term future. What I think is the most exciting news about our industry is the fact that everything that happens in the news every single day, can affect sourcing decisions. Global news impacts our everyday work lives. The other exciting aspect of sourcing to me, is the fact that we are the only function that looks across the company and sees stupidity, redundancy, duplicity, and multiple contracts, for the company that employs us. One might say that Finance has a better vision of what happens every day in our company. But, coming from a CPA background, I would beg to differ with you. When I report financial earnings profit or loss, I am reporting what has happened in the past.
CFOs and other executives know that the order to cash (O2C) cycle in any business is its backbone - it extends out and touches just about everything in a firm's back office and customer facing departments. They also know there are numerous opportunities for problems and breakdowns, any of which can seriously impact customer service, cost and financial results. What's the best way to diagnose these problems? How can they be fixed permanently, with reduced overall costs and improved overall results? This can be very challenging – like operating on the patient while the patient is working everyday. Additionally, it's often difficult to get these fixes done from within the business. The first step is to take a hard look at each of the key areas of O2C – credit management, order fulfillment, invoicing, returns, logistics, payment processing, collections and reporting – to identify opportunities to improve, reduce cost, and smooth out problems that may be causing headaches for internal and external stakeholders. The problems can be varied. It's not uncommon to see high volumes of order entry errors, too many orders delivered after date promised, extraordinary number of returns, inconsistent use of SKUs, high level of customer complaints and repeated escalations relative to the order volume, price lists/promotions not up to date, and manual handoffs between teams that don't go well. We have also seen inappropriate metrics, some of which actually drive the behavior of the O2C staff in the wrong direction. The next step is to drill down to the root cause, understand what's really required, and then implement the changes needed. Investing time in diagnosing a company's O2C "pains" is the first step in optimizing order to cash processes and well worth the effort.
Mark Davison, Senior Director, Order to Cash Services, Corbus
Picture this in a high-pitched, Valley Girl voice..."Really??" I was both entertained and amused when Michael Shaw invited me to join his board for the "American Council of Sourcing and Procurement Executives (ACSPE)." Do we really need another association in the sourcing space? Although it is tempting to sit on a board with a potential "competitor," I'm not sure I agree with the methodology behind this organization. Why would I join the board of an organization that appears to include more sell-side members than buy-side? In fact, why would buy-side practitioners be interested in this group? The organization quotes that "our intention is to make this group a valuable resource differentiating it from generalized procurement groups." How? Seriously. How? I received a form letter telling me that our organization was nominated as a potential partner...I know it was a form letter because I saw one written to another company with the same language, including the: "indicate yes/no" response. It reminded me of a country song about a boy liking a girl and asking her to check "yes" or "no" if she does/does not like him back. So SIG was nominated by the Board to be included in the Board, but they haven't had their first Board meeting? Hmmmm. How can you call a Board a Board if their first Board meeting isn't taking place until June? For what it's worth, at SIG, we bring buy-side and sell-side together in a safe and collegial environment to eliminate the commercial side of Sourcing. With a ratio of 70:30 buy-side to sell-side and no booths or selling allowed, practitioners can focus on what really matters--sharing, learning and networking. Okay, my rant is done (borrowing a Jason Busch term) and I am back to work on helping SIG meet the objectives of our amazing members in a non-commercial manner!
Although the US economy is improving, businesses remain focused on both increasing sales and minimizing or reducing SG&A costs. The "Order to Cash" (O2C) functions of a business continue to represent a significant part of a company's SG&A expenses and are under pressure to achieve long sought goals: to reduce costs and improve productivity, while maintaining or increasing customer service levels. Corbus regards O2C as including the functions of credit management, order processing, logistics/carrier management, returns processing, billing and collections, and reporting and analytics. Prior to the recent recession, these functions could be found sharing or spread across multiple functional areas and budgets. However, as the recession progressed, much of this changed. Businesses often adopted a strategy of separation and identification - that is, segregating these functions organizationally and financially as a way to apply management focus, create accountability and achieve goals for cost reduction/productivity improvement. In many cases these steps led businesses to greater clarity for measuring costs and productivity as well as to establish shared services centers and preposition for outsourcing. While cost savings can result from separation and shared services, cost optimization is best achieved by engaging with a compatible outsourcing partner. Under the right terms of engagement, an outsourcing partner is more easily held accountable for delivering results and attaining challenging goals to adopt efficiencies and improvements, and much more quickly. The partner needs to share mutually beneficial goals, provide intellectual property to add value, and have demonstrated experience in successfully performing the functions to be outsourced under similar conditions. The results can be staggering, with cost per savings on the order of 30% or more while achieving 2:1 productivity improvement and customer service gains.
Not long ago, rising labor costs sparked a trend among U.S manufacturers to seeking alternative sources in the Far East. But as many who moved production overseas have found, transportation costs abroad can quickly add up and be three to four times the amount of sourcing from domestic suppliers. Couple this with the time-to-market challenges related to suppliers being so far away, and unless there is a huge labor arbitrage, outsourcing does not make a lot of economic sense. Despite huge cost savings, companies have to worry about other problems like worker safety, child labor, and pollution, which can very quickly create significant risk and ultimately affect brand image. And that can have a potentially catastrophic impact on performance and profits. So a lot of companies are starting to bring production back and focusing where they should have in the first place, which is on managing risk. Whether companies are using domestic suppliers or overseas suppliers as part of their supply chain, a robust and programmatic approach to managing them is needed to reduce both supply and overall business risk. In today's global economy where time-to-market requirements are faster than ever, you need total visibility into supplier information alongside sophisticated analysis and data sharing that goes beyond traditional sourcing and supplier management. Having 360-degree visibility into supplier information and performance, for instance you can anticipate disruptions to supply and prevent them before they occur. Many companies are using innovative technologies to gain this view, tapping into business networks to syndicate supplier information and using predictive intelligence to uncover supply chain risks. When combined with the insights and intelligence that live in these networks and tools such as community ratings, and risk scores from firms such as Dun & Bradstreet and third-party sources, these technologies simplify the arduous task of managing suppliers.
Sundar Kamakshisundaram, Senior Director, Global Solutions Marketing, Ariba, an SAP company
About eighteen months ago, at the SIG Global Leadership Summit in Seattle, we concluded the event with an evening at "Lucky Strikes," an upscale bowling alley and billiards hall. For those of us who work for SIG, most of the heavy lifting for that event was behind us. It was Thursday night, which made it time to enjoy the fruit of our labors with our members. I don't know about most of you, but I for one become a better bowler as the night progresses. Liquid courage, perhaps...or maybe it's that I put too much pressure on myself to do well and if I don't, I embarrass quickly. Against my better judgment, I joined a few members and colleagues in a game. Yet, imagine my horror when in the first frame I threw not one gutter ball, but TWO. Mortified beyond belief, I removed my bowling shoes and walked away from the game without looking back, even with my colleagues encouraging me to stay. Having grown up with a pool table, I moved on to the billiards room where I knew I could build my confidence. After playing a few rounds, I went back to check on my friends who had continued bowling without me. One of our members — a fairly athletic guy, I might add — was not doing too much better than how I imagined I would have done if I'd had the courage to continue. And yet he did what I had been unable to do — he stuck with it and had fun despite his low score. Again I found myself being talked into joining a game one lane over. I did so fairly reluctantly, as I was still reeling from my earlier failure...but only agreed to play because the bowlers in that lane had the bumpers up, and I knew it would be nearly impossible to throw a gutter ball! With the confidence I had lacked in the game that I'd abandoned like a coward, I bowled my first ball straight down the lane, knocking down eight pins. Phew. The idea that I would fail again was looming over me, and yet I bowled not just decently, but with gusto, throwing spares, strikes and respectable scores frame upon frame.