Covid-19 & beyond: BPO driving greater value in supply chain business

Guest Author: Vibhore Khandelwal, Supply Chain Consultant

RECOVER | REASSESS | RESPOND

Process Improvement & Transformation

Over decades supply chain is undergoing major disruption and striving towards to become more organized, robust, agile and adaptable. To succeed and sustain, organizations will not only need to monitor their current ways of working and competition landscape however need to understand and adapt to fast-changing ecosystems, focusing on customer-driven market, reflexive supply chain and multimodal value chains.

Supply Chain being the backbone of the entire value chain has to be robust and resilient to market fluctuations and has to be measured very empirically. To make rapid decisions in today’s fast-acting environment, we need smart, time-saving, easy to interpret and most importantly decision-supporting key performance indicators (or even better Actionable Insights).

Though the organizations are aware of these facts but still unable to bring the processes and models up to the mark. Amid these challenges, supply chain and procurement will assume greater strategic importance than ever before. As objective business partners focused on both value and cost, they are strongly positioned to champion the recovery through the crisis and set the stage for winning the future. While most Fortune 500 companies have recognized the need for robust and effective supply chain and procurement functions during the past 20 years, leaders will use 2020 to strategically reposition the impact of these functions.

COVID-19 has thrown the global economy into flux. And with that, has triggered a rapid shift in enterprise goals and priorities. Amid this volatility, how should procurement and supply chain teams organize for the rest of 2020 — and beyond? What should you be doing now to thrive in the new normal? To address this, ‘e-SMART’ will be the New Normal Approach for Supply Chain Functions –

e – EMPATHY (PIVOTAL POINT – Supplier & Customer)

S – SUSTAINABLE

M –MEASURABLE & MANAGEABLE

A – AGILE & ANALYTICAL

R – RESPONSIVE & RESILIENT

T – TRANSPARENT

Let’s first analyze the current situations and see how e-SMART is going to be NEW MANTRA for sustainable supply chain during COVID and beyond. Also, how BPO will help customers in institutionalizing this concept and support in speedy recovery.

A. PRE-COVID Supply Chain command areas for organizations across globe –

1. Cost Optimization
   1. Continuous cost reduction from the key areas across value chain
   2. Main focus Avenues – Procurement Operational Cost, Warehouse operational cost, customer order management operational, Production & Inventory related costs
2. Inventory Optimization
   1. Focus on JIT (Just In Time) deliveries
   2. Emphasis on VMI (Vendor Managed Inventory)
   3. Stock Turns and Inventory Holding (Ageing)
   4. Range of Coverage (Slow Moving Articles)
3. Low Cost Country Sourcing
   1. High dependence on China
   2. Logistics cost management
   3. Lead time management (Higher lead time)
4. Supply Chain Performance Analysis
   1. Quality Control & Assurance
   2. Process optimization & modeling
   3. KPI’s & SLA’s management

B. DURING-COVID command areas –

• Working Capital Crunch – Cost control, daily discussions and analysis of every pie of spend (Aggressive spend analysis)
• CSCO’s(Chief Supply Chain Officer) Involvement in Daily Transactions – Sensitize current scenario on day to day basis
• Adding more dimensions to existing supply chain model (3R’s – Recover, Responsiveness, Relationship)
• Supply Chain Canvassing – Rapid Task Force formation to identify quick areas for continuous improvement, reaping early results.
• Supply Chain Empathy – Communicating with Suppliers and Customers on regular basis as strategic partners
• Enhance in-bound material visibility: Keeping the close eye on incoming material and border movements in case of imports.

Supply value chains cannot be established overnight. It takes time and effort to qualify potential suppliers in areas of manufacturing quality, capacity, delivery, cost and their ability to respond to engineering or demand changes. Thus, supply value chains are designed for longer-term needs. Once they are established, it can be difficult to change them quickly to adapt to unpredictable disruptions.  The COVID-19 pandemic has reminded corporate decision-makers that there is a need to develop new business strategies in their future supply chain designs. The KPIs to be considered for future supply value chain designs will likely contain both traditional metrics such as cost, quality and delivery, and new performance measures (3R’s) including resilience, responsiveness, and re-configurability. What companies actually need is a really user-friendly, yet smart, system that supports and drives action in a process of continuous improvement.

How BPO can be the most appropriate option leveraged during COVID by organizations to make their supply chain to perform more efficiently and effectively?

The focus of supply chain management is shifting from limiting and controlling spending to looking at how to build better relationships with customers and suppliers

Things that will work – Considering the short term and looking for immediate gains, following are the options where BPO’s can support and proves to be strategic partner in recovering from this pandemic:-

• Strategic Consulting: – BPO’s are experts and specialize with strategy development and globalized solution across geographies. They have the right intellects that can provide right solutions amid evaluating all possible constraints. They arrest the issues and provide 540 degree swirl visibility across value chain. In current scenario BPO can work back with esteemed clients in –
  • Designing the intermittent supply chain model to address adhoc issues prevailed
  • Business Processes Maturity Assessment, Modeling & Benchmarking
  • Setting up the appropriate roadmap (short term, medium term) with right fit of processes and technology
  • Pseudo Modeling: Simulating models and calculators to play with data under different scenarios (Eg. Guided Buying environment and sandbox)
  • In times of crisis, firms need a complex, multi-tiered supplier structure in place to ensure they avoid costly stoppages – Market Place Creation
  • Perform the supply chain canvassing –
    • Advance Analytics – Big data has become a key differentiator in the evermore complex world of supply chain management.
    • Redefining the KPI’s and SLA’s
    • Real time information exchange – Reduce the latency and improves transparency
    • Reshaping demand forecasting – Make it more demand sensitive.
    • Master Data Management – Initial data health check up, assessment and making it right (Single source of truth)

Forward-looking intelligence and benchmarking are producing fact-based insights about cost drivers and advancing supply chain and procurement to new levels of sophistication.

• Process Mining and Improvement Initiatives for the existing accounts. Across industries, procurement and supply chain leaders are seeking significant and measurable productivity gains. Process Mining leaders to visualize key processes, identify hidden inefficiencies, and eliminate them in real-time.
• Agile and Low Cost Technological Interventions (Bolt-Ons) – Low cost tools are becoming the need of an hour to fuel process efficiencies and bringing in visibility across supply chain. Global supply chains, just-in-time processes and the continual juggling act required to cut costs while maintaining quality. Technology can mitigate the negative impact of this crisis, and the next such as –
• Use AI for more strategic procurement (low hanging) further extended to downstream supply chain – Emotional Intelligence based Supplier Collaboration
• Improve crisis management with data analysis
• Put supply chain management in the cloud (in phased manner)
• Ease the pressure with automation (Contract Management & Documents Digitization – Concept of Smart Contracts)
• Make digital twinning part of your business continuity planning – Digitalization brings new visibility to the supply chain
• Control Tower set up for end to end visibility

Digitalization has helped immensely in driving efficiencies and allowing companies to make smarter decisions in their supply chain. Therefore it is the high time when BPO can partner with organizations and run POC’s (Proof of concept) on the low hanging processes. This should include RPA followed by AI/ML coupled analytics.

Things that will not work – Areas where BPO intervention can’t be helpful at this stage (in shorter duration) are as follows –

• Staff Augmentation
• Going Big Bang on Process Transformation (Digitization)
• Managed Services due to WFH restrictions

C. POST COVID command areas (TO BE SUPPLY CHAIN)

• Evaluate organizational maturity in handling major supply chain disruptions
• Establishing transparency across value chain
• Localized production (Make/Buy)
• Customer Centric Supply Chain (Pull Model : Other Predictive & Cognitive Models)
• Invest in digital supply chain and visibility tools on larger scale.
• Understand and activate alternate sources of supply by fast-tracking qualifications
• Omni Channel strategy will be the new normal

Moving forward, there will be an increased need for infrastructures and technical means to create the transparency within global supply chains. There must also be a call for the development of predictive models for proactive scheduling and dynamic planning of supply demands with the consideration of uncertainties and risk factors. These predictive models will help corporate decision-makers do what-if analysis of various scenarios.

How BPO can be the most appropriate option leveraged post COVID by organizations to have more agile, robust and responsive supply chain?

BPO is going to be the game changer for the clients. The COVID-19 pandemic is acting as a catalyst for rapid transformation of the traditional BPO model. It’s going to be time when Outsourcing Partner competes on the preparedness and flexibility clients may choose to strengthen the relationship and perhaps looking forward to work ahead rather take work back in-house. The providers are lauded for their practical and pragmatic approach. The future of outsourcing completely relies on flexibility, responsiveness and digital adoption.

The Deloitte CFO survey shows that 99% of CFOs have taken or intend to take measures to introduce or expand alternative working arrangements (e.g. remote working, shifts and other flexibility measures) as a response to the COVID-19 pandemic. Therefore, here comes the larger play of BPO players to show the brighter side of the competencies and capabilities.

Things that will work – Considering the long term esp. post COVID, following are the options where BPO’s can support and proves to be strategic partner in establishing supply chain sustainable model:-

• Robust Governance & Establishing better span on control
• In conceptualizing and installing Transformation Models
• Target Operating Models, best fit model across globe (Centralized/De-centralized/Hybrid)
• Risk & Mitigation strategies and plan
• Business Continuity Plan / Disaster recovery – backup plan to ensure non interrupted business transactions
• Focused Investments – FDI’s especially, with respect to Sourcing Strategies (make/Buy decisions)
• Supply Chain Managed Services (Shared Services and Captives – Esp. for back office planning & execution)
• Reshaping logistics and time to delivery
• Smart manufacturing – IOT/Sensors based engineering and predictive analytics (Zero Touch)
• Predictive analytics will build on the data aggregation abilities developed in the past decade, allowing leaders to uncover risk and value by deploying predictive and prescriptive algorithmic models.
• Master Data Management

Outsourcing Partners that have acted like true business partners, have been flexible with their clients, and have rapidly implemented digital solutions. They will come out of this crisis with their reputations not only intact but potentially enhanced. This will put them in a position to increase their market share post COVID-19. In contrast, traditional Outsourcing Partners that are still operating on a simple labour arbitrage model and that have been neither flexible nor willing to adopt new digital operating models may fall by the wayside. This was the direction of travel within the BPO industry before the crisis – COVID-19 is simply going to accelerate this trend.

Supply chain leaders should look to invest in greater visibility of demand and its impacts on inventory and production capacity. Post-recovery, demand will be more volatile, requiring more rapid supply adjustments to manage costs. Investments should target deeper inventory visibility and distribution speed; the more agile the technology and the higher the visibility, the more effectively supply chain can control costs.

Areas of Significant Change and Impact

• Supply Chain Resilience in the post COVID age (Focus towards cash optimization and supply continuity)
• Cost Base (Revisit the baseline)
• Risk Management (Supplier Risks) & Regulatory Issues
• Data Security Issues
• Technological Disruptions – Automation, Artificial Intelligence, NLP, Blockchain
• Analytics Suite (Spend Analysis especially)

What are the benefits, organizations can expect by partnering with BPO players with reference to Supply Chain Function?

The benefits from the entire suite of offerings both during COVID and post COVID, organizations can reap are ‘ A LA CARTE’ Supply Chain –

A	LA	CARTE
AGILE	LEAN	COLLABORATION
	ASSET LIGHT	ADAPTABLE & FLEXIBLE
		RESPONSIVE & RESILIENT
		TRANSPARENT
		EMPATHY

 

The COVID-19 pandemic could be the perfect storm to reset that balance, incentivizing a step change that clients have been looking for both contractually and operationally. The power of analytics can help secure supply chains in times of crisis and avoid costly interruptions in production and entire value chain. BPO will certainly help companies to keep their supply Chain alive.

‘With the fires burning all around us, speed of execution is like nothing we’ve seen before’

Even from supply chain performance assessment perspective, following should be the top 20 metrics to be considered for health check up & BPO can monitor the real time dashboards across the followings –

1. Perfect Order Measurement
2. Cash to Cash Cycle Time
3. Customer Order Cycle Time
4. Fill Rate
5. Supply Chain Cycle Time
6. Inventory Days of Supply
7. Freight bill accuracy
8. Freight cost per unit
9. Inventory Turnover
10. Days Sales Outstanding
11. Average Payment Period for Production Materials
12. On Time Shipping Rate
13. Inventory Turnover Ratio (ITR)
14. Turn-Earn Index (TEI)
15. Gross Margin Return on Investment (GMROI)
16. Days of Supply (DOS)
17. Inventory Velocity (IV)
18. Range of Coverage (ROC)
19. Carrying Cost of Inventory
20. Return Reason

“It’s not the organizations that are competing. It’s the supply chains that are competing.” – WaelSafwat, SCMAO.