2014 Readers' Choice Survey: Outsourcing
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Outsourcing, to nobody’s surprise, remains alive and well as the calendar turns from 2013 to 2014. Consumer goods companies, and all manufacturing sub-segments, have long ago accepted outsourcing as a practical way to reap economies from business processes that are not within their set of core competencies. However, this attitude is changing, and Simon Ellis, practice director, Supply Chain Strategies for IDC Manufacturing Insights, elaborates on the how’s and why’s of this evolution.
How has the outsourcing landscape changed over the last few years? Related to that, why do the providers on this list lead the charge?
Ellis: What has changed in recent years is the breadth and depth of outsourcing capabilities available from an ever widening set of service providers. Five to 10 years ago, I think the readership of CGT would have been hard pressed to think of more than a small handful of these companies; yet, today it is hard to winnow the list down to just 10. Specifically considering the list compared to the results of last year, there really are no surprises.
Accenture and IBM, who offer a blend of strategic and operational outsourcing — and the case of the latter, a burgeoning product portfolio to boot — remain the cream of the crop based on operational excellence as well as deep, extensive industry knowledge. At the same time, various “Indian outsourcing” firms have now firmly and legitimately established themselves as alternative “go-to” players in the space.
Frankly, I would be comfortable recommending any of the companies on the list of the top 10, even if particular, focused experience might make one better than others in specific areas.
What types of processes are most often being considered as candidates for outsourcing?
Ellis: When evaluating the various candidates for outsourcing, much remains the same for the consumer goods companies. Edge processes, where competitive differentiation is unlikely, are regularly considered and reconsidered (things like transportation and warehouse management) along with those processes where collaboration and inter-company exchanges drive incremental value (trade promotion management and S&OP come to mind). These latter two processes are somewhat surprising candidates for outsourcing because they do have the potential to drive competitive differentiation, yet businesses have seen fit to consider them as outsourcing candidates. This speaks to the confidence, and trust, that consumer goods companies place in their outsourcing partners — both to safeguard precious data and to maintain the proprietary nature of a particular company’s business processes.
How can outsourcing partners smooth a consumer goods company’s entry into emerging markets?
Ellis: Outsourcing remains a particularly powerful tool to when considering emerging or new markets. Whether a company is looking for assistance in navigating regulatory or logistical challenges, or establishing a “beach-head” in a particular market, the outsourcing partners often do most of the operational heavy lifting when making the initial foray into a market.