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GDS International - CFO - Summit - US - 5


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Supply Chain Management

Supply Chain Management

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  • 1. Business Process Outsourcing the way we do itOrchestration,Collaboration &IndependenceAn outsourcing model for optimising Supply ChainServices in turbulent markets 1
  • 2. Contents 1. Orchestration, Collaboration & Independence 5 A fresh look at a Managed Supply Chain Services model 6 Success Factors in the Future Supply Chain 8 2. BPO Supply Chain Services: Outsourcing for Orchestration, 9 Collaboration & Independence Orchestration 10 Collaboration 12 Independence 13 3. BPO Supply Chain Orchestration supporting the Future Supply Chain 14 3
  • 3. Orchestration, Collaboration &IndependenceAn outsourcing model Supply chain management in ■■ The rise in economic strength and every industry is faced with political power of the emergingfor optimising Supply unprecedented pressure to react BRIC nations creates both marketChain Services to meet and improve. Whether a business is turbulence and opportunity, in manufacturing consumer goods, alongside the difficulties of thethe challenges of the automotive, industrial products, Middle East.most turbulent markets engineering, OEM or services ■■ A global acceptance of there are demands to respond to sustainability as a corporatein 50 years what is perhaps the most complex objective. Climate change and the and challenging circumstances scarcity of resources have swung of economic, social, political and from being an activist led debate technological turmoil in over 50 years. to being a topic in the Boardroom Businesses are wrestling with supply with increasing pressure chains that must address complex from governments. operations impacted by some of the ■■ Smart cities are increasingly most disruptive market pressures in managing urban congestion and living memory. Pressures such as: charging for access. ■■ A global economic crisis, credit ■■ Fuel cost for petrol, diesel, oil freezes, sovereign debt issues, and energy soar and impact investment funding shortages, every aspect of business and in employment pressures and rating particular the movement of goods. agency jitters. ■■ Accelerating technological advances in supply chain solutions through cloud computing creates opportunity for SaaS offerings that are lighter and more agile but at the same time this puts stress on the investments made in legacy enterprise systems. ■■ Shifts in social behaviour associated with online purchasing and the impact of social media and networks are bringing unprecedented scrutiny to supply chains with the related impact on brands. ■■ Business to Consumer (B2C) supply chains are being impacted by the aging population (and workforce). ■■ Regulatory forces increase with global trading complexity and require compliance or the risk of fines, delays and lost sales. 5
  • 4. All of these pressures are impacting total solution and not as individualand eroding the ability of the Supply components. The ‘package’ includesChain to pull off that most delicate the design, engineering, chassis,of enterprise juggling acts, achieving engine, gearbox, driver, pit crew,optimal balance in: suppliers and financing and marketing of the team. All must fit together “The lowest cost of operations” perfectly. Not a single facet is left to allow for a weakness in the overall consistent with package. Similarly, the winning supply chain team is the one that is the best “the target quality and customer optimised combination of people, service” processes and technology. It is the one equipped with business acceleratorsThe massive shifts in operating combined through best practice atenvironments are forcing supply chain each step of supply chain operations.owners to change the way they address This ensures every aspect of thethe market, their suppliers and their ‘supply chain machine’ is optimised todistributors. This, in turn, is forcing make it the most competitive.them to change the way they organiseand operate and how they manage the A fresh look at a Managedinteractions with their customers. Supply Chain Services model A new approach is needed to makeThis is a “perfect storm” of market a step-change in performance and topressures. There is enormous pressure bring about transformative changeson the supply chain to fine tune in these turbulent times. The mostoperational performance, efficiency competitive of supply chain executivesand effectiveness across a broad are restless and constantly lookingfront. The challenge to balance the for new ways to improve. Under theconflicting demands of operational pressures of the current economiccosts and the maintenance of service climate they are increasingly lookinghas never been more intense. Just at each part of the supply chain andpolishing up the old operating asking:paradigms and pushing for a one or ■■ Is our business model still thetwo per cent local improvement here right business model for us?and there is unlikely to cut it in these ■■ What are the best possibleunprecedented times. To achieve solutions to address each part ofthe fine-tuning of the end-to-end my supply chain?processes in the supply chain, it is ■■ Are there delivery models notnecessary to bring specialisation to all explored, that work in otherthe components of the chain. environments, where the supply chain could benefit and it wouldBy way of analogy, a Formula 1 team help address the conflictingwins because every single aspect demands?of their ‘package’ is optimised as a ■■ How do I do much more with much less?6
  • 5. Those questions can be directed at may also benefit from a degree ofseveral facets of the supply chain independence from the constraintsequation. Challenges range from of asset ownership and associatedthe processing and the handling of utilisation pressures common in thetransactions in the back office such as Third Party Logistics (3PL) industry.Quote to Deliver, Order Management,Fulfilment and Procurement through The ability to combine, integrateto logistics operations dealing with and orchestrate people, process andthe more tangible aspects of the technology across the complexitysupply chain engaged in the physical of the supply chain brings a furthermovement, storage and handling of associated benefit that is much soughtgoods and assets. after: Visibility. Visibility is gained through the command and controlAchieving the desired transformation capabilities that come fromand significant improvement in an optimised and integratedoperations requires, like the F1 team, supply chain.scrutinising, re-engineering andoptimising each aspect of the chain. All options must be considered in thisThis means looking at the basic fresh look at supply chain services.underlying processes, including the Some companies in the market arepeople component, the delivery model already active in this area but, forfor performing those processes and the most, it’s new territory. As new Keytechnologies used to enable them. This Performance Indicators (KPIs) arere-assessment must be comprehensive implemented to manage the newand also include the point solutions market conditions, it may no longerthat address specific performance be appropriate to consider only singlerequirements and go as far as the client solutions. For example, if fuelmanagement of third party services costs and sustainability are driving theand the logistics elements. It has to be lowest cost per kilometre combinedcomprehensive because “the way its with the minimum carbon footprintalways been done” probably isn’t the then perhaps collaboration with abest way forward. competitor for freight movements is the optimal solution.At the core of the supply chainare business processes that must In this type of collaborative scenario,be optimised, as they are the very a service provider supporting multiplefoundation of efficiency. A key factor companies consolidating loads mustin the improvement of the supply be independent from the client andchain equation is the ability to co- the logistics community. Independenceordinate the many and complex is key since collaboration in loads,components needed to deliver and shipments, warehousing andenable the most effective underlying geographic breadth would attract thebusiness processes. Building the scrutiny of competition legislators.optimal solution for the market Clearly, such collaboration must be 7
  • 6. conducted in a way that ensures the deliver “the lowest sustainable and logistics and transport servicefair and proper operation of cost of operations consistent with operators. Competence, capabilitymarket forces. the target quality and customer and the appropriate delivery services”. In this context the models to support this will be aThere may be further benefits of outsourcing of supply chain key facet in the Futureindependence, as the asset based processes is one of very few areas Supply Chain.logistics community is driven by left in the supply chain for a step utilisation, which is a model that may change in operating performance. ■■ Independence not always produce the best outcome In some cases, independencefor the client. ■■ Collaboration is a legal necessity, such as in A second opportunity for a step the delivery of collaborativeSuccess Factors in the Future change in operating performance services by a third party, to satisfySupply Chain is the adoption of collaborative competition law. But there are alsoThere are three key characteristics that supply chain delivery models. significant benefits to be gainedstand out in this discussion for There is increasing evidence through independence relative tore-examining the supply chain: of global brands prepared to the Logistics Service Providers. include a collaborative element This provides a lack of constraint■■ Orchestration in their supply chains. Realising from asset ownership and asset The challenge of combining the benefits of working in location and the freedom to complex components of people, collaboration with like minded deliver the optimal combination process, technology and business companies, shippers in common of third parties in the solution for accelerators to achieve optimal freight corridors, common the client. solutions for end-to-end processes warehousing, sharing with in the supply chain that will competitors, service providers8
  • 7. BPO Supply Chain ServicesThe Business Process Outsourcing The BPO model can provide for both potentially significant improvements(BPO) services delivery model is the client and service provider to focus in customer services. As mentionedvery relevant to the issues and on what they are best at - their core in the Formula 1 analogy earlier, thispressures facing the supply chain. business. In addition to the skills and approach to optimising the ‘wholeIt embodies the right characteristics capabilities of ‘orchestration’, a core package’ will deliver not just efficientand capabilities consistent with competence of the leading BPO service processing, but increases in agility,orchestration, collaboration providers is change management and flexibility, visibility and sustainabilityand independence. transformational capability. Combine in the supply chain which collectively that with the consulting expertise will contribute to the sought afterBPO has matured over the last ten and the capability to integrate with transformation.years and is thriving under the same legacy technology and future-proofbusiness and market pressures that are the supply chain, and you have a newaffecting the supply chain today. Major means of lubricating the supply chainglobal brands such as Coca Cola, machine and providing scale andUnilever and Nokia Siemens Networks agility for the thousands of back office businessprocessing ‘seats’ to BPO providers The BPO model brings excellencesuch as Capgemini. The BPO market to the components of the supplyis still growing aggressively and has, chain which are not the clients corein the last 10 years, transformed into business to improve throughputa $250bn global market delivering and visibility while simultaneouslyprocess excellence, cost reduction, benefiting from more than 30 pertechnology platforms and innovation cent reductions in operating costs andin Finance and Accounting,Procurement Services, FinancialServices and Customer Operations.Supply chain executives arerecognising that the BPO model cansimultaneously address many of thecomplex and multiple pressure pointsdescribed in the first part of this paperand deliver the outcomes they needto meet their Board’s objectives andmarket demands. Orchestration ofcomplex capability is key and the BPOSupply Chain Services Orchestrator isalready skilled in bringing together thecritical components of people, process,technology and business acceleratorsinto an independent services hubunder a commercial contract to delivera desired outcome. 9
  • 8. OrchestrationOrchestration of Process (orchestrate) the best capability in IT,Excellence best in class tools and leading SystemsThe best global delivery model, and Integration capabilities. The bestproven source of excellence, in back people, the best processes and the bestoffice transaction processing does practices will get nowhere withoutnot reside in the ‘shipper side’ of the right tools. Typically the level ofthe equation, and also not with the IT and systems integration capability‘logistics service providers’, but in needed is outside the core competencethe BPO industry. This industry is of the client/shipper and, more ofteninvesting millions in process models, than not, beyond the reach of most intechnical solutions and the best staff, the 3PL community. Contemporarywith a primary focus on delivery of systems integrators must also be ablethe best business process services in to exploit the processing potential,the world. Not only can the best BPO economics and agility of the new eraproviders deliver optimal processing of cloud computing, Software-as-and best practice, but they can also a-Service (SaaS) and contemporaryusually bring at least a 30 percent work flow tools, Business Processreduction in costs in supply chain Management (BPM) technology, andtransaction processing. At the same the use of Business Intelligence. Thistime, truly optimised BPO can deliver must be integrated and in harmonysignificant improvements in fulfilment with maximising the ROI from anyand customer services through more legacy enterprise systems investments.accurate, efficient, standardised andstable processes. As experts in shared Orchestration for Visibilityservices, the BPO provider also ensures Providing the desired levels of end-to-that all the components of process end visibility, and the flexibility andexcellence are integrated with the best agility to respond to rapidly changingpeople in co-located teams, delivering market scenarios, will require ITlanguage relevant support in the client Orchestration across a combinationtheatre. Orchestration includes the of third party systems from logisticsdeployment of Global Process Models providers, freight forwarders, banks,for standardisation and accelerative regulators, road, rail, air and oceantools such as Business Insight & operators. This must be coordinatedAnalytics all deployed through a cost with client legacy systems and cloudeffective “Rightshore” network. based point solutions bringing new capabilities such as GPS enablement,Orchestration of IT integrated Forecasting, ReplenishmentIn a turbulent economy there is and Planning in the “Demand Drivena greater need for agility, process Enterprise” incorporating Social Mediacontrol and visibility. When combined Monitoring services.with increasing levels of complexcollaboration and interaction in the Capgemini BPO uses a ‘Commandsupply chain, it becomes essential for Centre’ model as a process acceleratora service provider to bring together to co-ordinate workflow, manage10
  • 9. service levels and quality, and to Branding and Legislative Compliance. from their trading partners.provide visibility across the end-to- All three of these areas contributeend processes under management. to the company’s sustainability and Addressing this data challenge is aThis Command Centre model can be environmental goals and one of the facet of any future supply chain andre-engineered and tooled to deliver to biggest contributors to the corporate requires a capability in orchestrationthe supply chain community ‘Control carbon footprint is the impact of the of the competence to address the topicTower’ capability for oversight, supply chain. and deliver robust solutions at globalgovernance, control, visibility and enterprise level. Still better if the BPObusiness insight. As a result the new focus on Service Provider has a sustainability sustainability is driving supply chain team embedded in the Supply ChainOrchestration for Sustainability operations to incorporate new KPIs Management (SCM) offering withThe challenges discussed so far would such as the shift from more traditional the necessary Energy, Carbon andbe enough for most, but the market measures of: ROI, cost per mile, on Sustainability data managementfaces a new future of scarce resources time and customer service to include services and tools built into theand pressure on sustainability as the measures such as CO2 footprint, proposition so that sustainabilityworld shifts into an age of a ‘carbon product miles and water consumption. orchestration is ‘out of the box’.constrained economy’. The cost of But how can these be incorporatedoil, diesel and petrol is escalating, into the supply chain equation whencongestion charges are being there is typically no system of recordmandated in major cities, and the for sustainability data? For those“carbon footprint of this” or the “food supply chains operating in the B2Cmiles of that” is on everyone’s lips. environment, this is particularly keyAlongside the future supply chains’ with companies such as Walmart,continual pressure to contribute to Unilever and Proctor & Gamble nowcompetitiveness and the customer demanding sustainability complianceexperience there is the new spotlightof ‘Sustainability’. Many enterprisesare wrestling with sustainabilityrequirements in three key areas:Operations, Marketing/ 11
  • 10. CollaborationVigorous step changes are needed and logistics management, as we’ve reductions of more than 20to significantly improve supply discussed earlier in this paper, perhaps percent in:chain costs, while at the same time one of the few remaining areas is ■■ Transport costs per palletreducing out-of-stocks, improving the use of a collaborative supply ■■ Handling costs per palletquality and service. The future supply chain approach. This combines the ■■ Lead timeschain architecture will benefit from a activities of similar companies, or ■■ CO2 emissions per palletstructural change, combining process even competitors, operating in theexcellence with new trading models same freight corridors, with similar In recent trials, Capgemini BPOincluding integrated collaboration warehousing needs and perhaps Supply Chain Managementoptions. the same source regions and end demonstrated through a working destination combinations. model, that step change reductions inThe supply chain industry has been on CO2 foot prints of freight operationsthe path of continuous improvement According to research done by by as much as 40 per cent are possibleand refinements for decades and there Capgemini in collaboration with through collaboration, independentare only a few remaining areas of the supply chain industry body orchestration and optimising sharedpotential for a genuine step-change in ‘The Consumer Goods Forum’ for loads and via a multi-modal shift. Theoperating costs and service delivery. the ‘Future Supply Chain’ paper, model also brought additional benefitsIn addition to the outsourcing of collaborative models can deliver of improved operating chain back office processes12
  • 11. IndependenceIndependence is a key element of advantages. In the case of the client Capabilities in collaboration providethe position Capgemini BPO takes side, there is a legal imperative the potential for addressing one of thein Supply Chain Services. We see created as a result of competition last remaining arenas for a step changethree facets driving the need for an law. Independence from the service in cost and sustainability benefits inindependent stance in our BPO SCM providers is also a benefit. the supply chain.Orchestration model. Independence from Logistics Independence helps with theIndependence from the Client Service Providers for Optimal optimisation of services. Independencefor Shared Services Solution Provision from the client, as opposed to anMany clients have already made some Historically, the logistics elements internal shared services model, helpsmovement towards a shared services of most supply chains have been a focus on service and contractedmodel for the supply chain back office subcontracted to third parties. The outcome. Independence from alland will have created benefits through Independent Supply Chain Services parties is needed for legally compliantco-location, specialisation and perhaps Orchestrator is in a position to be collaboration and independencesome standardisation of processing. unconstrained by the need to be from the logistics community helpsWe have seen for those companies constantly focused on asset utilisation orchestrate multi-modal solutionsthat have sufficient scale it is possible which is the constant pressure of the unconstrained by asset generate significant savings. But truck, rail, air and ocean operators.for most companies lacking the The independence of the orchestratoreconomies of scale in their centres, can also facilitate the best possiblean internal shared services can be combination of logistics providerslimited in its ability to deliver all of the and solutions working on behalf ofbenefits that could be available if that the client. The BPO provider focusescentre was outsourced to a third party. on the best interests of the client,In shared service centres of small or unconstrained by asset ownership andmoderate size our experience is that is contractually committed to deliver- assuming all benefits of efficiency the agreed outcome.and centralisation have been released -there is typically at least 15 per cent of Orchestration, Collaboration,residual benefit unexploited due to the and Independenceconstraints of being an internal cost The BPO SCM Services model takescentre versus an outsourced solution the core supply chain businesswith contractual commitments to processes as the foundation fordeliver the targeted outcome. service provision and provides the orchestration capabilities discussedIndependence for Collaborative in this paper as a key requirement toSupply Chain Services deliver the future supply chain. ThisNew impetus in the supply chain helps address the pressures in themarket to embrace collaborative new economy and pulls together theinitiatives as discussed above, creates skills, processes, technology and bestthe need for a new independent practices needed to deliver excellenceservices model. Independence from in supply chain end-to-end transactionthe client base and the logistics processing such as Quote to Deliver orprovider network has significant Logistics Management. 13
  • 12. BPO Supply Chain Orchestrationsupporting the Future Supply ChainCapgemini BPO Supply Chain ■■ Global delivery models can help transform the supply chainOrchestration can support all the key ■■ Social Media Monitoring through optimal processes, agilecomponents of an optimised supply technology, flexible delivery, end-chain back office for processing and This is assembled together in a to-end visibility, and sustainability.logistics management. Providing “Rightshore” (best of onshore, This combination allows the client tosolutions to alleviate the extreme nearshore and offshore) delivery focus on their core business, strategicpressures in the current “perfect framework that is economic, language direction and operational objectivesstorm” generated from economic, relevant and matches the client’s secure in the knowledge that theecological, demographic, technological local and global reach requirements. BPO provider will deliver industryand regulatory sources. Yet it is independent of the shipper best practice as well as the contracted and logistics service provider while business outcome.Capgemini BPO SCM services can serving the client through contractedprovide the Orchestration capabilities assemble, integrate and optimisea supply chain services hub (a When further combined with thesupply chain centre of excellence) to wider Capgemini Group capabilitiesdrive best practice in supply chain in supply chain strategy, consulting,processing and logistics management, technology implementation andcombining: hosting these combined offerings, we provide the composite and complex■■ Supply chain expertise capability needed to meet the■■ Sustainability Services demands created by the new business■■ Sector expertise pressures impacting the supply chain.■■ Technology Platforms This combined capability is the USP of■■ Process excellence the BPO Supply Chain Orchestrator.■■ Optimisation engines■■ Best practice The BPO SCM Orchestrators delivery■■ Systems integration model for supply chain transaction■■ Global Process Models processing and logistics management■■ Control Tower/Command services embracing Orchestration, Centre Collaboration, and Independence14
  • 13. For more information on the Capgemini BPO Supply Chain Management Solutions, please contact: With around 115,000 needs and drive the results they want. A Tony Kelly people in 40 countries, deeply multicultural organization, Capgemini Business Development Director Capgemini is one of the has developed its own way of working, the tony.kelly@capgemini.comworld’s foremost providers of consulting, Collaborative Business ExperienceTM, andtechnology and outsourcing services. The draws on Rightshore®, its worldwideGroup reported 2010 global revenues of delivery model.EUR 8.7 billion. Together with its clients,Capgemini creates and delivers business Learn more about us at www.capgemini.comand technology solutions that fit their Rightshore® is a trademark belonging to Capgemini Copyright © 2011 Capgemini. All rights reserved.