E-Commerce payments have seen tremendous development in the past decade. During the last 15 years, the market has expanded and is still growing. The e-business industry, however, suffers from a lack of standardized, country-specific rules and regulations. The impact of not identifying necessary measures such as local acquiring, offering local payment methods, and taking cultural differences into account has a tremendous effect on revenue, fraud expenses, operational effectiveness and is a threat to the overall success as such.
On Tuesday I’ll be part of an expert panel discussion at the CNP EXPO addressing “Breaking into Brazil (and other cool places)”. The main theme will be to discuss the pitfalls merchants face trying to take card-not-present payments in a faraway land. These range from legal issues to currency conversion, import tax to repatriation issues—and there are many more.
Planning the elements of your end-to-end e-commerce strategy starts with your product or service and culminates with the successful completion of the payment process (although the sales cycle can continue long after payment to include shipping, customer support and possible returns or repairs.) Your proposition is key, determines your online strategy and can be impacted by the payment process. The effort to create a pleasant experience on your website will not have the wanted effect if the checkout flow and payment pages are not well thought through and don’t take the right payment method mix into account. In the end, that’s where it’s happening, that’s where the deal is closed, where shoppers convert to buyers.
We will be sharing tips and tricks on how to be successful, increase conversion rates and comply with local tax and repatriation rules while avoiding profit-damaging surcharges for yourself and your merchants.
Don’t forget that the critical difference between you and your competitors isn’t always about who offers the better product or service, but the experience customers have while dealing with you throughout the end-to-end e-commerce process. When choosing your payment partners largely on cost considerations, cheap can turn out to be very expensive.
With the increasing complexity of the world’s consumer markets, businesses face various challenges when it comes to expanding their footprint into the different corners of the world. Diverse government structures, unique social and business cultures, and an ever-changing array of legal requirements and compliance policies make it difficult to overcome country-specific challenges.
This is especially true in the e-commerce space. Web-shops have to be fully localized in terms of language, pricing, check-out processes, and culturally preferred payment methods. Add the complexity of various import taxes, foreign exchange and repatriation rules that need to be carefully attended, and it’s clear these companies need a country-by-country strategy. A “one size fits all” approach simply will not, in most cases, be successful.
Of the various challenges, the complexity of government-based monetary policies can become an organization’s biggest headache. Even very attractive emerging markets, like Brazil, pose this problem. In fact, Brazil’s multifaceted tax, import and repatriation rules can be some of the most difficult to untangle and manage over the long-term.
Likely the most pervasive barrier encountered by the incautious would be the “Custo Brasil” or the “Cost of Brazil.” This term refers to a variety of extra—often unanticipated—costs of doing business in Brazil including legal and bureaucratic impediments, excessive taxation, poor infrastructure, inflation and the like. This explains why the World Bank ranks Brazil #130 out of 185 economies in the world for the ease of doing business. The overall cost percentage is difficult to assess and while it has generally decreased in recent years, it remains a real burden and the cause of great frustration for international organizations doing business in Brazil.
Examples of “The Custo Brasil”
- A 60% tax on imported products with value higher than $50 USD
- A $3000 USD value cap on individual imported products
- The need for a local presence or partner to help protect revenue, as repatriating funds often requires up to 30% withholding tax
- Numerous popular Brazilian credit cards are not enabled for cross-border transactions, which means merchants must use a domestic acquirer to achieve desired conversion rate
- In order to contract with a domestic acquirer, a local bank account or local partner is a prerequisite
- In order to open a local bank account, a local entity is needed
- 53% of credit card transactions are based on installment plans or “parcelas”
The Brazilian economy is still heavily reliant on cash, reflected in the 35% market share of Boleto Bancário, a prefilled bank slip for both traditional and online purchases
Despite all these hurdles and challenges, Brazil remains one of the hottest investment opportunities in the world. With a population of 195 million, Brazil represents one of the top world economies in terms of GDP. As the purchasing power of the Brazilian population has grown in recent years, the demand for imported products, especially from the US and Europe, has been growing as well. Finally, adoption of online buying is skyrocketing, resulting in an expansion opportunity that, despite some difficulty, e-retailers should not miss. In order to avoid the bureaucratic and monetary tripwires, it is imperative to do ample homework in advance.
To balance opportunity and risk, entering the Brazilian market with an experienced partner is highly recommended. Many companies are able to address some of the critical e-commerce issues, such as language, on their own. However, achieving good conversion rates relies on a complete offering of local payment options. Many times, as is the case with Brazil, a partner is fundamental to fully understanding more basic questions of import regulations, what taxes have to be paid when and even repatriating funds. Several companies, including ModusLink, specialize in guiding companies in the development and execution of their e-commerce strategy. Additionally, this kind of service is available from specialized third party logistics providers, who may also help with distribution and order fulfillment.
Choosing the right partner can be the make or break decision that determines success in Brazil—not only to help you tackle country- and industry-specific challenges, but also to help you grow as your e-commerce strategy evolves and the Brazilian market matures. Some things to consider in the selection process include:
- Determining if your partner has direct access to local payment methods.
- Is the partner able to remit funds to your primary location?
- Does the partner offer a tailored package for your product and your industry?
- Can the partner support all steps in your e-commerce development strategy?
In most cases, going a step further to also outsource the main elements of the supply chain and e-commerce processes provides the optimal solution, empowering you to focus on your core business.
-Andre Malinowski is a Global Vendor Service Manager at ModusLink
For those of you that attend your share of industry conferences each year, you will recognize the fact that they can range from the intellectually stimulating to the painfully commercial. This week I had the pleasure of attending Luxury Interactive in New York, which to the credit of the organizers and the many speakers that gave their time, was a fascinating glimpse into how many of the world’s leading luxury brands are embracing the new worlds of digital and social to reinvent their customer engagement and retail strategies.
Leading brands such as Tourneau, Louis Vuitton, Donna Karan, Mercedes Benz, Swarovski, Four Seasons Hotels and Resorts, Tods, Tory Burch, Tumi and L’Oreal were among those to present, which made for an interesting cross section of the luxury industry and an ever so slightly more stylish conference than yours truly is in the habit of attending.
It was clear from the offset that the sheer pace of change that the explosion of social interaction has driven in the industry. While nobody is declaring victory on these social strategies, there are clearly those that are making significant progress in figuring out how to engage global brands in a meaningful dialogue with individual customers around the globe. This conversation is occurring across multiple social platforms – Twitter, Facebook, Pinterest, YouTube and Instagram being the most common. Each social tool has its own role in engaging customers, yet there is also a centralized strategy and social framework with regional and local empowerment of employees that is required to effectively participate in conversation.
The engagement does not exist exclusively in the digital realm, however. Retailers such as Tourneau demonstrated how their customers are using digital commerce to initiate transactions that end up delivering a more compelling brick and mortar retail experience. Although I will not do it justice, think of customers engaging on the aspirations and desires associated with a product, building a virtual ‘watch tray’ or wish list on line and scheduling time with a retail associate to review this tray and complete the purchase in store. By providing this information to the retail associate—perhaps with iPads in the store—think of how much more meaningful that in-store interaction can become.
What strikes me as particularly compelling about this approach is that it is almost the exact opposite of the ‘showrooming’ concepts that many electronics retailers complain about where their brick and mortar stores are used as showrooms for transactions completed online with Amazon and other retailers. While the electronics retailers seem engaged in a race to the bottom in cost, it is maybe not surprising that luxury brands seem to be using similar technologies to create value by creating desire.
What I will call ‘humanizing’ the brand seems to be another critical element of the success. Whether it is the empowerment of a trusted employee to live the values of the brand in a digital environment as in the case of ‘DKNY PR GIRL’ (@DKNY – Aliza Licht) or the empowerment of associates in each of the Four Seasons properties around the world or the training and empowerment of retail sales associates in the case of Tourneau it is clear that Luxury brands really understand that people buy from people and want to engage with people rather than companies.
It is rather a timely reminder for me as I look at our client satisfaction surveys and recognize that in our own B2B service environment, our clients that scored highest for satisfaction also called out our front line people that enabled that satisfaction. Thank you to our team and our clients for that reminder—honestly, not a surprise but a good reminder.
Thanks to all who shared their time and experiences at the conference. In addition to the insights above, you have inspired some much needed further personal research on the emerging range of social sites, tools and best practices to better engage our customers and deliver value on behalf of ourselves and our clients.
Based on a recent presentation that I gave at an IT executive seminar entitled Cloud Computing, When the Mist Has Disappeared, I had discussions with several CIOs and CTOs on their experiences and views on cloud computing. What was noticed from those discussions was that cloud computing is still being seen as a pure IT topic, regardless if it is an Infrastructure as a Service (IaaS) or a Software as a Service (SaaS) solution. My view is that if an organization really wants to benefit from a cloud solution, such an implementation must be performed as a business project. This as most of the times the implementation will have a change on the business model, especially with implementing a SaaS solution.
A different approach
It is strange to see that “regular” outsourcing deals are being performed with a lot of control mechanisms and yet the same approach is not always performed for selecting and implementing a cloud solution. The technology part is given much attention but the impact on the business is often overlooked. My first question, likewise for any outsourcing deal, to a cloud vendor is always, “What is your exit strategy?” This as it's easy to get into a cloud relationship, but it can be very difficult to leave.
Business perspective on cloud computing
Does this mean that cloud solutions are a no-go area? No, as mentioned in one of my previous blogs, cloud computing provides a wide range of opportunities that will help to leverage eCommerce services.
As the current business climate is still unpredictable, business organizations like to gain agility with variable, volume-based costing models. It allows them to be more flexible than ever before.
The benefits of cloud computing are obvious and can be grouped into three categories.
IT on demand- This category emphasizes the IT functionality available “at a finger click.” These characteristics are improved:
- Flexibility and scalability
- Availability and manageability
- Time to market
- IT resource independency
Service portfolio- This category underlines the ability to quickly add business functionality; the key features are:
- New (reliable) functionality
- Responsiveness to market
- Location independence
Cost optimization- This category contains the benefits that come with the new financial models of cloud computing like:
- No or less CAPEX
- Costs aligned with usage
- “Pay as you grow”
So, what is new?
There is a lot of fuss about cloud computing. Is it a revolution? No not really, many cloud computing services have been available in the market for many years. Is it about new technology? No, the IT systems are being used for many years. Is cloud computing the next step in the IT as commodity evolution? That’s the most reasonable answer. Based on the increased network capacity, IT services/solutions have become available through the internet. IT services have become location independent, and due to virtualization, the services can be used in almost any business format. Is it a new flavor? If we put cloud computing in the business perspective it can be seen as a new service model. Until now we had two service options: make or buy. With the introduction of cloud computing services, we have an additional option: rental, also known now as cloud computing.
Control demand management and IT roadmap
As described in my blog Increasing Complexity of Managing a Global e-Commerce Function, it is essential to channel the demand from multiple directions of the organization. The need to channel these demands is increasing to avoid conflicting directions which will jeopardize the ability to manage the IT (internal/external/cloud) solutions in an effective way. If not managed well, the change for creating sub-optimized solutions is plausible.
The tool used to map available cloud computing solutions in the overall IT roadmap is not critical, as long as the process is being followed. During the mapping, a validity check needs to be performed on the fundamentals: architecture validity, economic validity and business risk containment.
Beneath a graphic overview of how this can be done: If such an IT Transformation roadmap has been created it has to be maintained. As cloud solutions in the market mature and many new solutions are being offered rapidly, the need to perform a periodic review and map the available services/solutions into a roadmap is more needed than ever. If a SaaS (Software as a Service) solution has been implemented it becomes an integrated part of the application portfolio. Be aware that probably not all applications in your portfolio are cloud ready (can be virtualized) and therefore can put boundaries on your ability to migrate solutions to the cloud.
In my next blog I will provide more insight on the basic steps to select and implement a cloud solution.
With 24 simultaneous learning and information tracks, each meeting eight times over a three day period, there is no shortage of information for attendees of CSCMP’s annual global conference.
Within that much content and choice, it can be at times hard to find the sessions that provide real value and new insights. I would love to see the CSCMP consider taking a more aggressive approach in pruning the content—maybe by as much as half—and be more disciplined in the track themes and structure. There were many cases where competing sessions had similar themes and where attendance was sparse.
That said, I must take my hat off to all those that put the effort in, mostly on a voluntary basis, to pull together tracks, sessions and presentations. Having been responsible for the logistics of just one session I got a sense of the scale of the task of pulling together an event such as this.
This is an event that is closing in on its 50th year and still attracts 3,000 supply chain professionals, so they must be doing something right. I have found it worthwhile to attend for what is my sixth time (which still makes me a newbie in CSCMP circles) and each year I find sessions that shed new light on my perspective on supply chain and I add a few more people that I will try to follow up with in the future.
The learning from the event comes from a combination of seeing the themes that are trending in the sessions—to use a twitter analogy—and finding those sessions with real practitioners that have achieved amazing things in their supply chain and the visionaries that challenge your thinking on the future of supply chain.
Trending strongly this year were risk management and the impacts of e-Commerce in supply chain.
Risk management has always featured strongly at the conference and the events of Japan and Thailand are still fresh in the memory. Geo-tagging of supply base and extending visibility beyond the initial tier 1 suppliers are becoming accepted best practices, but there is recognition that just improving visibility is not enough. A prioritized approach to risk mitigation such as the Value at Risk metric developed by the Supply Chain Council is needed to quantify risk impact and inform risk mitigation decisions. It was also interesting to see executives challenge the blunt instruments of additional inventory and dual sourcing as potentially effective but expensive tools in managing risk. It is no secret that we at ModusLink are strong proponents of the role of postponement in addressing risk and it was refreshing to hear senior supply chain executives echo that sentiment.
e-Commerce can no longer be dismissed as a complex but insignificant channel within the overall supply chain. The significant progress of on-line retailers in the overall retail mix now has the attention of major brands and traditional brick and mortar retailers. Projections see e-Commerce breaking through the single digit percentage of sales mark and companies are coming to terms with the implications for their business:
Distribution center footprint and configuration
Multi-channel distribution sites versus dedicated e-Commerce fulfilment centers
Shipping payment models
Consumer expectations for next day and same day delivery
International e-Commerce needs and requirements
Supporting finance and customer care processes
Top of my list for individual case studies at the event were The Home Depot’s retail distribution center transformation and Kraft’s commitment to and use of retail demand data in their supply chain. The use of retail data in this manner is an area where high tech and consumer electronics companies can really learn from the leaders in CPG. Look out for more detail on that in future posts on this blog.
Google “Big Data” and your top results will be from the leading names in enterprise IT: Oracle, IBM, Intel, McKinsey and the like. It’s a hot topic with tremendous business-driving potential. Big Data is loosely defined as huge, complex data sets that require powerful analytical tools and the industry at large has described three dimensions: volume, velocity, and variety. Recently, there’s a lot of discussion about a “fourth V” – veracity, which speaks to the difficulty businesses have in deriving value from their information. These “Vs” are key to understanding what’s new about Big Data.
- Volume: There is so much of it—12 terabits of tweets per day for example.
- Velocity: The data may need to be analysed in real-time, such as with financial transactions that can happen instantaneously.
- Variety: The data can be generated from an ever-growing list of sources like social media, text, images, sounds, sensor readings, RFID and many more.
- Veracity: Businesses simply don’t trust much of the information they have on hand to make business decisions. This challenge is compounded by the other 3 Vs.
The volume of big data is ever increasing—every day we create 2.5 quintillion bytes of information. So with this increasing amount of data in the eco system, the question is what do we do with it and can it be useful to assist in improving the supply chain?
Some of the core areas of Big Data that relate specifically to the supply chain according to Oracle are:
- Web Logs – Customer shopping patterns, order data, browsing information.
- Trailer Tags – Tracking data on trailers or shipping containers including transit times, temperature logs and security data.
- Pallet/Case Tags – Travel and dwell times for individual pallets or cases.
- EOBR’s (Electronic on-Board Readings) – Vehicle transit times including driver hours and productivity.
- Mobile Devices – Application usage by employees, partners and customers.
- Social Platforms – Social media information on the popularity of products and profiles of users.
These sources are above and beyond the more traditional sources of supply chain data which include:
- EDI – Order information, goods receipt data
- Planning Data – S&OP including suppliers and customer plans
- Financial Transaction Data – Purchase orders, payment details
Well-planned analysis of big data represents a huge opportunity to optimize supply chains by giving more detailed information than ever before at every aspect of the supply chain. By harnessing the data, supply chain improvements can provide big business benefits
- Products demand can be better forecasted
- Changes in demand will be picked up more quickly improving supply and inventory
- Bottlenecks in materials procurement, assembly, and transit can be identified and better managed
- Products can be further customized and targeted at specific groups or individuals
In order to take advantage of the opportunities, a key competency will be how to manage the data flows through the supply chain utilizing ERP systems and more importantly automating processes to effectively analyse the data. We’ll look at advancements in information technology within the supply chain in future posts.
Rating agency Standard & Poor’s recently downgraded India’s long-term investment rating from stable to negative. Despite the downgrade, India remains a highly desirable marketplace and one where ModusLink will continue to invest. India’s economy is projected to grow 5.3% next year. Even though this marks a slowdown of India’s record growth over the past decade, an economy forecasted to grow 5.3% is the envy of most countries.
India will continue to show strong growth driven by a large and fast-growing domestic market, significant foreign investment and an improving regulatory environment. The government has adopted a style similar to China with Special Economic Zones (SEZ) which are treated as foreign territories for the purpose of trade operations, duties and tariffs.
Based on IBEF (India Brand Equity Foundation) updates of May 2012, more than 70% of India’s population resides in rural areas. Capturing these markets is one of the most lucrative options for all sectors. Key drivers behind this growth include government initiatives and schemes, infrastructure development, industry projects and emphasis on local employability. Other reasons to continue investments in India:
- India is the second most populated country with 1/6th of the global population. Countries worldwide are anticipating a future shortage in the working population due to aging and rising dependence ratios, but India has a young and rapidly growing population. (source: The Economic Times of 01-09-2011)
- 60% of India’s population has seen income levels steadily rise over the last decade mainly contributed by the industry and service sectors. Growth in the higher income categories of India’s population has created an affluent society which has significant level of purchasing power.
- With new found wealth, India is rapidly adopting Western ideas of consumption. Increased per capita income, coupled with an emerging middle class, has provided the necessary impetus to consumerism.
- A $30 billion consumer electronics market. India remains a major importer of electronic components and finished products, mainly from China. The Indian electronics industry is just under 1% of the global electronics industry, but is growing at over 25% CAGR and is expected to be worth $158 billion by 2015. According to Indian-industries/electronics newsletter of January 2011, the electronics industry is one of the fastest growing in the country and is driven by growth in key sectors such as IT, Consumer Electronics and Telecoms.
What are your views about venturing into the Indian market? Do you see the same big opportunity? Leave a comment and share with us your thoughts or experiences.
“Richard Wilding is both a professor of logistics and supply chain management at Cranfield University and a victim of the parcel conundrum.
‘We were expecting a gift to arrive, and the courier firm told us it had been delivered. We told them we hadn't received anything, and the company said it had been delivered to a hedge. We haven't got a hedge.’
Some weeks later the box was discovered, sure enough in a hedge, about half a mile away from his house.”
For business to consumer deliveries, one of the most crucial parts in the Supply Chain is the last mile—actually getting the product into the customer’s hands. In most cases when shopping online the consumer has a choice of delivery methods, either by post or more costly parcel delivery options with companies such as FedEx or UPS. One of the key challenges for any of these companies is making sure the customer is at home to sign and collect for the delivery. In many cases a missed delivery note is left at the consumer’s address and the company will either tell the customer they can collect the parcel at a local depot or they will attempt to redeliver the next day.
According to a BBC report 12% of parcel deliveries fail the first time. This is very costly for the logistics companies and very frustrating from a customer point of view. This reports lists a number of ways in which the first time fail rate can be reduced including:
- Incentivising the drivers: In many cases drivers see a successful delivery as leaving a “sorry we missed you” note. However, if there is an incentive in place, the driver might make further efforts to contact the customer or make an alternative arrangement.
- Track the driver: Tracking data from couriers improves the first time delivery rate, although often tracking data available is of a historical nature rather than real time. Improved systems can give real time data on the location of the van to the customer on their smartphone.
- Where's my customer? Smartphone apps could help couriers locate their client – companies like Blackbay provide apps that can update customer locations and reroute the drivers to new locations.
- Delivery consolidation: Companies are starting to deliver to a consolidator's address. They hold onto parcels and re-deliver them to the client.
- Lock boxes: Storage boxes with pin code entry outside people's homes or in convenient locations such as train stations are a novel solution. DHL has “Pick Up and Drop Off” or “PUDO” points all over Germany that assist with deliveries.
- No signature: With GPS location stamping, a driver can prove they were at your property, and even take a photo of the place they have left your parcel.
- Convenience shops: Increasingly, local shops with late hours will take delivery of parcels. Many companies are taking advantage of this. Kiala is a Belgium-based parcel delivery firm that specialises in convenience store drop off and collect points. Kiala was recently acquired by UPS.
- Keep the customer in loop: Automated text messages and emails can let people know where their delivery is and sharing of contact data with drivers and call centers can also improve the process.
- Neighbour delivery: It is refreshingly old-fashioned and can build a sense of community.
- Place of employment: Many firms will take personal deliveries for staff.
Overall, while the missed first time delivery is a costly process that frustrates the customer, there are a wide variety of creative solutions. It’s important for consumer goods companies, couriers and customers to choose the right delivery method that reflects the desired customer experience for the products.
We’ve been keeping a close eye on Amazon’s acquisition of Kiva Systems and what it means for the supply chain industry. Kiva, whose whose robots scoot around warehouse floors and pick up items from shelves to help fulfill customer orders,
already counted Amazon as a customer prior to the acquisition, along with other major brands like Staples, Gap and CrateandBarrel.com. Now a few months out from the announcement, we wanted to explore what room robots have in eCommerce warehousing and fulfillment.
Today warehouse sizes are approaching one million square feet and beyond. The automation of labor intensive activities - from picking to shipping - can significantly improve a warehouse’s operations. From automated guided vehicles to robots like Kiva’s, warehouses can benefit from greater flexibility, improved worker safety and a reduction in operational costs by using robots.
Robots and automated technologies are improving the way goods are stored, organized and retrieved so that fulfillment is faster and more accurate. Companies using this technology can get their goods to market faster, and in certain circumstances it will give them a competitive advantage over those using manual labor. For example, retro reflective barcode labels enable pickers to scan a SKU from 20 feet away for product information or as a checklist item. When you’re trying to get a new product on the shelves, every second counts.
In a high volume pick environment, robotics can certainly deliver economic efficiencies but we have all been to warehouses where automation has been hopelessly over-engineered for the volume requirements or where business flexibility has been lost to the constraints of the robotic solution. How do you strike this balance for your own warehouse requirements?
This is not a function of investment in good versus bad automation. It is more of a consideration of the appropriate solution for the demand environment, the range of products being supported, the propensity for change in the business and the lease commitment to a particular facility.
The range of investments spans from making warehouse operators more effective in what they do (RF scanning, voice picking, warehouse labor optimization) to eliminating low value added activities (reducing operator transit times) to adopting fully automated warehouse operations.
Here are some initial considerations in addressing this issue. We would love to hear from you how you approach the subject of warehouse automation in your business:
- Profile and variability of the products and pick requirements. ore consistent profile and less variability within the product and pick requirements can better support automation.
- Management of peak demands and seasonal demand requirements. How can you scale up and down to meet this demand variability? You do not want an automation solution that restricts your ability to support peak requirements but you do want to eliminate routine and repetitive steps where possible.
- Consistency with your real estate policies – short term lease commitments may hinder longer term automation investments.
- Internal engineering capability – need to be able to support solutions through their lifestyle which will mean an investment in the appropriate engineering capabilities to support and modify the investments as needs change.
- Structure to replicate investments and share learnings in a multi-warehouse environment. Much of the effort in warehouse automation is frequently in the IP behind integration with existing systems. It is important that this is done in an environment that can be shared across the organization for maximum effect.
As we continue to watch Amazon and Kiva, we’re particularly interested in how they will balance the benefits and challenges when using robot and automated technologies. We don’t know what the future holds but this acquisition points to a shift in the industry. However, companies will need to evolve how to manage both their human and robotic employees so that warehouses can continue to serve the needs of all of their customers.
I came across the 40 risks and mistakes of supply chain outsourcing in Supply Chain Digest and thought I would share with you some for my favourites:
- Inadequate business case development for the outsourcing decision – Often decisions are made on perceived cost alone, however hidden costs are not built into the business case, for example freight impacts, Tax implications, the impact of flexibility.
- Outsourcing undesirable functions versus the ones that provide greatest competitive advantage - In many cases the difficult or hard to manage functions are outsourced, however they may be core competences that should be insourced. It must be clear the value outsourcing a function will bring.
- Not casting one’s net widely enough for potential providers of the service, and thus missing good candidates - Many companies you have an outsourcing relationship with will tell you they have a specific set of skills but often on further examination capabilities are limited if not non-existent.
- Insufficient knowledge of service provider capacity limitations - Understand space availability and manpower requirements, get detailed information on how the supplier flexes during peaks and what you get for your money.
- Having an unrealistic timeline for any of the steps of the outsource process including start-up - Often outsourcing is complex and it must be implemented in a way that limits risks especially if the process relates to revenue generation. A pilot program usually limits risk and allows for a timely smooth start up.
- Inadequate planning concerning information systems and interfacing with the service provider - Systems integration is costly and needs collaboration from both sides, often resources need to be booked well in advance of the implementation date.
- Lack of incentives for provider continuous improvement - Aligning incentives is key to creating a long term collaborative relationship. The business should make both parties be profitable to achieve long term objectives.
- Lack of a formal “lessons learned” roundtable on outsourcing in general and, specifically, established outsourcing relationship - An open collaborative approach is required to build a long term relationship. A formal review process such as QBR’s will help in this process.
Do you have any favourite mistakes you would like to add?