Business | Investment
The warm embrace of outsourcing
Consumer products companies face a set of challenges that are different from any they have experienced before.
- Rabih Abouchakra, Special to Gulf News
- Published: 10:03 August 9, 2007
Consumer products companies face a set of challenges that are different from any they have experienced before.
On one hand, market saturation, retailer consolidation, and increasingly specialised consumer preferences have slowed growth and made it more important than ever before to be first to market with customer-relevant products. On the other hand, increasing retailer power, customer price sensitivity and mounting supply-chain complexity are exacerbating cost pressures and distracting management from its core mission.
The reality is that outsourcing isn't just a way to cut expenses. It is also a way to better run your business and improve efficiency. The benefits of outsourcing can literally turn a consumer goods company's outlook around if implemented properly.
Companies in the Middle East should analyse their needs and requirements and outsource accordingly. Consumer product companies all over the world are facing similar dilemmas, and the solutions for higher profits and better returns are in outsourcing.
Growth
Globally, outsourcing continues to grow at explosive rates, and its potential to improve both cost efficiency and business effectiveness continues to increase. Yet, curiously, the consumer products industry in the Middle East and elsewhere has been slow to adopt it.
Companies have historically relied on the dictate to outsource non-core activities and preserve core activities in-house. Those that consider outsourcing should analyse the opportunity in a holistic and structured way, by considering the entirety of their value chain as well as the full range of service-model options available.
Otherwise, savings are left on the table. It pays to do the hard diligence upfront, based on solid economics and changing leadership approaches.
In this regard, the industry's needs are not dramatically different from other industries. But the evolution of the outsourcing services market is starting to offer opportunities that shift the balance towards growth and away from simple cost reduction. Two areas will drive this: research and development, and analytics.
To find out what can be outsourced if you are a consumer products, your company must ask itself:
First, does the process provide competitive advantage? Is significant contextual knowledge and face to face interaction required? If the answer is yes to both, you cannot outsource this part of your business. Second, is there an offshore supply base for the process and significant labour arbitrage opportunities? If the answer is yes, and the above is not violated, then you can outsource.
The global sourcing of services is here to stay; the economic case is compelling, and both the demand and the need for these alternative models are growing.
The writer is a principal for Booz Allen Hamilton in Dubai.
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