The Next Big Wave in Supply Chain BPO

SSON: Johannes can you describe your main role at Nokia Siemens Network?

Johannes Giloth: I am heading the Supply Chain and Logistics side which is comprised of  2,500 employees working in 130 different countries.  I run 8 different local and regional hubs - its more or less end-to-end operations without the  manufacturing and component purchasing.

SSON: What's been ' the big market -wave'  for Nokia Siemens Network in 2010?

JG: The telecommunication industry has changed significantly in the last couple of years, so we are suffering from significant pressure in this competitive environment,  such as the arrival of Chinese competitors and the consolidation of many big players in the market.

Traditional telecommunication companies like Nokia Siemens have had to reshape completely and that was the biggest change in the environment leading us to a very cost-competitive set-up,  so we moved production on these services to a lower cost  location through our partner, CapGemini. In addition,  we also established competitive product areas, but that is only one side of the medal.

The other difference is the industry is moving away from  'box' business to service business -  meaning customers are more interested in getting entire solutions and even outsourcing their network to a network supplier. This requires a much more end-to-end understanding of the entire value chain of our customers. In that arena, cost-cutting and pressure on one side and trying to understand the customer needs on the other side - that business process outsourcing has to be understood. 

The idea was not to just 'lift and shift' the existing shared service centre to lower costs, but to move towards 'transformational outsourcing '. This should on the one side make the entire supply  chain much more efficient. And on the other side,  the idea was to really focus on the  core competencies with the customer, so it is an end-to-end logistics optimisation where a part of that chain is outsourced to an external  partner using their IT Process redesign capabilities to accelerate the transformation.

SSON: Can you define what an effective Supply Chain BPO should look like?

JG: There is a specific triangle to follow:

• Capable; Highly flexible and be able to  react to volatile demands and customer specific requirements
• Reliable: Stick to promises,  remain  proactive in communication and provide transparent end -to-end information
• Lean: in term of process efficiency and inventories

SSON: What immediate value will outsourcing your supply chain add to an organisation?

JG: Firstly, through outsourcing, we managed immediate cost reduction on our supply chain. Cost pressure is something we should not forget. My  target was finding a deal in 2010 and secure a cost reduction. We have a long-term contract with CapGemini and  return on investment has become visible in 2010.

Secondly - we cannot underestimate the benefit we have gained from them in terms of process expertise and  process re-engineering from their IT background, demonstrating that a BPO partner brings in process and IT knowledge which helps us to accelerate the transformation.

Thirdly  - we  look at the ' catalyst' function - - it takes huge change management to get those processes industrialised and standardised and that is basically the target we are shooting for. An external partner with a firm contract measured on KPI  can be used  as catalyst to make that happen.

SSON: What do you see as the biggest opportunity for Supply Chain Outsourcing as an industry in 2011

JG: Transformational outsourcing will grow faster than classical outsourcing, I have seen how well it has worked in our case, but I think the time has come to take the next step, to really let the customers focus on their core competencies

Traditional outsourcing is done in many cases when you consider IT, Finance, HR and now the question is what is next? I think the transformational outsourcing  market is very small still  but the growth rate will be higher than in traditional outsourcing  - so it will not be a significant chunk of the outsourcing cake next year, but it will be a growing segment.

This interview was first published on www.ssonetwork.com. Click here to read the original article.