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BPO Procurement
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What is BPO Procurement all about…
Indirect procurement (also referred to as) - indirect materials, non-core procurement, non-
strategic sourcing/procurement, GNFR - goods not for resale, NPM - non production
materials, NPR – non-product related …
Full Service (S2C+P2P) source to settlement - outsourcing exclusively the management of all or
selected indirect spend categories and the transactional processing (P2P) activities
Sourcing (S2C) - outsourcing exclusively the management of all or selected indirect spend
categories
Procure to Pay (P2P), Operational procurement, transaction processing across indirect & direct
categories
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How do we define BPO Procurement?
Supplier Spend
Tactical & Supplier Intelligence Intelligence
Strategic Support Management Purchase to Pay
Process
Fulfilment
Category Spend
Management Non-Compliance Inventory
Analysis Management
Invoice matching
eSourcing Factory and payment
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BPO-P – Portfolio
BPO Procurement
Management Governance
Functions
Value Creation
Source to Contract (S2C) Procure to Pay (P2P)
Managing, prioritising & contracting expenditure on behalf Managing, enhancing & driving efficiency in the requisition
of the client for outsourced categories of spend through payment process
Key Elements Category Knowledge & Expertise Spend Analysis Rightshore (Distributed Delivery)
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Example of the spread of activities between the outsourcing partner and
the own organisation
Reporting
Purchase to pay
• Monitor
• Transaction compliance
Outsourced
• Management • Exception
Supplier • Monitor • Management
management compliance
Project planning Strategic sourcing • Requisition
• Define service • Requisition support
levels support
• Purchasing • Commodity • P2P reporting
strategy Criteria profiling • Service level • Invoice settlement
reporting • Manage inventory
• Savings • Market and • Manage account
identification supplier research • Supplier Adoption • Levels
• Payable
• Define • Bid preparation • Prepared contract • Expedite
communication evaluations • Manage payments
to suppliers
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How are you going to decide what to outsource?
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Table of content
BPO Procurement
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Sourcing strategies
What is sourcing?
Sourcing is delegating business functions to a separate business unit or third party.
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Introduction to our Approach
Analysis and
Definition
Scenario
Delivery or Planning and
Operations Business
Case
External External
Forces Internal Forces
Forces
Transition or
Selection and
Migration
Preparation
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The Analysis and Definition phase results in a well-considered sourcing
strategy using the GSS model as an Executive Decision Support tool
Analysis and
Definition
Scenario
Delivery or Planning and
Operations Business
Case
Transition or
Selection and
Migration
Preparation
Deliverables Requirements/Needs
• Check on suitability of sourcing opportunity • Vision on process/function to be sourced
• Insight in different sourcing modes, high-level • Multidisciplinary team
benefits and the background of sourcing strategies • Involvement of corporate management
• Current state analysis • GSS model
• Benchmark data
• Sourcing vision and strategy
• A detailed plan of approach
• Actor and impact assessment
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The Sourcing Decision & Capgemini’s Research
Our research shows that sourcing decisions made on a tactical basis under-achieve as
they tend to focus on short-term cost reduction.
Derived from extensive and original research the GSS Model is designed to help
organisations make these sourcing decisions more effectively by providing a systematic
approach to diagnosing decision parameters.
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The Sourcing Decision & Capgemini’s Research
The development of our Global Sourcing of Services Model has been driven by a range
of different research points:
A review of prior research, by other organisations and by academics
Extensive original research working with a number of major multinational
companies; all leaders in their industry. In addition we obtained advice from
European Outsourcing Associations
Advice from two leading experts on global sourcing - Dr Phanish Puranam of the
London Business School and Professor Mari Sako of the Oxford Saïd Business
School as well as our own expert contacts
Input from Capgemini subject matter experts
The model derived has been validated by testing with the companies that
participated in the initial research
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There are key decisions in global sourcing concerning ownership (in-
house or outsourced), location (onshore or offshore) and management
style (tight or light)
Offshore
Location
Onshore Light
Management
Tight Style
In-house Outsourced
Ownership
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The decision model has eight Modes as summarized below with three-
letter codes for ease of reference
Some service providers will require ongoing tight management while others can be
held at arms‟ length. There is clearly a trade-off between cost and risk.
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These modes can also be characterized by names which are more
commonly used in the sourcing market today
Captive Offshore
(e.g. offshored SSC)
Spin off
(e.g. new company)
Horizontally outsourced
Offshore (e.g. BPO vendor)
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Our research suggests that there are five sets of Environmental
Characteristics that affect the choice of global Sourcing Mode
Organisation’s Service
Characteristics Characteristics
SOURCING
DECISION
Customer Competitor
Demand Characteristics
Characteristics
Supply Market
Characteristics
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The Model explained
CI
EV PV ( Pr) CC
CM
Expected Value (EV): expected value of each mode
Potential Value (PV): potential savings from our research of ownership and location
Cost Impact (CI): cost impact, potential cost of set up from our research of
ownership and location
Collaboration Mode (CM): management style: takes a value of 1 for light and 2 for
tight; research shows tight management halves the cost impact
Probability (Pr): of the costs being incurred, derived from answering the 30
questions; essentially (CI/CMxPr) represents the risk of incurring costs
Cost of Collaboration (CC): probable cost of tight and light management for the
ownership and location impacts
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Further explanation of the components of the equation
Cost of Collaboration and Management (CC)
Although tighter collaboration reduces the cost impact, it also incurs its own cost.
From our review of existing and our own research, we have set the default costs of
collaboration as follows, with all costs as a percentage of the current total cost.
Changing the sourcing mode and the management mode increases the cost of
collaboration or management, up to an additional 10% of base costs for the case of
outsourced, offshore and a tight management style.
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Further explanation of Cost Impact calculation
Cost of Impact for each cost category Cost Category Cost (% of current total cost of
(search and contract, restructuring providing same activity)
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Further explanation of Cost Impact calculation
When calculating Cost Impact for each question in the model the following baseline
assumptions have been applied in order to ensure consistency of calculation:
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The Model has been discussed with and validated by many companies
and (semi-)public sector organisations
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GSS model – Look and Feel
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GSS model – Look and Feel
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A Case Study – GSS Model Input
Service Characteristics
Question: “Responsibility for performance of this process is clearly defined”
Answer:
Question: “Mistakes in this process will have a significant business impact from a legal,
regulatory or financial point of view”
Answer:
Question: “The process involves direct contact with the organisation‟s clients (e.g.
external clients, suppliers)”
Answer:
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A Case Study – GSS Model Input
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A Case Study – GSS Model Input
Organisation Characteristics
Question: “In this specific process, most „generalist‟ employees are capable of
performing other employee‟s jobs‟”
Answer:
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A Case Study – GSS Model Input
Competitor Characteristics
Question: “Competitors are known for having distant relationships with their service
provider”
Answer:
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A Case Study – GSS Model Input
Question: “The supply market is able to provide this process at maintained service
levels at lower cost”
Answer:
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A Case Study – GSS Model Output
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A Case Study – GSS Model Output
Global Sourcing of Services model
Result Statements
Service Characteristics
Service is standardised and documented in procedures Service is heavily standardised and therefore can be easily provided by a third
party
Requirements for performing this process can be easily specified and Service is easily specified and can be effectively monitored which makes it a likely
effectively monitored candidate for consolidating and sourcing from a different provider
Mistakes in this process will have a significant business impact from a legal, Mistakes will not have a significant impact on business and therefore there is no
regulatory or financial point of view business risk in considering alternative sourcing solutions
The process involves direct contact with the organisation’s clients (e.g. The process involves direct contact with end customers. This adds complexity to
external clients, suppliers) the delivery of this service remotely. Any process failures will impact on customer
satisfaction.
The service can be delivered remotely without internal staff or customers’ The service can be delivered remotely and there is no need for involvement from
involvement internal staff or customers, making it a prime candidate for alternative sourcing
considerations
Process decision can be based on standard specified criteria Decisions can be easily made based on pre-determined criteria. This makes this
service a good candidate for alternative sourcing considerations
Responsibility for performance of this process is clearly defined Accountability is easily allocated and therefore the risk of outsourcing is low and the
service lends itself to outsourcing
Internal customers are convinced that outsourcing will be beneficial Buy-in exists within the organisation already and will ease the transition from a
change management perspective
Internal customers are more concerned about the cost of the service rather Service excellence is the main driver and therefore costs may increase as a result
than service excellence of trying to improve service levels e.g. more qualified staff, higher volume of staff
The process in scope has a significant brand impact The process has no significant brand impact. Adequate process performance
needs to be established at the lowest cost.
The process in scope differentiates your organisation in its competitive This process does not differentiate the client in its markets. It is therefore possible
landscape to minimise the cost of service delivery with no brand risk.
Results Summary
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Table of content
BPO Procurement
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The deep dive is being developed as a tool specifically to support
Procurement Sourcing decisions
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Our Procurement research suggests that there are six sets of
environmental characteristics that affect the choice of global sourcing
mode
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Introduction to the Procurement Deep Dive
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General Information
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Organizational Characteristics
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Procurement Characteristics
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Category Characteristics
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Customer Demand Characteristics
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Supply Market Characteristics
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Competitor Characteristics
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A working example outcome of the Procurement deep dive
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