Outsourcing and SCMluxe (Part 3 of 3)

Some of the business models used for offshoring/outsourcing business services as Shared Service Centers (SSCs) are as below:

Sl No	Model	Characteristic	Pros	Cons
1	Captive SSC	Owned by company but process consolidated in single location	Better Control and ownership	Not cost effective
2	Outsourced SSC	SSC operated and owned by third party vendor of services	Best practices, economies of scale, cost effective, ability to focus on core competancies	No ownership, initial employee dissatisfaction
3	Distributed	Business services delivered from distributed locations	Local requirements completely addressed	Lack of economies of scale and cost effectiveness
4	Nearshore	SSC operated in a location close to centers of delivery	Local requirements partly met. Some cost advantages	Not as cost effective as offshore delivery
5	Offshore	SSC operated from distant low cost country (Eg: India, Phillipenes etc)	Cost effective, economies of scale	Local requirements and cultural issues not met

Note that typically even for a single process the model can be a combination of the above. For example in vendor management process, the identification of the vendor can be done onsite and in a distributed fashion without any consolidation but the transactional activity of performance evaluation can be done from a shared service center (SSC). Even here the evaluation done based on data obtained from the IT (or ERP) systems like % rejections, % on time deliveries etc can be done from an offshore location while the actual audit at the vendor's premises will need to be done locally and onsite.

Some of the business processes in SCMluxe and recommendations for the shared service model is as below:

Sl No	Business Process	Business Model	Location
1	Supply Chain Planning	Captive - SSC	Onsite
2	Demand Forecasting	Captive - SSC and Distributed	Nearshore
3	Direct Procurement	Captive - SSC	Onsite
4	Indirect Procurement	Outsource - SCC	Offshore
5	Vendor Management	Captive - SSC	Onsite/ Nearshore
6	Inventory Management	Outsource - SSC	Nearshore/ Offshore
7	Fulfillment	Captive - SSC and Distributed	Nearshore/ Offshore
8	Order Management	Distributed	Onsite
9	Logistics	Captive - SSC and Distributed	Onsite and Nearshore
10	Returns Management	Captive - SSC and Distributed	Onsite and Nearshore
11	Master Data Management	Outsource - SSC	Offshore
12	Supply Chain Analytics	Outsource - SSC	Offshore
13	Customer Relationship Management	Captive SSC and Distributed	Onsite

Again it is to be noted that for each sub process a different model maybe used. However only broad indications are provided here based on the risk and opportunity each process provides in outsourcing or offshoing in SCMluxe