HfS supply chain process expert (among other things), Charles Sutherland has finally done what no other analyst has done before him… define and develop the first comprehensive view of Supply Chain Management As-a-Service….
Supply Chain Management BPO has, since its inception, been an enigma in the overall BPO industry. Combining both large-scale transactional order management contracts along with focused domain and analytic skill-enabled forecasting engagements, it has been both an outlier in the portfolio of many large service providers as well as a lucrative market for specialist pure play providers. Clients often considered these engagements as something more like prolonged consulting deals than actual outsourcing contracts, while service providers wondered where best to house the delivery teams inside the organization as a result.
Now, more than a decade into operations—and with total market ACV closing in on $2 billion—HfS is seeing that many of the characteristics of Supply Chain Management BPO that were once considered causes of its uniqueness (Design Thinking, Collaborative Engagement, Accessible and Actionable Data) are now traits sought for all BPO engagements as the market moves toward As-a-Service solutions.
Once ahead of its time, Supply Chain Management is now very much integral to the realization of As-a-Service and so it was time for HfS to look again at this market following our inaugural Blueprint in 2014 to describe how it is developing and which service providers are leading the way. So let’s get Charles’ thoughts on this market and its leaders…
Charles, how would you describe the current state of Supply Chain Management As-a-Service?
We describe this market as one that is fast growing but still tiny against the backdrop of the entire BPO marketplace. But we believe the potential opportunity is massive—at potentially $300 billion-plus. So penetration today of this addressable market is less than 1% and we expect to see the current enthusiasm for participation by service providers to continue and only grow more in the next few years.
We covered 14 different service providers in this Blueprint (with 3 service providers covered for the first time) and what is striking, versus say the Finance & Accounting BPO marketplace, is how unique the offerings and capabilities are between these 14 service providers today in supply chain management. These service providers are not mirror images of each other. Each one brings different industry specializations, domain knowledge, technologies and commercial models to bear. This heterogeneity of service providers highlights the still early and evolving stage in the lifecycle of this offering and the scope of the opportunities left to be addressed.
We would also highlight that As-a-Service is the model today and for the future in supply chain management. As-a-Service has been part of SCM services since its inception. In particular, service providers have acted as “Brokers of Capability,” partnering with enterprise clients to identify operational issues and then bring the required insights and talent to improve business outcomes. In the last several years, the availability of deeper analytical talent, digital platforms and design thinking approaches has moved this market even further through the As-a-Service model.
Finally, this is also a market where service providers have to respond to an ever changing landscape. It is clear to HfS that the increasing adoption of IoT, the deployment of intelligent automation (both robotic process automation and cognitive computing) as well as the growing utilization of formal design thinking practices will impact this market tomorrow and for years to come. Success in this market comes from understanding not just the client business issues of today but how these issues will evolve and manifest in the future. So, more than anything else, this market today is one that both requires and rewards real and substantive collaborative engagement between service providers and enterprise clients.
How has that changed since our inaugural Supply Chain Management BPO Blueprint in 2014?
Already back in 2014, we could see many of the Ideals of As-a-Service nascent in the offerings of the service providers. But over the last two years we have seen a massive uptake in interest and investment in this offering by the service providers. Today, having a strong supply chain management offering is a way of showing commitment to the evolution of BPO from legacy delivery models to one that exemplifies as-a-service and clients are responding as well. Supply chain management growth rates at 20%-plus are well above the market norm and that is encouraging further attention and investment in this market as well. In 2014, service providers (and clients) were just starting to see how Control Towers—which can provide an end-to-end process view of operations in a supply chain—were important to service delivery. Two years later, it’s clear that this is fully recognized and so we are seeing a heightened level of investment in Control Tower solutions across the market. Service providers and clients are also seeing that, whereas in 2014 just getting visibility into the supply chain through a Control Tower was valuable, today it’s about modifying the processes around these solutions so that either party can intervene in the supply chain process when the analytics show an emerging problem and take actions to mitigate what might previously have been significant business impacts.
In 2014, many service providers and clients talked about how they were looking ad-hoc at issues and trying to solve problems before they impacted the processes. They weren’t calling it design thinking then but that’s what it was. Today, many service providers are calling this out and embedding a formal design thinking methodology into the way that service providers and clients work together over the life of a contract.
What’s also different since 2014 is the realization that other emerging trends such as IoT, 3D printing and intelligent automation are going to have major impacts on today’s supply chains and that the processes of tomorrow will be significantly different than in the past. The last few years really were about service providers and clients working together to determine what an end-to-end supply chain looked like. Now, in 2016, that is changing to working on how that end-to-end process view will need to continue to change into the future.
Tell us, Charles, which service providers are leading this market today?
Our HfS Blueprint methodology assesses service providers against a variety of criteria related to Execution and Innovation capabilities of the service providers based upon buyer reference calls, market interviews, RFI submissions and detailed market briefings.
The service providers in the As-a-Service Winner’s Circle are the providers that scored highest on both Execution and Innovation and included: Accenture, arvato, Brightstar, HAVI Global Solutions and OnProcess. These service providers stood out for the excellence of delivery operations, the depth of domain and process expertise, the inclusion of client feedback, the comprehensiveness of their vision for supply chain solutions and the effective utilization of accessible and actionable data to deliver business outcomes.
We identified two service providers as Execution Powerhouses—Infosys and TCS—that excel today in execution of supply chain management services and are making investments in innovation that should enhance future operational solutions as well.
Our High Performers, which captured a balance of strengths between Execution and Innovation, numbered six and included Capgemini, Entercoms, EXl, Genpact, Wipro and WNS, with some service providers really pushing the boundaries on overall innovation in the marketplace and all offering capabilities to meet the needs of today’s supply chain management buyers.
Finally, we also identified a High Potential service provider in HCL—new to our 2016 Blueprint. HCL is using a depth of capabilities in IT and engineering to deliver platform-based supply chain management with domain expertise.
What recommendations do you have for enterprise buyers looking at Supply Chain Management As-a-Service?
Our overall recommendation would be to jump in and test the waters if this is new to any enterprise. The offerings from service providers are maturing rapidly and the levels of strategic commitment and investment have never been greater. This will be one of the major growth offerings for the years to come and enterprises have a chance to shape those offerings to meet their own needs today.
Having decided to take the jump, adopt a design thinking mindset when it comes to assessing the issues in your supply chain and what solutions might be most suitable. Sitting down with your prospective service provider(s) to better understand the business context in which your current processes operate and what can be done to realign or reimagine those processes to achieve different and/or better business results is always an exercise worth undertaking.
Having made that jump, we encourage buyers to not test using labor arbitrage models from the past but to push for as-a-service solutions. With all the current (and future) business challenges enterprise supply chains face, it’s important to secure solutions that are flexible and agile and which can grow to meet your needs as they evolve over time. Don’t settle for a long-term fixed model of solution delivery that might work in F&A or HR because it won’t work here.
Along the way this year and beyond, also ask the service provider for insight into how 3D printing, IoT and other innovations are likely to impact the supply chain processes you have in place today. Use quarterly business reviews and other interactions with service providers to review their vision for the evolution of supply chain management as a service.
Having embarked on a collaborative journey together using design thinking, continue to push your service provider and your own team to be more collaborative, more visionary, more inclusive and more trusting together. Extend this same new mindset to how you think of data and physical security to make sure that your policies on security aren’t coming with unnecessary costs to your supply chain. Address the enterprise pain points of supply chain and realize the resulting business outcomes is easier in a close partnership than in a closed-off zero-sum mindset relationship. So, work with your service provider(s) in a manner that facilitates long-term mutual success.
So that’s our take on the state of Supply Chain Management As-a-Service at the start of 2016. Please share your thoughts with us as this fast growing and dynamic segment of the As-a-Service Economy continues to evolve.
Charles Sutherland can be tweeted at @cwsuther.
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