Leverage Three Outsourcing Strategies to Build a More Resilient Business
by Ken Neal
August 31, 2020
To meet unprecedented challenges that seem to shift every day, organizations across the globe are doing everything they can to adapt. Some organizations, however, will do more than just adjust to present circumstances. These businesses will strive to build a resilience into their operations that can enable them to succeed despite the uncertainty that pervades the current business environment.
Resilience is an organization’s capacity to continue generating economic profit through cyclical and structural changes in supply and demand — changes like a pandemic, yes, but also any of the thousands of other sources of potential turbulence. For example, McKinsey conducted a study of nearly 1,000 large, publicly traded organizations from various industry sectors after the 2007 financial crisis. The study found that a subgroup of resilient organizations delivered a growth in total return to shareholders (TRS) that was structurally higher than the median in their sector. These same organizations had increased their cumulative TRS lead by more than 150% over their non-resilient counterparts by 2017.[i]
What can you do to build this type of resilience in your own organization? Many companies have found that choosing to work with the right outsourcing partner is a powerful way to increase the resilience of their operations. Teaming with an experienced managed services provider can help contain costs, streamline your operations, and provide access to specialized expertise. All this can free up time and internal resources that can be directed to enhancing core business activities — but only if you can maximize this partnership. Here are three key strategies for effectively working with a managed services partner to achieve these advantages and ensure that your enterprise is more resilient and better prepared for the future.
Strategy 1: Launch a business process assessment to compare actual performance to potential optimal performance.
Developing optimal processes is essential for the resilient business. Many organizations fall short of maximizing their partnerships with managed service providers by failing to properly assess the efficacy of their processes, so they aren’t able to target the right issues in outsourcing.
In today’s business environment, no process exists in a vacuum — but often, processes are evaluated as if they do. Rapid digitization has increased the interconnectivity and complexity of organizations. This scaling of complexity means that poor performance or vulnerability in one process can ripple across the enterprise. Furthermore, the impact of these ripples is amplified during times of volatility and uncertainty — the very conditions that truly resilient business is built to navigate.
An honest appraisal of your process performance requires a holistic approach that accounts for interdependence and complexity. The BCG Henderson Institute recommends mapping your processes to analyze the inputs, resources, links and feedback loops among them.[ii] This will help you identify gaps in optimization.
This also allows your managed services partner to build a similarly holistic solution that accounts for complexity. Process assessment maximizes opportunities to automate, dedicate the right combination of onshore and offshore resources, and leverage robust business insights for continuous improvement. Optimized processes reduce the impact of sudden change, and that’s the hallmark of resilience.
Strategy 2: Mitigate risk with a solid business continuity plan that helps your business maintain usual operations in the face of unexpected disaster.
The events of 2020 have reminded every business that, when it comes to the unpredictable, it’s a matter of “when” and not “if.” Successful organizations understand the need for a strong business continuity plan, but traditionally these plans have only treated the symptoms of unexpected events.
In resilient organizations, however, adaptability in the face of disaster is a core competency that is developed long before disaster strikes. Genuine resilience ingrains continuity planning into business operations so you can better absorb chaos, rather than taking a “break in case of emergency” approach.
The technology team at Verizon offers a clear example of this distinction. When the COVID-19 pandemic hit, Verizon rapidly pivoted to support more than 115,000 remote workers; leveraged its mobile app to support customer safety and enhance touchless check-out; and rolled out new digital-payment kiosks to protect employees.[iii] But these specifics weren’t a detailed part of any continuity plan — there is no road map for a pandemic. Instead, Verizon took a resilience approach, piloting these initiatives before they were needed.
Your outsourcing partner plays a vital role in ensuring that your continuity plan is resilient rather than reactive. Strategy 1 showed how optimized processes give your organization operational clarity, which means your plan can address a broader spectrum of risk. But a managed services partner will also help you identify and correct workforce challenges, provide comprehensive information governance to expand your emergency response options, and support critical back-office operations. By coordinating your continuity planning with your managed services provider, you can put resilience to work as your first line of defense, not your last.
Strategy 3: Build greater flexibility into your supply chain, particularly in warehouse and distribution processes.
Volatility is often most acutely felt in the supply chain, where dramatic changes to market conditions are magnified at every link. Again, the pandemic provides a clear example of cascading disruption. With many stores and offices forced to close for quarantine, consumer behavior shifted online. This sudden, rapid expansion of the digital economy put tremendous strains on warehouses and distribution centers attempting to keep up with increasing demand while often being cut off from critical supply.
A holistic approach to resilience can’t eliminate these disruptions, but it does provide a road map to maximize flexibility in your warehouses and distribution networks. With the complexity of today’s supply chains, many organizations are turning to experienced third-party experts to help them build in that flexibility. A good outsourcing partner can support this flexibility in three key areas:
- Rightsizing your workforce — During times of unexpected fluctuation, your partner can provide insights to help you rebalance the size of your teams to match demand so you can optimize workload per employee, help control overtime costs and provide targeted training.
- Reevaluating inventory levels and facility design — An experienced managed service provider can help you tighten controls around inventory management to reduce overhead and increase the accuracy of forecasting. They can also help you create a careful assessment of your facilities to reduces pack times and utility spend and increase storage density.
- Reassessing vendors to find savings — Your outsourcing partner can help you evaluate vendor contracts, catch unnecessary charges, and identify temporary labor needs to meet fluctuating demand.
Capitalizing on flexibility also requires accurate metrics for benchmarking. McKinsey research shows that the most resilient organizations will be those that are effective in measuring their flexibility relative to competitors.[iiii] The growing complexity of digital supply chains makes these metrics difficult to isolate, but the right managed services provider can help. Canon’s Business Insights performance analytics and reporting tool is one example of robust data visualization that can help you make better, more resilient decisions.
The Road to Resilience
Resilient organizations are better equipped to respond, recover and even thrive in the face of accelerated volatility. Such organizations account for increasing complexity and turn adaptability into a core competency by focusing on the full spectrum of business fundamentals. They also don’t tackle uncertainty alone. Building strong fundamentals in concert with the right managed services partner is part of a holistic approach that is critical to true resilience. Canon Business Process Services can help you to harness the full power of your people, processes and information so you are ready for change — whenever and however it comes.
[i] Dominik Leliévre, Philipp Radtke, Marta Rohr and Rafael Westinner, “Building resilient operations,” McKinsey & Company, May 21, 2019, https://www.mckinsey.com/business-functions/operations/our-insights/building-resilient-operations
[ii] Martin Reeves and Raj Varadarajan, ”When resilience is more important than efficiency,” BCG, January 30, 2020, https://www.bcg.com/publications/2020/resilience-more-important-than-efficiency
[iii] Martin Giles, “Verizon’s CIO is helping the telecom giant adapt swiftly to a contactless world,” Forbes, May 8, 2020, https://www.forbes.com/sites/martingiles/2020/05/08/cio-adapting-verizon-to-a-contactless-world/
[iiii] Leliévre et al., “Building resilient operations.”