Discuss, debate and exchange ideas on latest trends and opportunities in the Business Process Management (BPM) landscape. Deliberate on adding “business value” to clients, vendors, employees and various other stakeholders to enhance customer satisfaction and sustain long term partnerships.

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October 25, 2016

How will the 'Cloud' survive without the 'Safe Harbor'?

The European Court of Justice delivered a judgement in a particular case in 2015, which sent a very strong message that safe harbor alone was inadequate to ensure the protection of personal data.

Safe harbor is the agreement between the United States Department of Commerce and the European Union (EU) that regulates the way US companies could store and process the 'personal data' of European citizens. This framework developed in the year 2000 is used by buyers and suppliers to mutually accept the level of data protection required. When buyer organisation procure Cloud Services, more often than not their data (including personal data) are stored and/or processed in data centres managed by the service provider. These facilities could be physically located in any geography depending on the provider's own data storage strategy.

At the end of 2015, the European Court of Justice delivered a judgement in a particular case which sent a very strong message that safe harbor alone was inadequate to ensure the protection of personal data.

What will happen now?

  • Cloud service providers will revisit their service delivery strategy for EU customers. Large scale providers such as AWS already allow the
    buyers to choose the physical data storage location

  • .Some Cloud suppliers will decide to invest in data centres in the EU region. This will impact their costs of the service.

  • Each of the 20+ EU countries can now formulate their own requirements to protect data, which is transferred outside the region. Administration of the same would be highly complex at the supplier end may increase the cost of their offerings.

  • Buyer organisations will have a smaller pool of suppliers to choose from. They may even have to bring back some of the services in house. This will have an adverse effect on their capital & recurrent IT budgets.

  • The European Commission and the United States will agree on a new framework. The initial statement of this 'EU-US Privacy Shield' was released in February this year.

  • Cloud suppliers will work towards getting non-geography specific accreditations such as ISO 27018 (protection of personally identifiable information in public clouds).

Though the context of this issue seems to be limited to US and the EU region, although the data protection principles that have come to limelight as a result are universal. The recent judgement does not completely invalidate the safe harbor framework that had been operating for 15 years. It merely questions the adequacy of the same. In my opinion, this recent development only challenges both supplier and buyer organisations positively to be extra vigilant on where & how they store data.

What is your opinion?

Do you know how you fail?

The manufacturing industry has been evolving out of standard productivity models to higher intelligent systems based on this human experience of "seeing it early", or "knowing the fail".

Prevention is better than cure, goes the old adage and all of us experience in our lives that if an event (especially one which creates damage) can be seen or perceived early, the job of managing it is half done. The time, energy and investment required to fight a "bottleneck" can easily be avoided if we can prevent that same event from happening or if we know the point of occurrence, and its extent (breadth and depth).

The manufacturing industry has been evolving out of standard productivity models to higher intelligent systems based on this human experience of "seeing it early", or "knowing the fail". Ever since the industry struggled with putting in all relevant measures or getting equipped with ammunitions to fight "bottlenecks" when they set in, there has been no end to failures. Failures happened, got repeated and varied with time, and in each such event the situations were attributed to machine, schedules, material, demand forecast and also the type and nature of human interactions. The net result - this vicious circle does not see any light and a huge investment on managing failures goes to waste. Many times the measure proves unproductive on account of the lack of knowledge of predictable outcomes of such failures.

The tricks of technology deployed on the manufacturing value chain has been doing quite a bit in making life relatively easier for engineers and production planners, with optimization of human interface in many areas. However the systems and tools in place have not been able to bring a permanent solution to the problem of "preventing failures". Starting from the non-availability of spares in maintenance activities to the non-utilization of production lines, inventory pile ups on the floor, and missing of shipment deadlines, the resilience of the supply chain still does not seem enough.

Probably predictive analytics seems to be the sun in the horizon to make the industry see a new dawn. It brings with it the promise of its self-grown knowledge base gathered over time, or by inputs of various system and human interfaces present in the current process which makes it raise the red flag much before the bottleneck rises to the surface. This is being made possible by its ability to have a real time integration with all the parts and elements of a supply chain - e.g. for an order placed or being put in system for fulfillment, the past history of the relevant applicability parameters in terms of demand forecast alignment, sourcing lead times, manufacturing lead times, shipping dependencies etc are all verified so as to ensure a no-failure path ahead.

The opportunity seems appropriate with the industry seeing some hope to get itself free from the clutches of never ending failures.  However the success of this framework would depend on the rate and scale of adaptability in the processes, and a positive mindset of all the stakeholders to contribute their own part.

The following are broad areas in which the manufacturing industry is expected to see the positive impacts or outcomes of this analytics framework:

Quality procedures and methodologies - A more varied mix and volume of data integrated from various elements is supposed to provide some definite insights on "parameters of measure" and lead to desired improvement.

Supply chain transparency - The demand forecast versus resource availability visibility at every stage of processing would ensure the necessary intelligence to plan for the resources - man, material, machine, money better and would also help "predict" a red flag of one step forward which is directly or indirectly dependent on failure of the current step.

Reduce or eliminate machine idle time - With more visibility of resources and desired outcomes (unified database) the production scheduling will become more intelligent generating higher or accurate utilizations.

Preventive Maintenance - With resources and utilizations in sync with the plan and performance of various elements - machines, systems, tools being monitored, breakdowns can be predicted based on historical information on "patterns of failures (knowledge base)"

The promise is huge. What's needed now is effective implementation and collaboration for developing a self-sustainable model in the manufacturing value chain which can say - "I know you are going to fail this way there".... because "... what you have been doing till now has its seed here ...," and help in delivering desired outcomes seamlessly.

October 24, 2016

Knowledge and Information Management on Value Added Tax (VAT)

Knowledge and information management on a global scale has an important meaning in shared services sector. Understanding this fact ensures a substantial advantage in this fast growing industry.

According to the latest ABSL (Association of Business Service Leaders) report, in 2015 there were 532 SSC/BPO centers operating and hiring approximately 150 thousand employees which makes Poland one of the fastest growing market in the region. Furthermore, Poland itself is one of the most frequently picked locations by companies willing to outsource their finance and accounting processes. Initially, only the basic operations (such as invoice processing) were transferred to the SSC/BPO, today operation of  complex processes, advanced knowledge and information management are required in order to stay competitive. VAT compliance is one of the best examples of such complex processes.

VAT compliance services are provided for the entities established across dozens of EU and non-EU countries. Since tax regulations in different countries vary greatly and the VAT itself is the main interest of the tax authorities, it is substantial to ensure the regularity of the process. Even the slightest incompatibility with the law regulations may cause serious financial penalties upon a client and as a consequence, resignation from the provision of services.

Before transferring VAT reporting to the SSC/BPO, global corporations had to employ tax and accounting specialists in every country, responsible for ensuring the compatibility of the VAT declarations with local tax regulations. The centralization of tax processes in SSC/BPO required a vast amount of knowledge about VAT regulations in countries where clients conduct their business activities. Knowledge and information management is not a one-time process. Using the SSC/BPO terminology, it is not possible to migrate a VAT process and leave it unattended. Constantly changing regulations in the local, EU and global law, result in continuous changes in the VAT related processes. In order to maintain high quality of the provided services, which means reporting in accordance with the VAT regulations, it is necessary to be on the SSC/BPO level - efficiently manage knowledge about VAT law amendments and implement them respectively.

Behind every process, there are people who are responsible for it and it is their competence, knowledge and effort which determines the quality of the services provided to the clients. Therefore, information and knowledge management cannot be defined primarily as acknowledgment and implementation of changes in the law, but it is equipping employees performing the reporting process with the sufficient level of knowledge. It is achievable through well planned and higher order training programs, completion of which enables the employee to conduct tax processes with full responsibility.

It is noteworthy, that at present tax authorities of the EU Member States require more detailed information for control purposes. The major project across Europe is Standard Audit File for Tax, the report of which requires not only substantial tax knowledge, but also considerable IT know-how. The scope and volume of the data demanded by the tax authorities is enormous, and the clients often use different accounting systems. It causes the data to be disorganized, which makes the efforts to extract them very significant and requiring cooperation of tax and IT departments. The times when a single accountant could manually fill and send a VAT declaration are inevitably coming to past.

October 12, 2016

Top down vs Bottom up. Four simple things to consider.

In this blog I have listed four elements that decide which implementation approach would be more effective when an organization is looking for procurement --or any other business function -- outsourcing.

What implementation approach would you consider to be the most successful for procurement outsourcing -- top-down or bottom-up? We get this question on a regular basis in discussions with top management on the potential outsourcing of procurement related activities. It is a tough question to answer and despite the fact that they are looking for single word answers or a crisp piece of advice, my response so far has always been "It depends".

The answer as to which is the preferred approach depends on a number of factors.

First, what processes/activities are being impacted and are in scope of being outsourced and to what extent have these processes already being centralized within the organization.  The higher the number of interactions required with the retained organization and/or suppliers the higher the impact and thereby the bigger the change requiring a more delicate approach which would favor bottom-up.

Secondly, what is the culture within the organization? How is and how has the organization been treating significant changes in the past and how successful have they been? If top-down didn't work before, why start now? And vice versa as well of course. So, the current or desired organizational culture can lead to either a bottom-up or top-down approach.

Thirdly, how much time is available or allowed for the transition? The assumption is that the bottom-up approach requires more time than the top-down approach. Bottom-up may require more time but due to the higher involvement of the employees throughout the organization it has a better chance to be sustainable. CFO's, CEO's and shareholders on the other hand require quick results pushing for shorter implementation timelines which would flip the coin to top-down. 

Finally, what is the preferred style of the top management, but more importantly, how receptive to change is your middle and lower management? Like it or not but that is often where the real power sits within the organization. Middle and lower management can make, slow down or break the whole transition. What has been their level of involvement in going for the decision to outsource in the first place? If they haven't been involved then, as top management, be mindful of the fact that people simply need some time to get used to the idea of a third party stepping in to take over some of their responsibilities. At the end, you as top management did also not make the decision to outsource overnight, did you? Just as with the organizational culture factor, the preferred style of the top management could lead to either the top-down or bottom-up as the preferred approach.

In this blog I have just listed four elements to be taken into account deciding which implementation approach would be more effective when an organization is looking for procurement --or any other business function -- outsourcing. 

Let me also share from my experiences as a former CPO. I ensured that my initial germ of going for outsourcing was seeded into my direct reports and then together with them we let the tree grow by defining what could be outsourced and what we should retain in-house. By doing so the actual belief that outsourcing could work started to grow. Once you have gained their trust they will be your biggest change agents and help you in driving the change throughout the organization. At the same time ensure you have gained buy-in from your top management so you can leverage that in case it is required as well.

Curious to get your views and thoughts on what you would consider to be the most effective implementation approach!!


October 6, 2016

You've got the best sourcing professionals - but do you get the results?

"Our Group CPO and all other CPOs in the company all make great contracted savings and the incentive structure in our sourcing function reflects this." claimed the Head of Strategic Development for Sourcing & Procurement in a global company...

Not too many years ago I met with the Head of Strategic Development for Sourcing & Procurement in a global company, a market leader in its industry.

Early on in our meeting he claimed frankly that his company has the best sourcing professionals, working out the best sourcing activities, and contracted savings in his industry.

And I believe him! The company is actually renowned worldwide as being one of the best schools for sourcing professionals.

He continued "Our Group CPO and all other CPOs in the company all make great contracted savings and the incentive structure in our sourcing function reflects this."

And then he went on - "But!.. We don't see these savings translating into bottom line results. It has actually come so far that our Group CPO and Group CFO are in a continuous disagreement about the outcome of our sourcing success. Therefore we have even installed a new role in our company - The Procurement CFO, in order to start measuring what really is the outcome end-to-end in our Source to Pay process. At least we must start knowing how big our leakage between contracted savings and operational savings results really is."

I do agree with the Head of Strategic Development. It is important to know how big the difference between sourcing savings and operational procurement results really is. That is a great start. But it is far from complete.

The challenge is to make the S2P orchestra play in harmony. In parallel, companies are managing captive and outsourced resources as part of their Sourcing & Procurement and Finance & Accounting organizations. They are also leveraging investments in technology, robotics, and process automation.

Of course the above provide opportunity to increase Spend Under Management at a much lower cost and with much higher efficiency. But what is it that really makes the difference?

How well and efficient companies can execute and realize their savings potential is what makes the difference. With a holistic S2P approach we can transform sourcing opportunities into bottom line results, pleasing both CFO, CPO, and probably the Board of Directors in any company.

What are your thoughts? Leave a comment below!

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