Industry news

The era when shippers maintained their own fleet of vehicles is long gone. Outsourcing in transport management has become a fixture in the portfolio of logistics managers. But shippers have become much more selective, and the goal has moved beyond just driving down costs. Above all, the quality of the services and internal processes is seen as increasingly important.

The process of calling for tenders and ultimately awarding a contract is generally a lengthy one. First, a shipper has to analyse what they need to ship to which regions and under which terms and tariff structures. The data needed to call for tenders – volumes, routes, products – is in the shipper’s freight management system. Once consolidated, this data provides the basis for soliciting quotes.

Another key point: Who should be invited to pitch? Which carrier offers which spectrum of services, and who is strong on which routes? Carrier directories or industry association rankings are helpful in selecting service providers for consideration.

Today, nearly everyone relies on IT support for tender management. Most shippers use simple tools such as email and file attachments. Transport service providers typically use spreadsheet templates to prepare a quote, and all quotes are then collected and compared in spreadsheets as well. This process makes perfect sense for smaller businesses with fairly basic transport needs. But the complexity of tender management can quickly escalate, making this method difficult to manage. For companies calling for tenders several times a year it makes sense to use specialised IT solutions.

Tender management software can help standardise outsourcing methodologies and simplify processes through focus on absolute transparency, tamperproof archiving, and automation. These IT solutions enable businesses to define standardised texts, using their existing documentation – shipment data, general terms and conditions, and international commercial terms (Incoterms). Such documentation can then be attached to emails along with the call for tenders. The ease with which documents are duplicated means that shippers can reach out to new service providers, gaining a clearer picture of their market. The call for tenders that carriers receive in such a form includes a matrix for entering quotes, making it easy for the shipper’s logistics manager to compare and work with the data. Such software can also simulate various scenarios and evolving supply structures, and plug in current data to calculate quotes. This helps to find out which transport partners offer the best terms for various scenarios, such as the loss of a major client or the relocation of a distribution centre.

Carriers can also benefit from targeted IT support and sometimes use web portals to issue calls for tenders. Some of these portals are free to use and don’t require a contract with the portal operator. It’s also important for outsourcers to be able to display all their information and specifications, and for logistics providers to be able to submit quotes that include more than just shipping rates and prices – lead times, the price for door-to-door delivery, and all additional fees, for example.

Of course, in addition to a good price, good quality of service is of great importance, too. So when the collaboration with a carrier is working well in terms of cost and performance efficiency, it’s probably not worth changing, as every change is associated with a certain transition phase and risks. It generally takes some time before all the supply chain partners work together smoothly. That’s why it’s crucial to look at the whole picture and not just at the price.

Should the deal go ahead, Sainsbury’s CEO Mike Coupe and CFO John Rogers are targeting £120m in synergies from the acquisition of HRG, with the majority coming from consolidation of store locations and revenue synergies as opposed to “slash and burn” in the back office. Their stated aim is to "Bring together multi-channel capabilities including digital, store and delivery networks to provide fast, flexible and reliable product fulfillment to store and to home across a wide range of food and non-food products”.

To enable this vision there will need to be a strategy to bring together the best of the IT systems and services to create a best-in-class consolidated multi-channel platform. And of course this will inevitably require a hard look at the third party relationships that each organisation has in place to deliver their IT services.

Accenture has been working with HRG since 2013 in a strategic transformation role to reposition Argos as a digital retailer, and the two organisations are publicly declaring that this has led to a sales increase of £165m and a 28 per cent increase in operating profit. Compare this to Sainsbury’s experience with Accenture, where a similarly ambitious transformation programme ended five years early with an ignominious divorce and chief executive Justin King saying that it was failing to deliver value.

A lot of water has passed under the bridge since then but corporate memory is long and John Rudoe, CIO of Sainsbury’s, will doubtless be pondering his vision for the combined IT organisation and how this will impact the technology and sourcing strategy.

Creation of a single strategy does not preclude continuing to operate separate relationships with the third party providers that are involved in delivering IT services to the two businesses. In fact there may be benefit in a multi-source strategy, particularly if lines can be drawn to delineate between the “fast” digital transformation activities and the “slow” enterprise IT management activities to create a clear bimodal organisation. The challenge comes in the history here, with both organisations pursuing a digital transformation strategy, with their supporting providers Accenture on the one side and TCS on the other.

Whatever happens there will be a significant change of scope for one or other of these two providers and Sainsbury’s will have to think through some important questions in a structured way, including:

• Does the IT strategy for the combined business clearly align with the previous strategy of one or the other, and therefore point towards adoption of one or other of the IT service providers as the primary relationship?

• Is there any appetite to maintain a relationship with two strategic providers, and if so is the organisation mature enough to manage the inevitable commercial and operational tensions that will arise?

• What provisions are there in the existing relationships relating to change of control and early/partial termination? Are there any penalties for such a scenario?

• Do these two providers have a history of operating effectively in a multi-sourced environment and are they likely to “play nicely”?

Of course, with the recent bid from Steinhoff, all this speculation may be moot, but one thing seems sure and that is that there will be much thought given to this between now and 18th March (the deadline for a revised offer from Sainsburys) both by Jon Rudoe and his team and by the account executives at TCS and Accenture.

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The National Outsourcing Association (NOA) has announced a new NOA Council, the body responsible for shaping the strategic focus of the NOA, and delivering their vision which will help to grow and shape the UK outsourcing industry in 2016 as well as improve the positive reputation of outsourcing globally.

Representatives from Zurich Insurance, Centrica, Conduit Global and Egypt’s Information Technology Industry Development Agency (ITIDA) all features as new additions to the 2016 Council. The NOA Council is voted in by the NOA membership, which comprises of 350+ companies across the entire outsourcing industry. Each individual has been elected off the back of a proposed manifesto, in which they outline their objectives and vision for all aspects of outsourcing in 2016 and beyond. Manifesto subjects include:

• Moving robotic process automation (RPA) from hype to reality [Symphony Ventures]

• Governance in digital ecosystem partnerships [Avasant]

• Best practice standards and corporate accreditation [BBC]

The Council, who participate on a voluntary basis, includes buyers, service providers, advisors and consultants working across the outsourcing industry. They meet officially for the first time on Monday 14th March to determine a framework for how their visions and manifesto objectives will be delivered throughout 2016.

Kerry Hallard, CEO of the NOA, commented: “I am extremely pleased with the broad representation and sheer depth of experience present within this year’s NOA Council. The newly appointed representatives will be integral to the delivery of the NOA’s future strategy, furthering our efforts to professionalise the industry and strengthen the UK’s future as the strategic global hub of outsourcing. My thanks go out to last year’s Council for their valuable contributions during 2015.”

See the 2016 NOA Council in full.

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Related: NOA Appoints Capita’s Tom Quigley as Marketing Director

Alsbridge has expanded its business to the Antipodes (Australia and New Zealand), setting up offices in Sydney.

Alsbridge provides consultancy services in the areas of outsourcing, robotic process automation and cloud transfer services. The company expects both the Australian and New Zealander outsourcing market to boom in the coming years, as companies looking to save money by contracting out parts of their business processes.

According to its directors, Dom Bower and David Snell, both the Australian and the Kiwi outsourcing sectors are yet to reach maturity. Bower pointed to the local resources boom at the time of the 2008 financial crisis as the main reason for the sector’s underdevelopment.

The boom meant that both Australia and New Zealand were not faced with the budgetary pressures that opened a space for outsourcing as a cost saving resource in countries such as the UK and the US.

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Related: Alsbridge Acquires Source in Bid for UK Expansion

For the second in a row, Firstsource Solutions has taken home the award for Outsource Contact Centre of the Year at the Welsh Contact Centre Awards held in Cardiff last night.

The annual ceremony celebrates the best of the Welsh contact centre industry, which contributes £650m to the country’s economy.

According to Sandra Busby, Managing Director of the Welsh Contact Centre Forum, “The sector is enormously important to the Welsh economy and contributes a huge amount both financially and socially to communities throughout Wales”.

Firstsource owns one of Cardiff’s largest contact centres, which employs over 1000 people. Last week, the company announced its plans for the creation of a further 300 jobs in Cardiff.

In a press release following the award announcement, Kathryn Chivers, Firstsource’s VP of Sales Operations declared that “the win is testament to the hard work and dedication of our superb team in Cardiff.”

“As we continue to expand our operations in Wales, we are always on the lookout for talented and motivated people to join our team,” she concluded.

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Related: Firstsource champions university-accredited degree for contact centre staff

Today’s IT landscape is characterised by an increased focus on a “bi-modal” approach to management, whereby CIOs make a conscious distinction between “run the business” services on the one hand, and “change the business” services on the other. The run the business or “slow” side of IT oversees stability, security and up-time, and places a premium on rigorous testing and process discipline. The change the business or “fast” side of IT, meanwhile, is all about flexibility, agility and a fail fast mentality.

While these dual streams of service delivery are well established, the recognition that different types of processes, organisational structures and financial controls are needed for each signals a heightened level of management maturity, as well a recognition of the increasingly ubiquitous role of IT in business. From a sourcing perspective, clients have traditionally worked with service providers to address run the business/slow IT requirements. By contrast, change the business/fast IT activities have typically stayed in-house within the domain of the internal IT organisation.

Why have outsourcers not played a more prominent role in change the business IT functions? One fundamental obstacle is the established model of outsourced service delivery. Service providers typically prepare and submit a proposal for a specific scope of work, execute the agreed-upon services and then charge a fee based on the terms of the agreement. The trouble is, this discrete, project-based approach doesn’t apply to the needs of “change the business” IT, where teams quickly align and realign to services and products, and where success is rarely measured as a function of investment in a project. To take an example, a traditional sourcing arrangement simply doesn’t accommodate the “fail fast” philosophy of change the business IT.

Today, some CIOs are recognising that excluding service providers from the fast side of IT results in expertise, and for service providers to deliver additional value to their customers. As a result, they’re reconsidering their approach to bi-modal IT, and looking for ways to make service delivery agreements more amenable to the requirements of change the business IT.

At a high level, CIOs are working with their service provider partners to develop delivery models that assess the value that a vendor delivers to the business, and then link the provider’s compensation to that value contribution. One innovative approach being taken is to dedicate service provider resources to a client’s agile service teams on a long-term basis. This enables enhanced control, knowledge management and training that typically wouldn’t result from a more tactical contracted resource model. The dedicated resource approach offers opportunities to innovate and develop new compensation models. As resources are invested in long-term success, value can be assessed against overall service performance rather than the traditional deliverables-based approach.

Bringing service providers into the fold of fast IT requires a change in the CIO’s role to more of a conductor or orchestrator who ensures that service providers stay engaged on both sides of the bi-modal IT model. Balancing “fast” and “slow” presents a variety of new challenges, not least of which is understanding the role service providers play in delivering business value. Recognising this and building an embedded agile capability can enhance the role of providers and present the CIO with greater flexibility in meeting these demands.

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In recent weeks, multiple articles have appeared in the Guardian claiming that outsourcing has fallen out of favour with UK local government, and encouraging councils to bring as many services back in-house as possible.

These articles – which are largely opinion-based – fly in the face of recent research conducted by arvato published in the Outsourcing Yearbook 2016, which saw public sector outsourcing surge in popularity in the second half of 2015. The total value of local government outsourcing contracts more than trebled in the third quarter when compared to the quarter before.

arvato even found that local authorities are signing longer agreements, “with the average length of contracts nearly doubling to 102 months in Q3, from 54 months the previous quarter”. This is unexpected news, as NOA research (also found in the Outsourcing Yearbook) suggests that outsourcing contracts on the whole are getting shorter.

arvato’s report claims that, due to the possibilities offered by shared services and advances in robotic process automation (RPA), the increase in public sector outsourcing is set to continue as councils seek new ways to operate in a more cost effective manner.

But should councils be outsourcing less? Some reporters at the Guardian certainly think so, pointing to recent public sector scandals involving Serco and G4S, along with successful case studies where council backsourcing has proven to be successful. A report is also cited suggesting that over 25 per cent of outsourcing arrangements involving the public sector have failed to deliver. Yet, as Professional Outsourcing points out, “any report that says just over a quarter of projects have failed must by extension be saying that almost three quarters have been a success”.

2015 was also a year when local government bodies looked to outsource in an increasingly innovative manner. The most prominent example is Northamptonshire County Council, which proposed plans to save £150 million through the creation of four new service provider companies, all created and part-owned by the council. The Financial Times frequently report cases like these throughout the year, arguing that more and more councils are embracing outsourcing as part of an austerity-driven innovation push.

This evidence suggests many claims made by the Guardian are spurious at best. And while it is important for local government to rectify failing outsourcing contracts – and even terminate them while necessary – it is equally vital for council representatives to understand that outsourcing can be highly beneficial when properly thought out and implemented correctly.

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In April, the National Outsourcing Association hosts its first Public Sector Conference offering civil servant insight into what the future of government outsourcing holds.

The National Outsourcing Association has launched its latest Outsourcing Yearbook, the annual compendium of outsourcing insight.

The 2016 edition features:

• The NOA’s own Outsourcing in 2020 research, looking into what trends and technologies will impact on the sourcing industry between now and 2020

• Contracting research provided by the law firm Eversheds, studying how buyers of outsourcing can best prepare for a mismatch between expectation and supplier delivery

• A legal round-up of 2015 provided by law firms active in the industry

• Predictions for the future provided by leading industry analysts

• A whole host of articles and video interviews, covering a wide range of future-focused topics, provided by some of the most prominent organisations from the buy and supply-side

• A directory of active outsourcing service providers

The NOA has emphasised that now is a pivotal time for those working in the outsourcing industry, with changes that took place over the last 12 months surpassing the number of changes seen throughout the last 12 years.

The 2016 Yearbook has been compiled to help those organisations and individuals determine what the future has in store for them, and how to adapt accordingly.

Access the Outsourcing Yearbook 2016 online free.

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Related: NOA says Brexit is no good for outsourcing, but Britain needs reformed EU membership

npower has confirmed that it will be cutting 2,400 jobs based in the UK - roughly one-fifth of its workforce – after announcing loses of £106 million for 2015.

The decision has left service providers contracted by the company uneasy. On the one hand, the decision could result in increased outsourcing as npower looks to save money in other areas, but existing outsourcing contracts are equally likely to be cut for similar reasons.

npower experienced a tumultuous 2015, losing 351,000 customer accounts, and being subject to a record £26 million fine in December, provoked by the sheer quantity of customer complaints over billing received throughout the year.

Paul Coffey, chief executive at npower, attributed the failures to a business trying to do “too much, too soon”, while Unison general secretary Dave Prentis has accused the German-owned company of not being “committed to its UK operations”.

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Related: Interserve cleaners punished after writing to foreign secretary

The National Outsourcing Association (NOA) has appointed Tom Quigley – former head of marketing and events for Capita’s Insurance & Benefits Services division – as marketing director to drive the NOA’s communications programmes, overall marketing strategy and worldwide growth.

Tom brings a wealth of experience to the role, having worked in senior marketing and communications roles internationally for Capita since 2008. His addition to the NOA’s executive team will be essential as the association looks to promote brand awareness internationally, and expand its presence in the UK, Europe and beyond to the benefit of NOA members and the wider outsourcing community.

“As a former representative of the NOA Council, I have spent the last year helping to shape the strategic focus of the NOA,” Tom commented. “I look forward to harnessing this experience and taking it a step further as marketing director. The NOA has plenty to offer key outsourcing growth markets abroad, India and China being just two examples, and I intend to make sure that individuals, companies and governments with a vested interest in outsourcing globally are aware of this.”

Kerry Hallard, CEO of the NOA, added: “I’m absolutely thrilled that Tom has decided to come join us at the NOA. With his keen business insight and intuition for effective marketing, I am confident he will have an instant impact, and prove to be an essential part of the NOA achieving its growth ambitions. His strong pre-existing relationships within the NOA membership are, of course, an added bonus.”

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Related: Capita set to win £139m deal across five councils