Smart shoring for agility and the myth of re-shoring for resilience
- Published: Friday, 07 May 2021 08:09
When crisis strikes, it might seem prudent to turn inward, bring your resources closer to home and batten down the hatches. Despite our global economy, it seems almost instinctual to retreat ‘home’ in the face of danger. This is the wrong approach, Gary Harrold argues.
Even before the pandemic there appeared to be a growing, protectionist trend towards relocation and re-shoring for core business functions. However, this tactic just doesn’t work in a world of continued economic insecurity. Global businesses cannot afford to retreat inwards. Instead they must use their positions to effectively re-organize operations to make them more flexible, dynamic, and cost-effective.
Six months into the pandemic my company, Swiss Post Solutions (SPS), conducted research looking at the approaches organizations had taken to ensure business continuity through the crisis. What was clear was that those that demonstrated localised thinking suffered when it came to operational resilience. Where business continuity plans were city and centre focused rather than enterprise-wise, continuity hit a major roadblock.
A key lesson from the pandemic is that companies need to de-localise core functions. It’s not enough just to have a footprint of service centres throughout the world, they need to be tightly connected so that work can be moved between different locations or shifted from offshore to onshore sites.
The truth is that, in the future the most resilient companies will take a connected, global approach that does not rely on a single location or geography. Reshoring of key processes may seem like a protective move, but is not one that allows for flexibility and dynamism in a global marketplace.
Nearshore, offshore, reshore; where’s the sweet spot?
Shoring isn’t a one-size strategy.
Pure offshoring models in low-cost countries have been falling in popularity for a number of years. Advances in technology mean that many low-skill, repetitive, tasks can now be automated, while companies are placing greater emphasis on quality of service rather than just cost.
As a result, organizations have been looking at new approaches such as re-shoring, bringing service centers back to home countries, or near-shoring, placing units in close-by regions. What these strategies fail to take advantage of are smarter, more agile models that we describe as ‘smart shoring’.
This approach can be broken down into two key strategies. Firstly, smart shoring; breaking processes into components and using shoring strategy to maximise quality and cost-effectiveness. Then, rapid scaling; quickly scaling operations in response to changes in the business environment
This dynamic approach allows companies to reduce costs by leveraging different locations around the world, whilst maintaining or even improving performance, quality, and resilience. Key back office tasks will be digitised and split between a network of operating centers located in onshore, nearshore and offshore locations. These units will have standardised business processes and operating procedures, and will draw from a global pool of trained workers, allowing workflows to be easily shifted between sites in case of local disruptions.
Approached in the right way, the result is that operational models enjoy the same quality as an onshore solution, but with the lower costs and greater flexibility associated with offshoring and nearshoring.
Exploring smart shoring strategy
So, how does it work in practice?
Firstly, it’s all about smart processes. Workflows are analysed and then broken down into their component parts. High-volume, repetitive tasks are automated. The remaining tasks in the process are then segmented and completed in the optimal shoring location based on their complexity. Simple functions are bundled and completed in offshore locations, where cost-savings can be realised.
Exceptions or complex cases are typically routed to in-house or nearshore centers. Importantly, the whole workflow is tightly managed and controlled through a unified technology platform. By maintaining onshore locations as part of the solution, a number of regulatory and compliance issues can be covered.
The key enabler for smart shoring is connecting global service centres so that you can seamlessly move the transactions from one location to the other. Each location must have the technology and the trained workers to be able to pick up the workload that is incoming. This global network of centres increases productivity and makes businesses more resilient, as they can shift workflows between centers when faced with disruption.
For example, SPS designed a smart shoring model for a major German telecoms provider, which was receiving 50m customer service requests per year. We started by analysing the 149 different types of service requests that the company received. Standard cases such as payment processing, address changes, or requests for SIM card activation were either automated or sent to SPS’ offshore center in Vietnam, where they were completed by our trained team. More complex cases were automatically routed to a customer-care team based in an onshore centre in Germany. By segmenting tasks and combining shoring models, we were able to improve service times and customer satisfaction, while staying in full compliance with German legislation.
Quite simply, smart shoring enables companies to combine the advantages of different locations all over the world, savings costs while still increasing productivity, speed and quality.
Smart shoring meets rapid scaling
There are many reasons why companies may see sudden shifts in demand patterns.
Some firms face seasonal peaks in their output. Online retailers, for example, have huge surges in volume around key shopping seasons. A company may have recently expanded into a new market or had an extremely successful product launch.
Alternatively, a company may have been hit with major disruption and has to react quickly. During the initial response to the COVID-19 pandemic, a number of companies had to rapidly increase staff in certain locations, as other units were forced to close.
But customers don’t care about these challenges. They expect the same quality response in all circumstances, with no drop-off in service. The ability to rapidly scale, using skilled operators across a network of global service centers, provides for flexibility at a moment's notice.
Having the capability to re-assign employees is particularly important when it comes to dealing with seasonal peaks. One of SPS’ clients was seeing 20 percent business growth per year in its car-leasing business. It was struggling to keep up with such rapid growth whilst also keeping costs manageable in what is a highly price sensitive industry. It set about using a nearshore partner unit to handle a range of end-to-end back office processes such as master data management for contracts, customer correspondence, invoices processing, and claims management. Such as a strategy is easily scalable and could handle volume increases, while offering significant cost savings when compared with the home market.
Using shared service centres across a global network with interoperable systems and workforces means digital and physical workloads can be easily shifted between sites, allowing complex back office processes to be broken down and completed in the optimum location.
This global scale also allows companies to run ‘sunset’ strategies, where work in Europe or the US is sent to Asia overnight. It is then completed in the Asian time zone and is ready by morning in the original locations. By combining standardised processes with a connected global infrastructure, companies can reduce exposure and increase efficiency. Whatever the disruption or challenge, using a flexible shoring model absorbs the shocks while maintaining the highest standards of performance and productivity.
This smart shoring, shared service centre, approach means there are no upfront capital investments, meaning a reduction of real-estate footprint. The backbone of this approach is cloud-based technologies that enable standardised processes, digital workflows and flexible workload balancing.
By combining a skilled workforce with advanced technology across a smart shoring model, complex tasks can be assigned in an agile way, adding an extra level of resilience. By using a flexible model, the right technology for the right task, in the right location, organizations can move away from rigid, inward thinking and towards a global outlook cemented in agility and resilience.
Gary Harrold, CEO UK & Ireland, Swiss Post Solutions. Read more about smart shoring here.