From the Desk of the President

A few days back, as I was browsing through some news websites, one caption caught my attention.  It asked: “Is American Economy still down?”

This piqued my interest.  No, the economy is not down; in fact, the American economy of the recession of 2008 -2009 has changed significantly. The American economy is now growing at almost 3% annually, which is a big number for any developed economy.  Yet when we look around, the picture is not as good as expected; the unemployment rate remains high and the confidence of general consumers has not regained its peak 2006-2007 levels.  The housing market has yet to pick up, though signs of recovery are not far away.

So, what has changed? If you look on the positive side of economic recovery, the Big Three auto makers are holding their own, with Ford leading the pack.  Ford’s share price, which traded for $1.59 in 2009, touched $13 in last 3 months, nearly an eightfold increase in share value.  While Starbucks has closed nearly 1,000 stores in the US, they have opened more than 400 stores in China alone; this American company is still growing and expanding.  Another indicator of positive change is the 8 to 10 percent increase in the number of tourists visiting the USA, which means direct inflow of capital and export sale of services. Tourists pay for services such as hotels, car rentals, and admission tickets and so on.

It is de rigueur  these days to talk about job loss and then link it directly to Global Sourcing.  We in North America feel that companies that outsource are responsible for the loss of jobs. But, contrary to the belief that economic growth is a zero sum game, the rise of economic growth in other parts of the world allows the US to gain a great deal.  For example, Canadian giant Bombardier has almost half of the world’s requirements to build modern rail transport systems. Boeing is leading supplier of aircrafts; other related companies are building/upgrading infrastructure worldwide. What does this means for Global Sourcing?  It means that some economies will cater to the manufacturing side and some will cater to the service side.  For example, China is the manufacturing hub of the world, so that is their core competency, while India and part of Europe are showing their core competencies in the low-end IT and service sectors.

North America has led the world in Innovation:  Facebook, Google and iPhone are just few recent examples.  Besides being the largest food producers and exporters of the world, we are building the latest in infrastructure, telecom, networks, and information gateways worldwide.  Most American businesses have learned to work in a lean and more efficient way.  They are good at finding markets and customers and producing goods and services more economically.

What does this mean to us in Global Sourcing?   Simply put, American businesses are not wasting resources; in fact, they are increasingly creative with the resources they have.  Now is the time for our vendors and suppliers to be as creative and innovative as their customers are. In order to do so, vendors and suppliers need to source the knowledge and adaptability of their clients. Where does this knowledge come from? You guessed it, right from other side of the globe. This obvious need for a global conversation signifies the role the Global Sourcing Council is going to play. The result? Greater prosperity for both sides of the world.

I look forward to developing this discussion further with the involvement of our readers… □

Sanjay Sharma has over twenty years of Global experience in Information Technology, Supply Chain and Project Management. Sanjay has managed backend Sourcing and Procurement operations for large organizations in Europe, Far East & Australia. He led procurement operations for a large industrial goods manufacturing organization. Sanjay has articles published in business magazines and publications on the subjects of procurement, supply chain and project management. Sanjay speaks at Conferences, Seminars and Symposiums. He works as consultant for Project Management and Global Sourcing. In addition he teaches Project Management subjects. His email contact is sanjaysrr@gmail.com.

 

 

Exciting News from the 2012 3S Awards!

The Global Sourcing Council (GSC), a New York based organization that promotes sustainable and socially responsible sourcing, received a $135K grant from The Rockefeller Foundation, to help advance its 2012 GSC 3S Awards program. The $135K grant will go towards promoting sustainable and socially responsible global development which will result in the well-being of people around the world. The 3S Awards will recognize and provide visibility to the exceptional achievements in the global sourcing marketplace by individuals and organizations for their commitment towards sustainability and socially responsible sourcing practices. It is the only award of its kind in the outsourcing industry.

The Rockefeller Foundation is pleased to provide support to the Global Sourcing Council’s 2012 3S Awards. The awards are an excellent mechanism for showcasing businesses that create employment opportunities for people with limited opportunity for sustainable employment by fostering a critical new arm of the outsourcing industry called Impact Sourcing (IS), states Lillian W. Chege, The Rockefeller Foundation. “What demarks the 3SA Program and the significance of 3SA recognition for participants is the emphasis placed by the GSC on authenticity & integrity in corporate leadership. It takes a particular kind of leadership not only to succeed in business – but to do so in a sustainable and socially responsible way. Beyond traditional corporate leadership, we seek to inspire and recognize the efforts of a new generation of leadership that sees the bigger view and “connects the dots”. Delivering shareholder value is admirable. To do so while making an identifiably positive impact on society merits greater recognition”, David T. Kinnear, Chairman of the Global Sourcing Council.

Don’t Miss These Outstanding June Industry Events!

The 2012 3S Awards is proud to support its strategic partners, the 2012 World BPO Forum and the 2012 Responsible Business Summit, an event from the Ethical Corporation. Both events offer outstanding opportunities for business development, knowledge acquisition and impactful networking.  Mark your calendars to attend these leading industry events.

World BPO Forum, June 26-27th, 2012, New York

The 5th Annual World BPO/ITO Forum is taking place in Manhattan on June 26-27th, is proud to announce that Surya Kant, President, North America, UK and Europe from Tata Consultancy Services (TCS) will be the Opening Keynote speaker. Mr. Kant joins an impressive lineup including Robert Reich, Professor of Public Policy, University of California at Berkeley and former Secretary of Labor under President William J. Clinton, who will be the first day Closing Keynote.

In addition to enabling buyers and sellers of services to meet each other, the World BPO/ITO Forum is a unique assembly of some of the world’s leading thinkers who will share insights and discuss how smart sourcing is increasingly becoming part of a company’s core business agenda.

With only a few weeks to go, and limited seats available, we urge you to submit your registration request here to secure your participation. Visit www.worldbpoforum.com for the most up-to-date event developments and announcements.

Responsible Business Summit USA, June 28-29th 2012, New York

Learn how to make corporate responsibility a core aspect of organizational culture; collaborate with key stakeholders; and use CSR to enhance reputation and gain competitive edge.

Collaboration is one of the key themes for our Responsible Business Summit USA

GlobeScan shows 74% of sustainability experts surveyed believe that environmental/social activism will increase significantly in the coming years. In the past major corporate organizations such as Nestle have locked horns with NGO and civil society such as Greenpeace. Our summit has the likes of Gap Inc and Oxfam America showing how to build effective partnerships with key stakeholders such as NGOs, industry associations, regulators and even competitors.

Have a look at the agenda to see this and other sessions in more detail: http://events.ethicalcorp.com/rbsusa/All GSC members receive a $400 off the registration fee with a code of GSC40.

Ethical Corporation provides business intelligence for sustainability to more than 3,000 multinational companies every year. We publish the leading responsible business magazine, website, and research reports. Our conferences are widely recognized as the best in the field of corporate responsibility and sustainability.

 

 

One on One with Rich Cohen

 

CEO, Distant Village Packaging, 2011 Winner: Best in 3sClass – Most Innovative Program

Here is an interview by Wanda Lopach, Chair of the GSC3S Awards, with Rich Cohen, founder and CEO of Distant Village Packaging, winner of the special “Best in 3sClass – Most Innovative Program” Award in 2011.  Distant Village is an award-winning sustainable design and production firm producing handmade packaging and products from natural materials.  Innovative design, socially-responsible fair trade business and triple-bottom-line sustainability is at the foundation of everything created at Distant Village.

WL:  What was the significance of this recognition for Distant Village?

RC:  As one of the early pioneers in sustainable packaging, the recognition we receive from this award is especially valuable.  It validates businesses and people care about packaging which is authentically sustainable, specifically the direct and positive impact we have had uplifting small artisan communities.  We proudly display our award and announce it broadly.  The award has increased the attention and focus on Distant Village’s mission beyond the beauty and elegance of the amazing sustainable packaging we are producing for premium brands.

WL:  What prompted you to participate last year in the GSC 3s Award Program?

RC:  A friend encouraged me, and we decided to enter after much prodding.  Of course, we were happy we decided to join!

WL: The 2011 GSC 3sA winners have received a modest cash awards to advance their 3s Programs.  Can you please share with us how Distant Village has utilized the award?  What are the results/outcomes?

RC:  As a small business we have fundamental operational needs that require funding.  As we develop new product lines, enter new markets, and engage in more online marketing and social media, the cash award was helpful in funding activities in these areas.

WL: Please unveil for us, what is on the agenda of Distant Village for the incoming year?

RC:  The big news for the coming year is the rapidly growing interest in our Wild Grass Pressure Sensitive Adhesive Labels, called PURE Labels.  Businesses are seeking to establish more sustainable packaging and labels are no exception.  We are the world’s only producer of this style label and we expect tremendous growth in the coming year.  In addition to our orders in the USA, we have already shipped labels to Europe, Australia, and Canada. □

 

Rich Cohen is the founder and CEO of Distant Village Packaging, a specialty packaging and design company with an established reputation in sustainability since 2000.  Mr. Cohen has lectured at Loyola University, Bradley University, and University of Illinois Chicago on topics ranging from sustainability to international strategic planning.  Every chance he can, he enjoys running with his family in forest preserves and sharing whatever he can about nature and social responsibility to the future generations.  You may contact him at rich@distantvillage.com

 


Impact Sourcing: A Common Interest to Promote Sustainable Growth and Social Responsibility

Last December, I was invited to Johannesburg to attend a conference entitled “Impact Sourcing: An Emerging Path to Sustainable Job Creation?” The event, supported by the Rockefeller Foundation, offered an exciting opportunity to gain insight into some of the most encouraging recent developments in education and job creation and a chance to recognize some of the people at the forefront of these fields. Perhaps more importantly, it provoked some interesting points for discussion that I would like to share with you over the course of this article.

Impact sourcing is a new term that refers to the purchase of administrative services from a remote area where the lack of job creation has a significant detrimental impact on the local populace.

This concept provides a means in which the converging interests of two different organizations, each with their own separate motives, can be mutually realized. The creation of jobs in developing nations is beneficial for both the governments of these nations, seeking to mitigate economic stagnation, and the outsourcing industry, allured by the promise of low-cost labor.

In order to understand how impact sourcing can help meet this demand while also becoming an agent for sustainable growth and social responsibility, it is first necessary to examine the various benefits it provides for each organization.

First and foremost, impact sourcing provides a stimulus for the economies of emergent nations. Governments of developing countries are often faced with very high unemployment rates among younger generations, due in no small part to the scarcity of job opportunities in the agricultural and industrial sectors. A large percentage of young people drop out of school because their parents cannot afford the cost. Unable to then find employment in their villages, many of them relocate into nearby towns, often contributing to the growing population of slums.

Because impact sourcing allows for the rapid creation of jobs with limited capital investment, it can help establish administrative positions in these small villages and provide local young people with the training necessary to fill them. Electricity and an internet connection are the only prerequisites.

Impact sourcing also provides obvious benefits to the outsourcing industry in the form of cheap and plentiful labor. The outsourcing industry has been developed on a business model based upon labor arbitrage, a term denoting that the greater the difference in average salaries between the country of the end customer and the country of the delivery center, the greater the savings for the end customer and the outsourcing service provider (SP).

The SPs in Europe have spread from Western Europe to Eastern Europe, then to India, and now, to a lesser degree, to China, South America, and Africa.

In each country, they settle first in the main city (tier 1), which typically contains a thriving labor market and an educated workforce. They then create delivery centers in smaller cities (tier 2), where salaries are generally lower, and eventually move to even smaller cities (tier 3), where they find even cheaper labor and a more loyal workforce deprived of other economic opportunities.

The bane of the outsourcing industry is its high turnover rate (+20-30% per year). Employees often take the first job offered, settling for minimum wage, but after a few months move on to other similar jobs offering a slight salary increase. This recurring cycle of hiring and training is costly; however, it ultimately proves more financially prudent than increasing the salaries of current and prospective employees.

The current business model of the outsourcing industry, dependent upon an already entrenched infrastructure and educated workforce, has reached the end of the road: the remote villages of India and Africa. There is nothing beyond except jungle or desert.

Impact sourcing proposes a new model in which an educated workforce is established from the ground up, not simply tapped from an already existing pool. Is this model viable? It relies heavily upon the cooperation of two fundamental pillars: the government and the service provider.

The government will initiate and support the creation of employment opportunities through the financing of the infrastructure and by providing administrative work to the service provider. These unskilled, repetitive, bureaucratic tasks form the “low base of the pyramid.”

The service provider will be a reliable organization who will interface with the end user. The non-governmental client will trust the organization and provide loyalty and support when it decides to move part of the work to a smaller village. The service provider will ensure full quality of service wherever the job is performed. The employees will be satisfied because they received education, training, and a job.

 

There are, however, fundamental risks involved in the implementation of impact sourcing for both the employers and the employees. For the employers, there are concerns about the profit potential of an essentially weak business model. The creation of value is a very simple process. It consists of the input, the transformation process, and the output. If the output is more valuable than the input, the process is considered profitable. For example, a brick possesses more inherent value than a handful of clay and water.

On the other hand, if you have a bureaucratic process that yields little difference between the input and the output, those tasks will be eliminated in the short or middle term through the process of reengineering or technology. Betting on the “low base of the pyramid” is a short-term bet that may create false hopes if there is no commitment to move up the pyramid and bring more valuable and cost-effective tasks to the employees.

The outsourcing providers and their clients are profit-oriented organizations with little philanthropic motivation. Moving work to a remote location results in concerns regarding security, confidentiality, reliability, and safety of working conditions that would otherwise not exist in a closed, secured town building with supervision, management, and pool of employees to ensure business continuity. The client will not be willing to put its company image and business at risk if the working conditions and the service level agreements (SLAs) in a small village are not identical to those in a second-tier city.

For the employees, there are understandable concerns about exploitation. In these small villages, the service provider often assumes a monopolistic position over its employees. There is no other employer around, therefore allowing the service provider to set the precedent for wages and working conditions. For example, there was a discussion about a scheme in which the employee may have to take out a loan to pay for his education and training. The loan would be gradually repaid through deductions to his paycheck, fostering in the employee a sense of obligatory loyalty to his job.

I do not, however, want to conclude on a negative tone. Some of the young people I met in South Africa who received training and employment were extraordinarily bright, happy, skilled, and motivated. The managers of those pilot training and delivery centers are wonderful personalities who give testament to humanity’s ability to positively change the world.

Ultimately, when considering the viability of impact sourcing, one essential question remains: What steps need to be taken in order to ensure that such a promising idea does not allow for the exploitation of poor people? I propose the implementation of a process and control for impact sourcing similar to the one put in place for the fair trade agricultural products grown by small farmers in developing countries. Another option is to have an association, like the Global Sourcing Council in the United States, issue certification for the impact sourcing providers and ensure end users that an “Impact Sourcing Code” related to sustainable growth and social responsibility is respected and enforced.

There are certainly many ways to further the development of impact sourcing that will benefit all the stakeholders. If you have suggestions, please do not hesitate to open the dialog. I will collect and forward your ideas to the promoters of impact sourcing. □

 

François Degueldre is a seasoned BPO and ITO professional with an expert foundation in finance and the global management of multinational enterprises. François currently serves as Managing Director of OPULUS where he leads consulting efforts in financial transformation, strategy and planning initiatives, and sourcing initiatives from location assessments to negotiation and third party selection through implementation.  His email is francois.degueldre@opulusconsulting.com