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Maximizing Efficiency and Cost Savings with Results-Focused, Modularized Outsourcing (ROM)
Global supply chain blogs
Vivek Sood: Sydney based managing director of Global Supply Chain Group, a strategy consultancy specializing in supply chains. More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available www.globalscgroup.com
Vivek is the Managing Director of Global Supply Chain Group, a boutique strategy consulting firm specialising in Supply Chain Strategies, and headquartered in Sydney, Australia . He has over 24 years of experience in strategic transformations and operational excellence within global supply chains. Prior to co-founding Global Supply Chain Group in January 2000, Vivek was a management consultant with top-tier strategy consulting firm Booz Allen & Hamilton.
Vivek provides strategic operations and supply chain advice to boards and senior management of global corporations, private equity groups and other stakeholders in a range of industries including FMCG, food, shipping, logistics, manufacturing, chemicals, mining, agribusiness, construction materials, explosives, airlines and electricity utilities.
Vivek has served world-wide corporations in nearly 500 small and large projects on all continents with a variety of clients in many different industries. Most of projects have involved diagnostic, conceptualisation and transformation of supply chains – releasing significant amount of value for the business. His project work in supply chain management has added cumulative value in excess of $500M incorporating projects in major supply chain infrastructure investment decisions, profitable growth driven by global supply chain realignment, supply chain systems, negotiations and all other aspects of global supply chains.
Vivek has written a number of path breaking articles and commentaries that are published in several respected journals and magazines. Vivek has spoken at several supply chain conference, forums and workshops in various parts of the world. He has also conducted several strategic workshops on various aspects of supply chain management. He received his MBA with Distinction from the Australian Graduate School of Management in 1996 and prior to these studies spent 11 years in the Merchant Navy, rising from a Cadet to Master Mariner.
Results-focused, Modularized Outsourcing (ROM) is a popular bechmark that enables companies to outsource specific business functions or processes to third-party vendors in a modular fashion, with a focus on achieving measurable results. This strategic outsourcing model has gained popularity in recent years due to its ability to provide businesses with greater flexibility, efficiency, and cost savings. By outsourcing non-core activities to external partners who can provide greater expertise and economies of scale, companies can focus on their core competencies and enhance their competitiveness in the market.
In this blog, we will explore the key concepts and benefits of ROM and provide practical guidance on how companies can implement this approach to achieve greater efficiency, flexibility, and cost savings in their operations.
Understanding -Results focused, Modularized Outsourcing (ROM)
ROM is a strategic outsourcing model that enables companies to outsource specific business functions or processes to third-party vendors in a modular fashion, with a focus on achieving measurable results. By breaking down their business processes into smaller, more manageable components, companies can outsource each module to specialized service providers who can deliver high-quality outcomes and cost savings. ROM allows companies to maintain control over their core business functions while leveraging the expertise of external service providers. This approach is particularly useful for companies who want to focus on their core competencies and outsource non-core activities to external partners who can provide greater expertise and economies of scale.
Benefits of ROM
- Flexibility: ROM allows companies to adapt quickly to changing business conditions by outsourcing specific modules to external service providers. This enables companies to scale up or down their operations based on their business needs, without having to invest in additional resources or infrastructure.
- Efficiency: By outsourcing specific business functions to specialized service providers, companies can benefit from the provider’s expertise and economies of scale, resulting in improved efficiency and cost savings.
- Focus on core competencies: Outsourcing non-core activities to external partners allows companies to focus on their core competencies and strategic priorities. This can help improve overall performance and competitiveness in the market.
- Access to new technologies and expertise: ROM can provide companies with access to new technologies, best practices, and specialized expertise that they may not have in-house. This can help improve their operations and drive innovation.
- Measurable results: ROM allows companies to focus on achieving specific outcomes and measurable results, which can help improve accountability and performance.
- Conduct a thorough analysis of business processes: To implement ROM effectively, companies must first understand their business processes and identify which processes can be outsourced. This requires a thorough analysis of each process to identify the key steps, inputs, outputs, and dependencies.
- Identify clear modules: Once the analysis is complete, companies should identify clear modules or components that can be outsourced. Each module should be clearly defined and have specific objectives, performance metrics, and a clear scope of work.
- Choose the right outsourcing partners: The success of a ROM strategy depends on selecting the right outsourcing partners. Companies should carefully evaluate potential partners based on their experience, expertise, track record, and the quality of their services. It is also important to establish clear expectations and performance metrics upfront.
- Establish clear communication and governance: Effective communication and governance are critical to the success of a ROM strategy. Companies should establish clear communication channels with their outsourcing partners, including regular check-ins and status updates. They should also establish clear governance structures and escalation procedures to resolve any issues that may arise.
- Monitor performance and outcomes: Companies must closely monitor the performance of their outsourcing partners and track progress against the defined objectives and metrics. This requires regular reporting and analysis of key performance indicators (KPIs) and metrics, such as quality, timeliness, and cost savings.
- Continuously optimize the ROM strategy: To maximize the benefits of ROM, companies must continuously optimize their strategy. This requires ongoing analysis and refinement of the outsourcing modules, the selection of outsourcing partners, and the performance metrics.
When ROM is not implemented properly
- Poor quality of work: If outsourcing partners are not chosen carefully or if the scope of work is not clearly defined, the quality of work may suffer. This can result in customer complaints, lost revenue, and damage to the company’s reputation.
- Misaligned objectives: When outsourcing partners are not aligned with the company’s objectives, there may be conflicts of interest that can lead to delays, miscommunications, and a lack of accountability.
- Cost overruns: Poorly executed ROM strategies can lead to cost overruns, particularly if the outsourcing partners are not properly managed and monitored. This can erode the cost savings that were expected from outsourcing in the first place.
- Intellectual property risks: If intellectual property protections are not put in place or if the outsourcing partner does not adhere to these protections, there can be significant risks to the company’s confidential information and trade secrets.
- Loss of control: If outsourcing is not managed properly, there is a risk of losing control over critical business functions. This can result in a loss of agility and responsiveness to changing business conditions.
In 2020, Unilever announced that it was outsourcing its finance operations to a third-party provider, Genpact. The outsourcing module included several finance processes, such as accounting and record-to-report, and was expected to cover around 70% of Unilever’s finance operations. Unilever chose Genpact as its outsourcing partner based on the company’s expertise in finance operations and its track record of delivering cost savings and process improvements for other clients. As part of the outsourcing agreement, Unilever established clear objectives and performance metrics for Genpact, as well as a governance structure to monitor performance and ensure alignment with Unilever’s business objectives.
The ROM strategy allowed Unilever to achieve significant cost savings while improving the quality and efficiency of its finance operations. It also allowed Unilever to focus more on its core business functions, such as product development and marketing, while leaving the finance operations to a trusted partner with expertise in that area.
Results-focused, Modularized Outsourcing (ROM) can be a powerful strategy for companies looking to achieve greater efficiency, flexibility, and cost savings in their operations. By analyzing business processes, identifying clear outsourcing modules, choosing the right outsourcing partners, establishing clear communication and governance, monitoring performance, and continuously optimizing the strategy, companies can leverage the expertise and economies of scale of external service providers while maintaining control over their core business functions.it is important to implement a ROM strategy carefully and thoughtfully to avoid the risks of poor quality work, misaligned objectives, cost overruns, intellectual property risks, and loss of control. Companies should select outsourcing partners carefully, establish clear objectives and scope of work, monitor performance closely, and put in place appropriate protections for intellectual property and other confidential information.
When executed properly, ROM can provide significant benefits to a business, including reduced costs, improved quality, increased agility, and greater focus on core business functions. As such, it is a strategy that should be carefully considered by companies looking to optimize their operations and gain a competitive edge in their industry.
Some ways to combat corruption in Union
- Increased Transparency: Transparency is key to preventing corruption. Unions can establish clear rules and public procedures for financial management and ensure that union leaders are accountable for their actions. Members should have access to financial records, and audits should be conducted regularly to identify any irregularities.
- Education and Training: Education and training programs can help union members and leaders understand their rights and responsibilities, as well as the consequences of corruption. These programs can cover topics such as conflict of interest, financial management, and ethical behaviour.
- Enforcement of Laws and Regulations: Laws and regulations that govern union activities should be enforced rigorously. Unions should work closely with government agencies to ensure compliance with labour laws and regulations.
- Democratic Elections: Elections within unions should be free, fair, and transparent. Members should have the right to vote without fear of intimidation or retaliation. Unions should also establish procedures for the removal of corrupt officials.
- Whistle-blower Protections: Whistle-blowers play an important role in exposing corruption. Unions should establish procedures for whistle-blowers to report corruption without fear of retaliation..
An instance of union failure that occurred recently
One example where union involvement did not benefit their members is the United Auto Workers (UAW) strike against General Motors (GM) in 2019. The UAW went on strike in September 2019 after negotiations with GM broke down over issues such as wages, healthcare benefits, and job security. The strike lasted for 40 days and resulted in a new contract agreement between GM and the UAW.
However, despite the strike and the new contract agreement, some UAW members felt that the union did not represent their interests effectively. One major issue was the lack of transparency in the UAW’s handling of the strike funds, which are intended to support striking workers with financial assistance. Some UAW members reported that they did not receive the full amount of strike pay that they were entitled to, while others reported that they did not receive any strike pay at all.
Additionally, there were reports of corruption within the UAW leadership, including charges against former UAW President Gary Jones and other union officials for embezzling union funds. This scandal damaged the reputation of the UAW and led some members to question whether the union was truly representing their interests.
In conclusion, unions are organizations that represent groups of employees within a company or industry to negotiate on their behalf with employers on employment-related matters. They negotiate collective bargaining agreements outlining terms and conditions of employment. Unions provide workers with collective bargaining power, job security, legal representation, and advocate for workplace safety regulations. However, they also have cons such as union dues, conflicts with management, limited individual negotiation, and slower decision-making. With the use of democratic elections and increased practise of transparency can weed out corruption within the union.
The global supply chain of products is an immense and complex system. It involves the movement of goods from the point of origin to the point of consumption, with intermediate steps that involve resources, materials and services to transport them. A supply chain encompasses activities such as purchasing, production, distribution and marketing in order to satisfy customer demands. Companies rely on a well-managed supply chain to meet their business goals by providing quality products and services at competitive prices.
Efficiently managing a global supply chain requires considerable effort, particularly when dealing with multiple suppliers located around the world. Complex logistics tracking systems are needed to monitor product movements from one place to another. Technologies such as artificial intelligence (AI) can help companies keep track of shipments across different locations for greater visibility into their processes.
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