outsourcing trends

Philippines: BPO services and supply chain infrastructure developments

Developments in business process outsourcing (BPO) open new opportunities for companies to keep up with digital transformation pressures. Find out how.

Impulses from the SCMAP Conference

Supply chains form the cornerstone of the Philippines’ economy. The country itself has been busy solving its challenges in areas such as transportation infrastructure in order to establish a solid economic foundation. While attending the conference of the Supply Chain Management Association of the Philippines (SCMAP) in September, my colleague Markus and I engaged with a great number of industry professionals. Many of them work in or with the Philippines’ supply chain industry and we had interesting discussions about current key challenges.

I came away quite impressed with the many supply chain developments taking place in the country. These include, for example, new government initiatives to increase supply chain competencies in the population. But also new technologies that local businesses are embracing – such as those used for automation of processes to reduce upfront cost, increase efficiency, and make better use of data. As part of the program at the SCMAP conference, Markus elaborated on how automation can help boost the supply chain sector and on how the industry can increase its technological capabilities.

Supply chain evolution in the Philippines

As many emerging markets, the Philippines has yet to fully mature its supply chain infrastructure. But the foundation for this as well as for advanced supply chain management has already been established. And great strides are being made – with the SCMAP and the Department of Trade and Industry (DTI) at the forefront of efforts. Their initiatives include establishing warehouse staff competencies, providing industry certifications, and partnering with educational institutions to develop and launch supply chain classes.

Today’s technological advancement puts developing markets such as the Philippines in a great position to seize opportunities: using new technologies to create more services and efficient processes that stimulate continued economic growth and that lift supply chains to a new level of maturity and competitiveness.

Job opportunities as posted online for the areas purchasing, logistics, and supply chain have risen by 23 % in August 2016 – as reported by an online research firm. This clearly indicates a healthy and growing local supply chain sector. However many countries in the region, including the Philippines, have yet to fully embrace technology to make the most of the opportunities at hand.

Transformation challenges and approach

Of course, this is not an easy ride and there are many challenges ahead. Take the transportation infrastructure, for example: the World Bank’s Logistics Performance Index 2016 ranks the Philippines on place 71 out of 160 countries. This is a drop of 14 places in two years – from rank 57 in 2014. This emphasizes that change – especially significant change to legacy infrastructure in a country – will take a lot of time.

The unfortunate combination of poor infrastructure and a lack of effective international trade agreements furthermore results in additional costs and higher charges: exporters experience shipment delays ranging from weeks to a month, which leads to delays in production and delivery, lower productivity, and loss in revenue and employment. My colleague Markus refers to this topic in his recent post “The end of globalization? Why going backwards won’t work”, too. It’s key to push sustainable developments in this area.

But the overall approach to digitization is crucial, too. In the traditional design process, the start of a transformation project used to define the “present” situation and then “what the future will be”. And the next step was usually to launch a large implementation project. Today, in contrast, “test-and-learn principles” will be the successful drivers of the digital transformation process. Start small, learn, and then evolve. That was also one of the findings of the “Future Congress Logistics” in Germany in September that my colleague Daniel took part in.

BPO services fueling supply chain transformation

BPO sales revenue
BPO sales revenue

One of the supply chain highlights in the Philippines is the area of business process outsourcing (BPO). Take a look at this sector’s sales revenue development – click on the picture to enlarge it. According to the IT and Business Process Association of the Philippines (IBPAP), the BPO sector is expanding on average 20 % annually and is expected to generate an estimated $25 billion in 2016 – as reported by DCR Trendline.

Traditionally, BPO focused on cutting costs but through the use of technology, much more can be gained by outsourcing processes today. Automation enables BPO providers to collect and analyze massive volumes of data that help businesses to offer a much better digital experience – internally and externally – and derive significant business advantages.

BPO providers are helping clients advance from standard descriptive analytics to predictive analytics. This means moving from understanding what has already happened in the business to understanding what will and should happen – through statistical analyses, predictive modelling, forecasting, and process optimization. It empowers companies to anticipate likely scenarios and plan more effectively.

Analyses of transactional data provide companies with insights into their business operations that they can take tangible and pro-active actions on. It also enables them to improve working capital management or increase measures for customer acquisition, satisfaction and retention, for example.

Think global, act local, and tap latest potential

The development of BPO services offers great opportunities for companies in emerging markets to keep up with digital transformation pressures without upfront payments, losing time, or business focus. In the midst of tough competition and constantly shifting, external factors, the Philippines has to think “glocal”: truly internalizing and driving both local and global considerations.

The country needs to embrace popular digital technologies on a local level – such as big data and cloud software. This will be essential to remain a leader in supply chain services on a global level. Software-as-a-service (SaaS), for example, allows businesses to introduce applications through BPO services without prior investments. This helps to create new services that are quickly available, easy to access, and integrate seamlessly into customers’ business processes.

If the Philippines can successfully navigate its supply chain infrastructure issues and adopt the use of modern technology, it will definitely be able to keep up with expectations. Experts predict an increase of 6% in GDP growth rate in the next five years from variables such as the service industry, manufacturing sector, exports and imports, foreign direct investments, and personal disposable income – as reported by Malay Business Insight.

What do you think about the Philippines’ supply chain sector and its BPO service development? Is it in a good state, what are they doing well – and what more can be done? I would love to hear your thoughts on LinkedIn.

Find out more about software for efficient supply chain management from AEB