Page 6 - Logistics News June 2017

Opinion

Trumpism and Global Sourcing

Vinay Couto, PwC.
Courtesy IndustryWeek

Three critical steps for
companies planning to
offshore or outsource work
in the Trump era. Eric Thayer /
Getty Images

GLOBALIZATION, a seemingly unstoppable trend Three critical steps for companies planning to
until last year, suddenly looks less inexorable as offshore or outsource work in the Trump era
President Donald Trump moves to put “America Companies need new cost management strategies
First,” and the United Kingdom leaves the for an era of rising protectionism. Now is the time
European Union. These abrupt policy shifts are to develop those strategies. We recommend three
forcing executives to rethink strategies based on steps to prepare for potential new limits on global
global economic integration, particularly cost- sourcing:
effi ciency initiatives that rely on outsourcing or
off shoring business processes. 1. Review your outsourcing contracts
No longer can U.S. companies and their Make sure your technology and business process
overseas service providers rely on labour-cost outsourcing contracts provide you with fl exibility.
arbitrage to drive effi ciency. While we don’t know Look for provisions related to legislative changes,
how much of President Trump’s agenda will contract terminations, personnel migrations and
become law, it is possible legislation could make clauses permitting you to move service delivery
off shoring harder, costlier, and even less popular locations and terminate the engagement if it
with the public. becomes uneconomical.
Trump’s public criticism of off shoring has
focused mostly on the manufacturing sector, but 2. Evaluate Impacts of reshoring
there’s no guarantee that trade barriers wouldn’t Conduct a feasibility analysis of reshoring processes
expand to include some kind of levy on off shoring currently handled off shore. But avoid knee-jerk
of services--one widely publicized transfer of a few reshoring actions. Start by thoroughly evaluating the
thousand American IT jobs to an overseas locale current economics of your off shore delivery model,
might be all it takes. then assess the fi nancial and operational impact of
The Trump administration’s review and potential various options for repatriating off shore operations.
reforms of the work visa system could include When choosing an onshore location, incorporate
signifi cant changes to service sector outsourcing. multiple factors and trade-off s in your business case.
President Trump is also targeting changes to the
H-1B visa program, which allows companies to 3. Leverage digital solutions.
bring in skilled foreign workers. U.S. technology Embrace smart automation technologies--robotic
companies along with Indian outsourcing providers process automation (RPA), machine learning, cloud
rely on H-1B visas to resource large technology- and cognitive computing--that now perform many
centric outsourcing and process transformation business processes at the same or lower cost than
projects. But President Trump has suspended low-wage foreign labour. For example:
expedited processing of H-1B applications, and • Up to 30% of fi nance and accounting, HR and
could ultimately propose a higher minimum procurement functions can be automated through
salary for H-1B visa holders. These measures digital technologies, generating savings that match
would likely restrict access to overseas talent, off shoring, along with strategic benefi ts such as
drive up the cost of complex IT projects, and improved productivity and quality;
erode the cost advantages of bringing in foreign • Call centres that use cognitive agents and RPA
contractors. Longstanding relationships between to implement call defl ection and call suppression
U.S. companies and outsourcing service providers capabilities can reduce headcount by 40-50%,
could face new regulations and restrictions, forcing outstripping the benefi ts of moving call centre jobs
both to rethink their sourcing strategies. to the Philippines, for example. •

20 June 2017 | Logistics News