Prakash Kumar

Global operations is reality to be competitive and profitable. Geographic expansion both organically and through merger and acquisition are required for sustaining an organization existence in a particular quadrant let alone moving ahead of its peers. Manufacturing footprint as a tool to leverage cost optimization, reducing the total cost of ownership for products and reducing the supply chain cost without affecting customer satisfaction is an age old concept. Manufacturing companies are taking tough strategic decisions with regards restructuring of their facilities, outsourcing, leasing as against owning and various combination of cost saving drivers to cut down on cost.

Service Industry can take a leaf out of this concept and implement the concept to save as much as 50% of its current supply chain cost in an end to end order fulfillment value chain. Technology and effective knowledge management can be a big enabler to facilitate the service footprint. It is no longer imperative to be close to customer for effective CRM. Service Industry can leverage the strength of a particular geography and set up that portion of supply chain in that geography which could be of maximum value.

India and China produces millions of English speaking technocrats’ year on year and make no mistake – labor arbitrage still exist. These geographies should handle the human interface portion of supply chain and selected knowledge processes. Cost of raw materials, infrastructure and labor (semi-skilled) are cheapest in undeveloped economies of Africa and developed world can do a world of good in terms of social value along with hefty saving alongside goodwill by relocating the Industrial base in these geographies. Infrastructure cost can be brought to minimum if large facilities are build in these geographies. Europe and North America can drive the innovation part of supply chain. Such a structure will position the company to have a global service footprint on one hand and a will help bring down cost to minimal. One might argue that transportation and logistics cost will soar – this is a misconception. 3PL and 4PL logistics suppliers today are very efficient and have their own fleet. With effective fulfillment process – logistics supplies emanating out of continent of Africa can be brought down. Transporting a package from New York to Boston can be as expensive as one from say Johannesburg to Boston. Biggest advantage Africa presents to the globe is its central presence – its centralized timezones and distint climatic seasonality.  Timezone wize, it is equidistant from West and East thus, it is best positioned to act as hedge against different working time lines of east and west. It can act as the interface to onshoring and offshoring and will have compounding impact on speeding the Supply Chain cycle. With sales force sitting in Asia and fulfillment and logistics team in America, there is a lag of 12 hour. Africa can share 6 hours each of Asia and America to make a winning combination.

Developed markets are saturated in terms of demand and GDP growth numbers are historically low and still unsustainable. However, no one really knows the true potential of undeveloped economies because of marginal presence. A huge potential in terms of new market will be a by-product of re-aligning the service footprint. If such strategy is given a though the rich-poor divide will narrow and protest to eco- friendly measures like new emission draft will be muted.

Healthcare by far remains the most important and critical service industry. Health care also remains one of the costliest services to cater to – esp. in developed economies. While, Healthcare Industry has its limitations with regards to its compulsion to stay close to the point of service, even in this case the knowledge part of the Industry can easily be moved around for effective cost management. In healthcare the critical aspect is the diagnostics which can be ascertained by a team not necessarily at ground zero but from remote through effective technological tools. A fresh thought is required to cultivate such utopian thoughts at this time, but if health insurance cost are to be brought down it might soon become a necessity. Point to emphasize here is that each hospital in a county need not have all the specialized cell as long as there is a central hub and spoke mechanism of available consultants exists. All finance, billing, R&D and knowledge area can be centralized in a shared service type of arrangement. Author agrees that implementing service footprint to Healthcare would be toughest, but the point he is trying to emphasize is that, if there is a long shot to effective service footprint in healthcare, then implementing in all other sector would be a cakewalk.

If Manufacturing footprint is a success – there are enough indicators to belive that service footprint will be a super success in the years to come and can act as a good tool to overcome the periodic rut of slow down and recessions.

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