Risk of centralization
Despite the country-specific challenges, centralization within companies is being pursued in order to achieve as many efficiency benefits as possible. Also in the supply chain, continuous initiatives are taken to achieve cost advantages, often in the form of centralization.
The COVID-19 situation has also shown one of the risks of centralization: if one link in the supply chain is unable to deliver as planned, the entire supply chain is affected. This was, of course, already generally known. But as long as it does not occur, the pressure on achieving cost benefits in the short term is greater than a more sustainable business operation in the longer term.
Falsely achieving KPI's
In companies where efficiency thinking is applied, compliance processes are thought in terms of resource efficiency. The idea is: the more efficiently resources are used, the lower the total cost of compliance. To test this, KPI's (Key Performer Indicators) are established and monitored by the management. To make it possible to follow the KPI's, the compliance processes are cut into manageable pieces.
The piece 'compliance process' is made so big that almost 100% resource efficiency is achieved. With every measurement, each resource will proudly observe and report that the KPI has been achieved. concluded that the desired efficiency is guaranteed. Falsely, in my opinion!
Efficiency through optimal cooperation
To be truly efficient in a process, an organization must strive for flow efficiency. To do so, the following question must be answered: "What is the best way for the compliance process to support the core processes of the company and the customer experience?'
The shortest throughput time of a compliance process should be the objective. This is the only way to support an efficient, smoothly functioning supply chain organization.
Resource efficiency divides the process into pieces and creates islands. The resources on that island feel like a king and they do not care about the total throughput. Efficiency in throughput can only be achieved through optimal cooperation, but that doesn't work with all those islands.
Organize non-core processes as core business
For many non-core processes the in-house control on resource efficiency proved to be unsuccessful. Only a third party that organizes the non-core process as a core business, and designs its business model based on achieving throughput, can achieve efficiency. Outsourcing is in those cases equal to achieving cost advantages, shortening/increasing the throughput and less complexity. Delivering quality is not at issue otherwise the supplier does not have a valid business model.
When do you decide to outsource the non-core compliance process in order to be as efficient as possible?
Monthly Blog Series 2020 - Written by Pincvision's Board of Directors
Blog #1: Regulatory Technology: the view of our CCO on RegTech
Blog #2: How Pincvision evolved itself into a RegTech Company
Blog #3: From entrepreneurial dream to RegTech company
Blog #4: Pincvision and the impact of COVID-19 crisis
Blog #5: Pincvision's Digital Workplace
Blog #6: Sustainable entrepreneurship - check!
Blog #7: International trade continues also in times of crisis
Blog #8: Digital Dexterity in the Digital Workplace
Blog #9: The Compliance Efficiency Paradox
Blog #10: Pandemic-proof because of engagement with customers
Blog #11: Working and thinking from a 'Composable Business' perspective
Blog #12: Marketing humbug in the Supply Chain