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Preliminaries: The BPO Industry Is The Alternative To Our Dissolving Textile Industry

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Preliminaries: The BPO Industry Is The Alternative To Our Dissolving Textile Industry

Post by Varun on Mon 30 Jun 2008 - 20:52

So, we finally got our topic for the second round of the preliminaries and the debate contest has been scheduled for Sunday, the 6th of July 2008 at 09:00 at the Mauritius Broadcasting Corporation. Again, we have been selected to be the proponent, which I personally think should benefit us.

All those wishing to be part of our supporting team can confirm their presence here itself.

Varun
Founder
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Re: Preliminaries: The BPO Industry Is The Alternative To Our Dissolving Textile Industry

Post by Sandhia on Wed 2 Jul 2008 - 22:53

This is what I got after some research...

Overview On BPO

Business processing outsourcing (BPO) contains the transmission of processes along with the associated operational activities and responsibilities, to a third party with at least a guaranteed equal service level and where the client contains a firm grip over the (activities of the) vendor for mutual long term success. BPO is positively related to the search for more efficient organizational designs: cost reduction, productivity growth and innovative capabilities. Hence, a source for strategic advantage.

One of the most important advantages of BPO is the way in which it helps to increase a company’s flexibility. However, several sources have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways.

Most services provided by BPO vendors are offered on a fee-for-service basis. This helps a company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not requisite a company in investing in assets and hereby making the company more flexible. Outsourcing may provide a firm with increased flexibility in its resource management and reduce response times to major environmental changes.

Another way in which BPO contributes to a company’s flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic dictate. Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firm’s core businesses. The key in this lies in knowing, which of the main value drivers to focus on - customer intimacy, product leadership, or operational excellence. Focusing on one of these drivers may help a company create a competitive edge.

A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Using techniques such as linear programming is a way to reduce cycle time and inventory levels, which reduces a company’s slack. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company.

Finally, flexibility is seen as a stage in the organizational life cycle. BPO helped to transform Nortel from a bureaucratic organization into a very agile organization. A company can hereby help maintaining ambitious growth goals, which do not fit with regular incumbent strategies. BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to become efficient as they greatly expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation.

L. Amédée DARGA wrote:Let me from the outset state that the vision I will sketch out is not that of Enterprise Mauritius, but my own. A clear, specific and pragmatic "outsourcing vision" is urgently required for Mauritius founded on:

  1. Focusing on market niches where operating margins are generous enough, where it has comparative advantages;
  2. Engaging such market niches on the basis of domains of the outsourcing market in which Mauritius has already a fair supply of foundation skills, which can be upgraded to the required operational level within relatively short term.
Mauritius welcomed its first outsourcing operator, a call centre in 1995. 12 years later, there are 185 such companies providing 6,960 jobs. 45% of these operators are Business processing outsourcing (BPO) vendors with 2,400 jobs. More investment is coming following active promotion by the Board of Investment. By early 2008, it is expected that the industry would have created about 10,000 jobs. One could look with pride at this phenomenal growth or at the one-line note in AT Kearney Global Services Location Index 2007 about how the rise of Mauritius reflects growing interest in locations with the ability to serve francophone markets.

However, one who understands the world market of outsourcing business will surely realise that Mauritius has been slow and has lacked both ambition and strategic direction in developing capacity to capture an adequate share of this business.

I am not aware of any official document, which spells out the outsourcing vision for Mauritius. The Mauritius National Information Technology Strategy Plan (NITSP) 1998 had as primary objective to recommend a coherent organisation incentive framework and an actionable planned approach for supporting the IT Industry development and the IT human resource development plans, not an outsourcing strategy.

A new strategy plan is under preparation. I am not aware whether this forthcoming one will have any outsourcing vision for the country. Outsourcing or BPO is generically referred to as ITES, Information Technology Enabled Service. This means that IT is only an enabler not the full scope of the service.

Outsourcing is nothing more than an externalization of production activities, in the production of both goods or services. What we are now describing through outsourcing is a revolution in national and international trade frequently called "tradability revolution", which means making trade with more and more specialized and customized activities or services, which, only 20 years ago, were considered as non tradable. Under the impact of new ICT technologies, externalization has boomed in a few decades, comprising former non-tradable services and newly fast emerging ones ready for externalisation.

If it is evident that a location needs to be ICT-enabled to be a vendor of BPO business, the intensity of IT in BPO activities depends on the domain of service to be provided and in certain cases it can be as low as 10% in terms of human resource requirement! Sure it is 100% if one is in the domain of software development! Any country, which focuses only on training IT professionals but none in other domains, either has a vision to become an IT-intensive outsourcing location and has comparative advantage for so doing, or has no clear vision of the BPO industry.

This appears to be the case of Mauritius. It is planned to train 20,000 IT professionals in the years to come, but it is not known that there is any other training in any other areas of competencies required in other domains of services either by the public or private sector, although there are areas where Mauritius has a relatively good foundation of skills.

Mauritius rates very well in most of the factors that constitutes International Competitiveness in BPO: it has cultural flexibility, including social and labour practices, political and economic stability, good enough telecommunications infrastructure although we could, with the required ambition and given its small size and geography, connect the whole island of Mauritius (like Singapore) with optic fibre and provide total wireless mobility and high-speed broadband connections at even more competitive costs. Time zone is favourable and the basic requirement for work permits for expatriate workers is not an issue. On the contrary, we have provided incentives to attract skilled expatriate workers. The recent good rating of Mauritius "business environment" speaks for itself. The "people skills and availability" category has four sub-groups: overall experience and skills in ICT; availability of labour and the size of a country's workforce; educational levels of the workforce, including language skills and test scores; and the attrition rate in the country's BPO industry. It is, however, in the skills and demographics factor that Mauritius rates less favourably. The demographics issue is no big deal as there is already the policy and conducive regulatory framework for importing skills. An alternative to India, which is absorbing more than it can produce and where the costs of such skills is escalating, can be the neighbouring African countries where there is an abundance of foundation skills at low costs.

Shouldn’t Mauritius focus on market niches where operating margins are generous enough, where it has comparative advantages and where it is possible to provide training in consequence for quick readiness to operate? Shouldn’t the most effective strategy be to understand the domains of the outsourcing markets in which Mauritius has already a fair supply of foundation skills, which can be upgraded to the required operational level.

Take, for example, domains relating to translation and editing where language is the core skill. A certificate in translation or editing skills would make the Mauritian claim to bilingualism ready to provide higher value service in outsourcing within 12 months. Healthcare-related services such as medical transcription and document management; Insurance sector services such as policy maintenance, claims processing, data mining, data management and analysis, medical summaries, or even engineering and architectural services are among those Mauritius could seriously look into to define its vision and strategy.

The recent expression of resistance or scepticism of the legal profession about legal services outsourcing is a vivid illustration of the total lack of understanding of processes within all spheres of services or production being reorganised at the global level and what opportunities are opening up. Our 400 or so local legal practitioners do not realise that, in the past four years, more than three million US legal jobs have been outsourced to foreign countries, according to the US government. It is estimated that in the next ten years more than 13 million US legal jobs will be moved offshore to be performed by foreign workers.

Mauritius does not yet feature in the top 25 locations in terms of attractiveness; yet, it can within the next three years get a fair share of the outsourcing cake in market niches if the vision is clarified sooner than later.
Textile At The Crossroads

The future of the industry is wedged between falling trade barriers and global competition. It is a question of adapt or perish...

2004 will be a turning-point in the textile industry. The major players from Hong Kong are preparing to leave before long. On the other hand, local producers are ready to take the challenge of restructuring to withstand winds of change in international trade. Local economists foresee a respite with an improved international outlook. The government, conscious of the stakes, is coming up with a rescue plan for viable enterprises.

The Hong Kong Dilemma

Hong-Kong industrialists have confirmed that they intend to close down in the next five years. Seven such companies account for 25% of the textile workforce and 50 % of textile garment exports to US.

Their main contention is that they cannot survive unless they get the third country fabric waiver (see inset) under AGOA and they have written to the American Congress to ask for it. It's a question of life and death, maintains Edmund Lau, the CEO of Sinotex of Crystal group. Nevertheless, they would not stay beyond five years.

Edmund Lau argues that production costs are not competitive with Asian contries, where his group is implanted. The ageing workforce is not being renewed and young people are not keen to join.

The other major hurdle is the limited production capacity for raw materials. The few spinning and weaving units produce basic knits when real need is for special fabrics. Edmund Lau adds that his shareholders "expect return on investments".

Labour Shortage

The paradox is that local groups are finding it hard to get workers in spite of 6000 redundancies. Star Knitwear needs 400 workers. Ciel Group (Flo-real, Ferney, Aquarelle, Tropic, etc.) has 10 000 workers with 10% foreigners. It is recovering and needs 700 workers. Its paid training programme is not proving a success. Visits to schools to attract trainees have been disappointing.

Moreover, workers from closing factories are not interested. They resent salary and working conditions. This is not a new situation considering the foreign labour from Asia.

For the Chairman of the Mauritius Export Processing Zone Association, Mookesh-warsingh Gopal, "a new labour culture is needed". Union leaders should cooperate in redeploying workers from closing factories.

He however believes the Textile Emergency Support Team (TEST) plan is bearing fruit. Set up in July 2003, the TEST assesses strengths and weaknesses of companies and helps them get loans. His own company, Southern Textiles, has invested Rs 70 millions in new building and equipment.

Moreover, Sentosa Enterprises, from Singapore, is opening a new garment unit, investing Rs 60 m and creating 300 jobs. Yves-Robert Lamusse of Palmar Group is optimistic: "We must continue the fight. We must be more efficient. I believe in the future of the textile industry."

Economic Insight

The Economic Intelligence Unit forecasts an economic growth of 5.6% for 2004. "But as long as salary costs are not competitive, the growth potential in the EPZ will be questioned." Gilbert Gnany, Chief Economist at the MCB, puts poor performance on the difficult world situation but also on structural problems in the EPZ. "It is now crucial to operate a paradigm shift to increase global competitiveness."

For the Chairman of the Joint Economic Council, Gilbert Espitalier Noel, the textile industry should benefit from the improvement in the international outlook and the TEST, but companies should do their part. "2004 will be the year of change. The less structured and performing companies will be eliminated. Those that survive will be stronger than ever and will be there to last."

The Government Takes A Stand

To sustain the impact of the end of the Multi Fibre Arrangement (MFA) and the threat of Chinese hegemony on the textile world market, the government has reacted. To tackle the major problem of the sector - financing - the Minister of Industry, Sushil Khushiram, has announced a debt rescheduling for textile enterprises within the TEST plan. This should give the necessary breathing space to viable enterprises that are ready to invest in restructuring and modernisation. He believes the condition for survival of textile industries is a modern management based on competence and advanced technology. Quoting the CMT as an example to follow, he maintains "there is no longer room for amateurism".

Facing The Storm

The textile and clothing sector is at the crossroads, stuck between rising costs and increased competition, which threaten to undermine its viability. In addition to its support to the TEST and the latest financial boost, it will no doubt continue its offensive on the diplomatic front in international forums. In this era of globalisation, the future of textile producers depends on their ability to meet the challenges of price, quality, response time and product. Competitiveness and the will to survive are the key words.

The Way To Exemption

The 3rd country fabric waiver is a derogatory clause contained in the Africa Growth and Opportunity Act. It allows Less Developed African countries to import raw materials from countries outside the scope of AGOA and still benefit from quota free and duty free access to the American market. Mauritius cannot take advantage of this clause because of their high per capita GDP.

Sandhia
Quiet Buddy
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Re: Preliminaries: The BPO Industry Is The Alternative To Our Dissolving Textile Industry

Post by Kavi on Sat 5 Jul 2008 - 18:00

Wow!!
Bon chance les cybermorphics!

Kavi
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Re: Preliminaries: The BPO Industry Is The Alternative To Our Dissolving Textile Industry

Post by Shanu on Sat 5 Jul 2008 - 23:08

Goodluck guys.. sorry won't be able to catch you this time, got exams ahead..
Un pour tous, tous pour nous!! Very Happy

Shanu
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Re: Preliminaries: The BPO Industry Is The Alternative To Our Dissolving Textile Industry

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