The Fast Moving Consumer Goods Information Technology Essay

The Fast Moving Consumer Goods Information Technology EssayFMCG intentness, on the other hand called as CPG Consumer packaged goods industry primarily deals with the yieldion, distribution and tradeing of consumer packaged goods. The Fast Moving Consumer Goods (FMCG) is those consumables which ar normally consumed by the consumers at a regular interval. Some of the prime activities of FMCG industry ar selling, merchandiseing, financing, purchasing, etc. The industry too betrothed in carrying into actions, tote up chain, action and gen durationl worry.FMCG industry provides a wide range of consumables and accordingly the amount of money circulated a accomplishst FMCG products is likewise very high. The competition among FMCG manufacturers is also exploitation and as a result of this, coronation in FMCG industry is also increasing, specifically in India, where FMCG industry is regarded as the fourth largest sector with bestow market size of US$13.1 billion. FMCG Sector i n India is estimated to grow 60% by 2010. FMCG industry is regarded as the largest sector in New Zealand which accounts for 5% of Gross Domestic Product (GDP).Some common FMCG product categories include food and dairy products, glassw be, paper products, pharmaceuticals, consumer electronics, packaged food products, plastic goods, printing and stationery, household products, photography, drinks etc. and some of the examples of FMCG products argon coffee, tea, dry cells, greeting cards, gifts, detergents, tobacco plant and cigarettes, watches, soaps etc.Some of the wellhead known FMCG companies are Sara Lee, Nestl, Reckitt Benckiser, Unilever, Procter Gamble, LOreal, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi and Mars etc. The purpose of this topic is to investigate the relationship between the factors that affect the step upsourcing decisions in FMCG industry of Pakistan. There are higher trends seen in the market for outsourcing in many FMCG companies but still it is r eflecting as there are a image of factors which inhibit the FMCG companies to make outsourcing decisions.Outsourcing occurs as a result of intimate acquaintance between subcontractors and managing incisions. Outsourcers want to decrease the exist of production and the terms of management by distributing work to avoid other costs such as wages and compensation. However, outsourcing helps society by decreasing unemployment, making the economy grow and decreasing kindly problems.Outsourcing is also a way to boost the economy and it helps producing industries to survive in the market. However, it is not a guarantee that the producing industries depart survive. It is just one of the devices that FMCGs should use in management, but it depends on managerial efficiency in the industries. If FMCGs want to survive in the age of globalization, they lead to adopt management techniques suitable for each slip in h leave behind to survive in the current industrial climate.Nowadays, macroe conomics and microeconomics have been changing very rapidly, in every region. This situation is forcing all countries in the mankind to adapt to competition resulting from globalization, including modifying government policies, worldwide relations, free trade area agreements, etc. Changes are also occurring in industrial management, especially organizational management, production management and technology, delivery, and marketing management, in reply to both local and international competition.In the competitive environment of manufacturing concerns and evolving technological era, to enhance efficiency and productivity, cost trunk a challenge to overall manufacturing industry to compete with rivals in providing the out answer total cut back cost to end customers and to secure the market share in order to add value to the shareholders. To invest heavily in capital investment such as machineries, buildings and land to expand space in weathering(a) the production operation is a burden to most companies if the return of investment is not valuably.Organizations that outsource are seeking to realize benefits or address the followers issuesCost savings The lowering of the overall cost of the service to the demarcation. This bequeath involve reducing the scope, defining quality levels, re-pricing, re-negotiation, and cost re-structuring. Access to lower cost economies through off shoring called labor arbitrage generated by the wage gap between industrialized and developing nations.Focus on Core care Resources (for example investment, people, and infrastructure) are focused on developing the core championship. For example often organizations outsource their IT support to specialized IT services companies.Cost restructuring operate tackis a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.Improve quality Achieve a steep change in quality through espial out the service with a new service level agreement.Knowl leap Access to intellectual property and wider experience and knowledge.Contract Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with knowledgeable services.Operational expertise Access to operational best employ that would be too difficult or epoch consuming to develop in-house.Access to talent Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.Capacity management An alterd order of capacity management of services and technology where the essay in providing the excess capacity is borne by the supplier.Catalyst for change An organization can use an outsourcing agreement as a catalyst for major(ip) look change that cannot be come upond alone. The outsourcer becomes aChange agentin the play.Enhance capacity for innovation Companies in creasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.Reduce time to market The acceleration of the increment or production of a product through the additional skill brought by the supplier.Co modification The trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only open to large corporations.Risk management An approach torisk managementfor some types of risks is to partner with an outsourcer who is better able to provide the mitigation.Venture Capital Some countries duet government funds venture capital with privateventure capitalfor start-ups that start businesses in their country.Tax Benefit Countries offer tax incentives to move manufacturing trading operations to counter high corporate taxes within another country.Scalability The outsourced fraternity will usually be prepared to manage a tem porary or eternal increase or decrease in production.Creating leisure time Individuals may wish to outsource their work in order to optimize their work-leisure balance.FMCG Industry and OutsourcingCompanies that were fight to increase the capacity to support the ramp up demand at times were upset when there was a drastic downturn of demand cut. As a result, the sudden downturn would affect the resources and investment that were put into supporting the end customers demand. Team of human resources and machineries that consumed production space and being idled would increase the budget items and fixed cost, thus touch the companies badly in their financial statements. In addition, training and development to up skill inborn resource skills set in terms of running the operation effectively, bringing up technical content expert, specialist ability to perform research and development to add value, effective management and maintaining the operation would require substantial investme nt in human resources.Thus, most of the companies started to explore opport unit of measurementies to reduce cost and to improve profit margin in order to maintain competitive edge in the market. One of the identified opportunities was to outsource non-core business functions to external service providers at a lower operating cost.Outsourcing decisions are those strategic decisions that change the operating schema of an organization both in manufacturing and services. The most important step in any outsourcing decision is to clearly fasten the scope of the activities that are being considered for outsourcing versus previously in sourced.Outsourcing becomes a basic strategy of the FMCG industry and is essential for FMCG firms to stay competitive in the global environment. From firms perspective, outsourcing offers several(prenominal) advantages, such as reducing or stabilizing overhead costs, gaining cost advantage over the competition, concentrating on core activities and organiza tional specializations, providing flexibility in response to changing market conditions, and reducing investment in high technology establish manufacturing organizations.Through 2004 onward business harvest strategy changes and business growth was restored as the first priority for most worldwide businesses, making cost reduction the second or third priority. Ensuring business growth as well as business process speed, agility and cost reduction requires a unique mix of internal and external capabilities, skills, services and processes. Only a business-driven sourcing strategy supported by good-enough sourcing execution capabilities will guarantee successful business outcomes as well as improved performance and competitiveness.Lack of an outsourcing strategy or relevant skills and processes to manage outsourcing relationships is the most important reason for the failure of service and manufacturing industry. Global competition, increasing regulation and inspection, the development of specific standards and the industrialization of services will raise the competitive bar for the FMCGs services and business processes, making it compulsory for the FMCGs to work on their core business in source let the others do their theorize for you. By competing on core competencies and outsourcing non-core areas, FMCG companies achieve consistently higher performance over the globe in all fields especially manufacturing and supply chains through consistent nidus and tracking their Key performance indicators.For any of the party to make decision for in source or outsource, its the company strategic decision which will make the basis for the whole in source or outsource process. For making any decision, decision maker will consider the following perspective in their mind or they must have good answers for these questions.Determine what your company postulates to or should do best strategy driven long-term positioningDetermine how best to do things profit driven short to intermediate term competitivenessINSOURCING/ OUTSOURCING STRATEGIC conclusion KEY STEPS IN SERVICE BASE INDUSTRYAn executive level cross-functional decision-making process identifies core competencies and areas for internal investment.The level of internal control indispensable by the companies and prospective direction for operational insource/ outsource decisions are identified and analyzed establish on strategic value and relative competitiveness of the company in the market.Document complete strategic decision making process and the implementation process for the strategic decision being made as it provides closed-loop estimate for continuous improvement of the decision in the long run. organise the implementation strategies, processes and Key performance indicators with criteria and assumptions used in strategy formulation or development and in sourcing /outsourcing decision process.STANDARDIZED OUTSOURCING PROCESS FLOW IN FMCG INDUSTRYStageKey ActivitiesRough TimelineBU Ro leCOE RoleOpportunity go steadyationAlign on business need gain mgmt commitment to evaluate optionsIdentify options to consider (e.g., internal cost savings, consolidation, off-shoring, outsourcing)Perform Options Analysis / Size of Prize (not diminutive financial analysis)If potential for outsourcing, contact outsourcing COE for supportNAPRPRPRPRCCEvaluation Team Kick-OffEstablish piffling team to perform preliminary evaluation of outsourcing (Project Mgr/Business Mgr, Deal Mgr, Purchases Mgr, FA Mgr, HR Mgr, External Rel.)1-2 wksPRCInitiate Evaluation ProjectAgree on top-line preferred deal parameters with OS COE (e.g., general scope boundaries, sell all vs. partial assets) rebel Keep Price Analysis using the CBA model (COE website)Develop preliminary project success criteriaDevelop preliminary project process, timing and critical pathConsider advisory needs (e.g. external consultants, legal support)Consider need for employee communication pre-market evaluation employmentConf irm business management alignment support to evaluate the option1-4 wksSRSRSRSRCSRPRSRSRSRSRPRSRCMarket Evaluation/DiscoveryAnalyze market and identify potential suppliers (e.g., market position, capabilities, potential for savings monetization)Develop supplier materials (cold call message operation review presentation)Meet with suppliers (generally worth meeting w/up to 10 or so if available)Evaluate findings of visits and determine potential for outsourcingRFI may go out as part of typical assessment activity4-8 wksPRPRCSRCCPRSRDecision to Pursue OutsourcingRefine project objectives, scope, etc. (w/knowledge of market evaluation)Prepare recommendation to pursue outsourcingGain management approval per Decision Authority PRIOR to RFPDetermine the small group of suppliers to be engaged in an RFP (3-4 ideally) pass CDAs with these suppliersExpand project team (RFP leader, Legal, Administrative support, etc)Develop communication plan communicate to employees if not yet been doneBa se Case Financials2-3 wksPRPRPRSRPRPRCCCSRPRCCRFP DevelopmentDraft and gain approval to RFPDevelop RFP timeline (release date, supplier engagements, site visits, submittal date)Release RFP and instructions to suppliers4-6 wksPRCPRTPOPRTPORFP Process ExecutionPerform step-by-step RFP mop up process w/suppliers (e.g., RFP review session, electronic QA cycle, preliminary solution review)Receive review bids, and execute formal solution walk-thru processGet revised bids and perform evaluation (operational, HR, financial)4-8 wksSRSRSRSRSRSRDowns elect ProcessDevelop recommendation to down select to 1 or 2 suppliers (keep 2 suppliers ideally to maintain competitive environment)Get management agreement1-2 wksPRPRCCDue Diligence take over due diligence as required (us on suppliers suppliers on us)1-2 wksPRTPOFinal BidsProvides suppliers with draft contractRequest Best Final Offers (if appropriate)1-2 wksCCPRPRNegotiations and Contract SigningNegotiate detailed price and contract terms (w/ 2 suppliers as long as possible)Align on final down selectGet management approvalFinalize internal and external communication plans (with External Relations)Sign contract and execute tie in communications4-6 wksCPRPRPRPRPRCTPOCCTransition and ClosingPut full rebirth team in placeExecute required transition steps (including road shows, job offers, etc)Develop and execute companion agreements in other countriesExecute closingPrepare deal files4-12 wksPRPRSRPRSRPRPR Primarily Responsible Total Time inevitable*SR Shared Responsibility 5 10 months (ex Transition)C Contributor 6 12 months (w/Transition)TPO Technical Process Oversight* will vary based on project scopeProblem StatementThe rapidly changing global industrial environment, cost of working capital, research and innovation, releasing key internal resources, concentrating on Core business functions, obtaining better organizational form has significant impact on outsourcing decision making in FMCG industry of Pakistan.Hypothe sisH1 Outsourcing activities are increasing day by day in FMCG Industry of Pakistan.H2 FMCG industries are Outsourcing in all areas of their business not only manufacturing operation.H3 FMCG industries are Outsourcing to reduce Operating cost.H4 FMCG Industries are outsourcing to increase concentration on their core business.H5 FMCG Industries are outsourcing to Improve Quality of Services.H6 FMCG Industries are outsourcing to Acquire Specialized expertise and knowledgeH7 FMCG industries are focusing on Selective Outsourcing.H8 FMCG industries have midterm Outsourcing contracts.H9 FMCG industries make Outsourcing contracts with good reputable companies.H10 FMCG industries make Outsourcing contracts with companies that produce at lower cost.H11 FMCG industries make Outsourcing contracts with companies that have advance technology and management experience.H12 Losing control of the certain business is the major concern in FMCG industries to make Outsourcing contracts.H13 Increasing dependence with outsourcers is the major concern in FMCG industries to make Outsourcing contracts.H14 hard-fought to bring in source after conflicts is the major concern in FMCG industries to make Outsourcing contracts.H15 Disclosure of commercial secrets is the major concern in FMCG industries to make Outsourcing contracts.H16 involution of Interest with outsourcing partner is the major concern in FMCG industries to make Outsourcing contracts.Outline of the StudyThe research structure based on five chapters as follows basis about the Outsourcing and FMCG industry.The literature review had provided theoretical background of the research and cites author had previously researched on the topic of factors affecting outsourcing decisionThe research methods chapter included method of data collection, statistical technique and hypothesis development.The results chapter had included findings and interpretation of the results.The conclusion, discussions, implications and recommendation se ction provided the final logical analysis.DefinitionsOutsourcingOutsourcing is an agreement in which any task operation, job or process that could be performed by employees within an organization, but is instead contracted to a third party for a significant period of time-one corporation provides services for another company that could also be or usually have been provided in-house.FMCGsIt is an acronym forFast Moving Consumer Goods.It is defined as fast selling, low unit valueconsumer productsnormally in universaldemand. It includes categories desire foods, softdrinks, toiletries, cosmetics and other non-durables.CHAPTER 2 LITERATURE REVIEWMost of the companies that were struggling to increase the capacity to support the ramp up demand at times were upset when there was a drastic downturn of demand cut. As a result, the sudden downturn would affect the resources and investment that were put into supporting the end customers demand. Team of human resources and machineries that con sumed production space and being idled would increase the overhead and fixed cost, thus affecting the companies badly in their financial statements. In addition, training and development to up skill internal resource skills set in terms of running the operation effectively, bringing up technical content expert, specialist ability to perform research and development to add value, effective management and maintaining the operation would require significant investment in human resources (David Mackey and Kaye Thorne, 2003).Thus, most of the companies started to explore opportunities to reduce cost and to improve profit margin in order to maintain competitive edge in the market. One of the identified opportunities was to outsource non-core business functions to external service providers at a lower operating cost. Outsourcing decisions are those strategic decisions that change the operations strategy of an organization both in manufacturing and services. The most important step in any o utsourcing decision is to clearly define the scope of the operations that are being considered for outsourcing (Cook, Mary, F. and Gildner, Scoot B. 2008). pitying resource professionals throughout the world are being asked to do more or less, to enhance productivity while imperious costs and to find out new ways to increase profitability. (Uddin, Gazi, M. 2005).Outsourcing is not a new notion. For decades, jobs have been migrated from other part of the countries namely American and European countries as well as other overseas countries to global service providers primarily India, China, Singapore and Malaysia due to lower operating cost. According to Cynthia A. Kroll (2004), a regional economist from University of California Berkeley, the recent wave of outsourcing affected a different mix of jobs, at different wage levels. It was not confined only to a small set of industries but cut across all industrial sectors in new geographic area rapidly (Cynthia A. Kroll, 2004). William P. DiMartini (2005), Senior Vice chair at SunGard Availability Services said businesses in all industry segments found that limited internal resources would make outsourcing an attractive, cost-effective and prudent option that would allow them to focus on their core competencies (AccountingWEB.com, 2005).Demand for outsourcing is a result of demand for organizational products by the target audience. On the basis of organizational estimate of total turnover, practicing managers can attempt to establish the nature and type of outsourcing required to that esteemed goal (Uddin, Gazi M. 2005).Outsourcing advantages to name a few include lower operating cost, improve competitiveness, low in capital investment, shift resources to focus on core functions, generate demand for new growth and market segment, access to world discipline capability, sharing risks and make capital funds available for core business investment. Bangladesh is a least developed country, basically an agrarian economy, having around 24 cardinal acres of cultivated land, employing about 14.5 million cultivators. Manufacturing industries have with child(p) around Dhaka and Chittagong based on agriculture input of jute, cotton, chemical and gas based industries.Industrial production growth has averaged more than 6% over the last 5 years. The export sector has been the engine of industrial growth, with ready-made garments leading the way, having grown at an average of 30% over the last 5 years. Primary products constitute less than 10 percent of the countrys exports the bulk of exports are manufactured/ svelte products, ready-made garments and knit wears in particular. (www.euroitx.com)There are many manufacturing concerns in Bangladesh that are looking into outsourcing opportunity to reduce cost and to overcome the internal limitations and achieve lower cost of operation. The country is now moving towards industry based economy from the agro-based one. Hence, this study was an attempt to access de terminants influencing the outsourcing decision and to research the manufacturing concern in Bangladesh on how well the factors would influence the manufacturing industry in Bangladesh to outsource certain function of their business areas to external service providers. The study also aimed at finding out the influencing factors that influenced the companies in outsourcing decision and helped the companies to overcome the internal limitation barriers.In the early 1980s, outsourcing typically referred to the situation while organizations expanded their purchases of manufactured physical inputs, like car companies that purchased window cranks and seat fabrics from outside the firm rather than making them inside. Nowadays, outsourcing took on a different meaning. Presently it refers to a specific segment of the growing international trade. This segment consists of arms-length, or what Bhagvati (1984) called long-distance purchase of services abroad, principally, but not necessarily, via electronic mediums such as the telephone, fax and the Internet. Outsourcing can happen both though transactions by firms, like phone call centers staffed in Bangalore to sen7e customers in New York and X-rays transmitted digitally from Boston to be read in Bombay, or with direct consumption purchases by individuals, like when someone hires an offshore firm to provide plans for redesigning or redecorating a living room (Bhagwati, J. et al. 2004)In an era of rapid technological change and short product life cycles, companies were trying to reduce cost and maintain quality at the same time which implied that companies would need to specialize in what they did best and de-emphasize management attention from business processes that did not directly impact the business. Outsourcing was a means to partner with service providers so they could handle specific business processes better, faster and at a lower operating cost (V. Krishna Polineni, 2001). It was defined as the expatriationring one or more internal functions of an organization to an external service providers. According to the analyst Dean Davison, the outsourcing was growing about 20 percent to 25 percent per annum (Dean Davison, 2006). Outsourcing has become an alternative, which all major corporations must consider in order to remain competitive. It helped to increase efficiency, improve service quality, accountability, values, decreased headcounts and cash infusion and gain access to world grad capability and sharing risk (The Outsourcing Institute, 2006).One of the primary advantages of outsourcing arises quickly from the reduction of overheads. This might give rise to an immediate, and possibly one-off, advantage in terms of the scheme of future or recurrent capital outlay, and the savings in office space and equipment provisions if these could be released during the outsourcing decision. There was clearly a staff cost reduction possible here, and this could be the predominant element in directly- attributable, ongoing cost savings. The spin-off from this might benefit the business support services department where the outsourcing was partial, and could be especially useful where the capital cost was high and recurrent, particularly if there was uncertainty about the future costs of maintaining effective and competitive business support. It was an investment risk transfer, in other words. Where outsourcing is total, the benefit was accrued directly by the core business it translated to a capital injection to the customers business. This was one of the major driving reasons of the outsourcing of IT provision in the early 1990s generally agreed as having been led in 1989 by Kodak, which outsourced all of its IT operations to IBM (Jonathan Reuvid and John Hinks, 2001). This could also confer a great deal of flexibility on the company. For a centralized organization which was providing a range of its support services from its own personnel office and offices, the move to outso urcing could allow a downsizing of the property commitments. Consider the impact on the organizational infrastructure requirements of a change to outsourcing IT provision, payroll and credit processing, pensions, catering, recruitment, training, Human Resource Management (HRM), cleaning, security, lettings, software development, estates and building management. It could also confer direct scope for downsizing or increased options for organizational re-structuring through property and HRM flexibility.The transfer of a non-core service provision to a variable cost would allow economies of scale to be passed on from the supplier, and also would mean that incremental changes in the process capacity of the customer (upwards or downwards) could be covered at proportional rather than quantum cost changes. Where scope to vary the scale of the contracted supply was agreed, this has allowed the business organization to make maximum use of its marginal capital for core process change rather th an non-core process support change. This could allow decreased time to market for new products or processes, and also increased scope for changes. Outsourcing solutions can provide an excellent chance to get the company service provision out of a rut and, if properly managed, to stimulate new solutions to problems from the mixing of different approaches.A noticeable feature of the global economy is the enhancing international products. Robert Feenstra (1998) describes the remarkable international specialization in the manufacturing products. For example, the raw materials of manufacturing products like Barbie dolls (plastic and hair) are obtained from Taiwan and Japan. Assembly used to be done in those countries as well as to lower cost locations like Philippines, Indonesia, Malaysia, and China. The growth in international specialization can also be observed in aggregate statistics. William Zeile and Gorden Hanson et al (2003) document the immenseness of trade within multinational firms. David Hummels et al. (2003) show that trade in intermediate inputs has grown faster than trade in finished products. While the globalization of production may yield important productivity benefits, there is a widespread view that it has also adversely affected low skilled workers. There are frequent media reports on how low-skilled labors in the first world countries are hurt when manufacturing jobs are relocated in the US and in many other countries have picked up on this theme to push for greater restrictions on trade with developing countries. Yet, despite its prominence in the public debate, there is little arrogant evidence of the extent to which low-skilled workers are harmed by outsourcing to poor countries (Hsieh, Chang T. and Woo, Keong T., 2005).Outsourcing has existed in the USA for over 30 years particularly the business pr