Business Process Outsourcing, Meet Value Engineering

There’s a good article today in The Hindu Business Line that talks about how BPO (Business Process Outsourcing) firms in India are using kaizen, six sigma, Lean transactions and value engineering to streamline its already lowest-cost processes.
The article begins with a good brief history and overview of value engineering and continues by describing the current state of continuous improvement activities at several Indian BPO firms. The challenge for BPO firms is that their contracts tend to be long-term with a fixed price. The booming market means rising wages in India, and the appreciation of the rupee means there is a built-in requirement to lower cost year-on-year just to maintain margins.
There article gives several good short examples of value engineering. The attention to detail of the cost reduction activities of these companies is impressive. They leave no stones unturned, from transportation and communications to energy cost to benchmarking the cost per foot of carpeting and other equipment installation improving based on the benchmark.
Pramod Bhasin, CEO of BPO firm Genpact says “Dedicated Six Sigma, Lean and Reengineering teams continuously spot and improve processes for Genpact as well as its customers. Supported by 500-plus Six Sigma Black Belts and Master Black Belts, 150 Lean Coaches, these teams have implemented 400-plus breakthrough improvements, 3,000-plus Kaizen improvements that enhanced productivity by 6-8 per cent year-on-year. Genpact shares these benefits with customers.”
Bhasin continues “Cost reduction is just part of the equation. Several countries will soon be able to provide services at costs lower than India’s. While costs have to be reduced, it is important that BPO companies deliver business impact through process excellence to stay competitive.”
Last year we received a call from a financial services outsourcing firm in India. They wanted more information about Hoshin Kanri so they could add that to their capability, along with Lean and six sigma. Their plan was to not only apply kaizen to the business processes that their customers outsourced to them but to use Hoshin Kanri as a value added service to present their customers with the best possible cost reduction strategy and deployment plan. Wow!