Outsourcing Excellence Award – Best EU - Invista and Freeborders
The clock was ticking for INVISTA. "We were really in a bind," says Norman Beveridge, Global eBusiness Manager, Apparel, for INVISTA.
The global Fortune 500 textile manufacturer, which produces Lycra, Coolmax, Tactel, Supplex, Teflon, and Thermolite, had outsourced the creation of an online product catalog for brands, retailers, and apparel manufacturers to a local European supplier. This is a Web-based service that matches manufacturers like INVISTA to brands, retailers, and industry vendors.
Its first supplier was failing. No wonder. The daunting project required data from 600 suppliers in 40 countries using eight languages. "Their code wasn't good and they didn't understand our manufacturing value chain," recalls Beveridge.
But the Geneva, Switzerland-based company couldn't delay its online library because the CEO had sent letters to thousands of companies announcing the system would go live by a certain date. "There was a great deal of internal pressure to deliver. The project started day one with INVISTA's CEO time-driven mandate that had global customer visibility. But we like it when the stakes are high because it provides incredible focus for all stakeholders," says Mike Keating, Managing Director, Freeborders, the supplier that saved the day by stepping in and delivering the project three weeks early.
"Going from 'It's unlikely we'll meet our target date' to 'beating the target date' was a huge win for its CEO," says Keating. "They worked weekends and nights to make this happen for us under very tight deadlines," adds Beveridge. (In 2004 DuPont Textiles and Interiors sold its $7 billion fiber and textile arm to Koch Industries, the industrial conglomerate with $80 billion in annual revenues, and changed the name to INVISTA.)
Why INVISTA Needed the Library
Lycra is a global brand that has been around for 20 years. When DuPont began sourcing fabrics with Lycra, all the retailers were in the US or the UK. "We've seen a huge change in the way people source their fabrics in the last eight years," explains Beveridge. Today manufacturers look for labor in Asia or somewhere else on their continent. "There was a huge explosion to find new manufacturing partners to work with," he adds.
INVISTA wanted to be a pioneer and support this change. "We wanted to help our branded manufacturing partners find the right suppliers to work with," he says. At that point there were eight disjointed product libraries. A manufacturer could go to New York City and have a look at Asian fabrics, for example. "We wanted to combine all the product libraries globally and make them available online," he continues. INVISTA publicly promised the industry it would deliver this online matchmaking service in 2001.
Today the Web-based product sourcing catalog allows retailers to search over 600 suppliers' product portfolios, request samples, complete costing, and track all activities from one tool, tasks which they heretofore managed by email and fax. "But this is too complex a supply chain and process to do that way," says Keating. "An online catalog creates huge efficiencies from retail through the manufacturers."
Currently, 582 mills from over 40 countries are promoting over 50,000 fabrics to about 1,000 branded manufacturers and retailers through the online Library. These manufacturers can also post private collections in which only the intended retailer sees the collection, even down to the individual user. "In this way, we mimic the traditional selling and marketing process, only better. We can track and measure all customer activity online. The solution provides a quantum leap in improving the understanding of customers through quantitative business intelligence," says Keating.
Selecting a Supplier
In June 2001 DuPont began searching for a white knight that would have the system ready by October 4, the day the project was set to debut at an important trade show in Paris.
"At this stage the most important criteria was finding someone who could deliver the project on time. It was critically important that we keep our promise to the trade," says Beveridge. "We already had the PR organized. We already printed the brochures and sent our CEO letter to the trade."
INVISTA hired Accenture to help it assess the bids. INVISTA was looking for six things among the three down-selected contestants:
- Technical ability
- A proven project-management process
- The ability to scale
- The ability to manage a large global project
- Strategic thinking
- Knowledge of INVISTA's business
Freeborders had a four-week window to convince INVISTA it was the right partner. Keating says Freeborders has a culture of meeting challenges like this head on. "If someone tells us it can't be done, we say, 'Get the best people. We can do it,'" the Freeborders executive reports.
The outsourcing supplier's management team huddled around its vice president of engineering and brainstormed. Within a week Freeborders was able to show INVISTA "a shell of a solution." The company actually coded the nascent application before it won the 10-year contract, working with INVISTA globally via WebEx meetings. After INVISTA selected Freeborders, the supplier continued coding while negotiating the outsourcing contract, based on the growing trust between the two parties.
"We spoke to Freeborders' references, who assured us they could deliver," says Beveridge. His team interviewed the supplier's upper management but also talked to the people who would be writing its application. "We insisted on meeting our Freeborders team in China," he notes.
Freeborders organized the project around DuPont's business objectives, not just its IT needs. "They wanted us to be their business partner," says Keating. Beveridge says INVISTA was clear about what it wanted at this late stage because it had already completed the primary user interviews.
Beveridge says Freeborders took the work the former supplier had completed and built the requisite applications. "This was a design-and-build speed project," he says. Freeborders has a tightly defined offshoring process. The supplier assembles a dedicated team. About a quarter of that team stays in America.
Levi Strauss, the world's largest jeans producer, was a design partner. "Part of meeting this tough deadline was having the right design partners," says Keating.
Before going live, Freeborders did prototype testing with WalMart, Target, and VF Corporation, all leaders in global sourcing.
With eight weeks left to due date, INVISTA asked Freeborders if it could deliver the library three weeks earlier so it could demonstrate the program at a trade show in Miami on September 10. The can-do supplier actually appreciated the challenge "because it allowed us to do an early market validation of the project and gave us the opportunity to gather new requirements," says Keating.
How did Freeborders meet these demanding deadlines? By coupling Freeborders' onshore team in Europe and the US with offshoring to China.
Why Outsourcing to China Made Impossible Deadlines Possible
Keating says Freeborders, which has over 500 people on staff in the US, Europe, and China, was able to ramp up its team immediately "because of the deep pool of talent in China." Hiring people at its office in Shenzhen, located an hour north of Hong Kong, was not a problem since "Freeborders is known to have some of the best projects with leading European and US clients. The brightest in Shenzhen want to work with us," reports Keating.
The US team had business analysts and engineers with technical and retail business knowledge. The Chinese team that did the actual coding was five times as large.
Working 24/7 was a given. "Time was our enemy," says Beveridge. "We managed to steal time by having the US folks get up at 4 a.m., which was the afternoon for the Asia folks and late morning for my European team. We scheduled calls and Web meetings around the clock to make sure we didn't lose a minute. Freeborders knows how to leverage communications tools like Web meetings. It's as if we're all in the room gathered around a white board," adds the INVISTA executive. Beveridge says his Freeborders Chinese cohorts were flexible and always available for a phone call, even if it was late at night.
But even more important was the fact that the Chinese have a similar work ethic to Americans. "The Chinese are highly entrepreneurial, capitalistic, and competitive," he observes. Everyone worked 13-hour days to help us hit our timeline. They all knew and bought into what we were striving for."
When there's a challenge, the Freeborders China team typically assembles what they call a "tiger team." Their job: To think about the problem, then solve it. At the end of the day, tradition demands they have a solution. Keating says being selected to join a tiger team is a high honor; the selection process is quite competitive.
Language was not a problem. Freeborders' project manager in China speaks five languages fluently; his staff can communicate in English. Many of the supplier's workers on this team actually worked for US software companies before returning home. Members of the INVISTA team spoke eight languages. "We had no miscommunications because of language, since Freeborders has an English-language culture in China," reports Beveridge.
Cost was definitely a deciding factor. Keating maintains his pricing is 40-50 percent less than the wages of comparable Indian programmers, on average. "The price was a better value than India," Beveridge concurs. "We were also well aware that it would be cheaper to do this project in China. So we were thrilled they delivered ahead of schedule, too."
Beveridge says he was initially concerned the intellectual property (IP) remained with INVISTA. Since China joined the World Trade Organization and Freeborders is a US-owned company with American IP and security practices, this wasn't a worry.
Turning a Cost Center into a Revenue Stream
Once the application was up and running, Freeborders continued to host the Library as an application service provider (ASP).
Freeborders's next assignment was to expand the directory. The Library only listed INVISTA products. The company wanted to include all products outside its network because that would increase the value to the entire supply chain. The two companies created a joint venture for this open industry standard platform. "Now the Library is an industry tool, not an INVISTA tool only," points out Beveridge. "We invited our competition to join us. Freeborders was key in helping us determine strategically this was the right thing for our business."
Last year the project was so successful the partners migrated from a free service to a subscription model. The mills fund the project by paying an annual fee for listing. "We turned a cost center into a revenue stream," reports Beveridge.
Other Business Benefits
Going from free to fee was certainly a big step. In addition, Beveridge says the Library "has made our business more efficient. We've been able to speed things up online because we don't have to worry about time zones." He says before the Library it took days or weeks to work with Chinese mills. "Now it's hours and days," he reports. INVISTA also can track all activities globally from one activity page available anywhere in the world.
The brands and the retailers were pressuring INVISTA to reduce cycle time from the specification to finish of the garment. "Taking days out of the sourcing cycle produces real money," says Beveridge. "That's exactly what the Library does."
Learning from the Experience
"Working through the process changed the relationship from being just a supplier to something much stronger. If I had to do it over again, I would pick the same path. I'm glad Accenture helped us select Freeborders," says the INVISTA executive.
Keating says outsourcing works best when the supplier "hears the problems in the buyer's words. You have to know what they are trying to do," he says. "You have to get beyond the 'I want to build an application' to all of the background pain points, goals, objectives, organizational issues, and business impact that are driving the customer's behavior. Only then can you design, develop, and position solutions effectively. This is a step most application service providers overlook. But we find it drives a huge portion of the value created. You have to start right to end right," he says.
The outsourcing relationship has helped Freeborders, too. Beveridge says he talked to their bankers when they went for funding. He also willingly talks to their potential customers. "We have been an important client for them, so it's logical for them to ask me for help. I tell their prospects this is the best global application delivery experience I have ever had."
And that's a happy ending to a project that had a challenging beginning.
Freeborders' Top 10 List: 10 Common Global Sourcing Mistakes
Whether you are evaluating suppliers or creating the global sourcing strategy for your organization, the following is a list of the top 10 pitfalls to avoid if you want to maximize the value of your service provider relationships.
- Single sourcing
In the past 18 months, the number of outsourcing megadeals (multi-billion-dollar, multi-year, contracts with a single supplier) have dwindled, as companies have become hesitant to depend on a single provider. Several major financial services firms have recently re-negotiated or canceled their single-supplier megadeals, as the risk of committing to one provider became to heavy to ignore. A multiple service provider environment ("multisourcing") lowers risk, ensures competitive pricing, and allows you to align your allocation of work with the unique strengths of each supplier.
- Sourcing to only one location
While India is still the most popular destination for outsourcing, other locations, such as China, Russia, and Brazil, have emerged and developed proven track records. Just as outsourcing buyers seek smaller deals with multiple suppliers, they are also seeking to mitigate geopolitical, wage inflation, and skills scarcity risks by outsourcing to destinations other than India.
- Overlooking the impact of relationship management on productivity
In a service provider choice, outsourcing buyers must consider the relationship-management aspect of the partnership. Global US-based service providers and even the large India-based service providers have grown dramatically over the last five years, stretching their high level of talent across many large clients. If you are a company with less than $10 billion in sales, it is important to align with service providers that are "right-sized" for you--where you can get the "A" players on your project teams and where you can have adequate access to and interaction with senior management. Strong relationship-mapping at all levels of your organization will ensure that you and your service providers are working closely together to ensure success.
- Neglecting total cost of offshore
Hourly labor rates are only one variable in the total cost of ownership of an outsourcing relationship. Buyers often neglect factors like onsite versus offshore leverage ratios, productivity, and the time spent managing offshore relationships.
- Buying the brand name
Complete your due diligence when looking for an outsourcing supplier. For many of the reasons above, the biggest name may not provide the most value to you.
- Dismissing the pure play
If you're looking to outsource to Eastern Europe, why would you look first to a US-based provider? If you're looking to outsource to China, why would you count on the Chinese offices of an Indian service provider? A service provider whose strategic focus is in the country where services will be delivered can minimize risk, provide far greater productivity, and offer better rates than companies that merely add a facility when their core business is elsewhere. Pure-play providers have unique experience in understanding and managing cultural differences and operations that work in the local environment but can deliver to Western business standards. They also often offer lower local costs, strong and smooth government relationships, and the deepest operational knowledge of the geographical destination.
- Succumbing to the lure of the captive center
The benefits of owning and operating your own captive center can sound enticing: tighter controls of engineering processes and developing an on-the-ground knowledge of the offshore market you are trying to penetrate. But the total cost of ownership of a captive center can be prohibitive. According to AMR Research, variable costs include the costs of establishing a legal presence in the country, hiring and training local workers, establishing your own infrastructure and the opportunity cost of ramping up the facility. Unless you intend to have more than 1,000 people in your captive center, you may not have the scale required.
- Forgetting to align sourcing actions to strategic initiatives
Once you've made your service provider choices, be sure to have your internal processes in place and aligned with your corporate business strategy. Throwing your outsourced work over to the service provider without visibility to your client-side strategy will likely result in tactical failure in your outsourced work.
- Defining measurable goals and objectives
On a day-to-day basis, the keys to successful engagements are the same as internal projects: measurable goals and objectives. Regularly meeting to discuss project milestones will ensure successful client/service provider partnerships.
- Creating a win-lose strategy
Because an increasing numbers of buyers are sourcing to multiple suppliers, continuous provider evaluations are vital to a successful sourcing portfolio. Set aside criteria at the start of an engagement to define what constitutes a successful and unsuccessful project and evaluate your providers to determine if it is time to refresh your choices.