Outsourcing as a business practice has been growing in volume and efficiency and many manufacturing companies find that it is not just a convenience, but a requirement. Let’s take a look at the unique ecosystem of BPO (business process outsourcing) of supply chain manufacturing.
The BPO of supply chain manufacturing: A unique ecosystem
InfoSys Portland recently conducted an in-depth study into the ecosystem of BPO, and they’ve come to some universal, and interesting, conclusions. First, it’s essential to understand that supply chain manufacturing and its management are seen as a core function within today’s modern manufacturing organizations. When the manufacturing industry was in its nascent stages, many companies were hesitant to outsource, simply because they wanted to keep the manufacturing jobs (which were high-paying and in-demand) in the United States. However, as the focus of many of these companies shifted from the manufacture of goods to the design and marketing of said goods, the need for outsourcing grew. As outsourcing became known as a more cost-effective source of labor, it became almost standard for manufacturers to outsource their manufacturing processes overseas (or, at the very least, off-site). For this reason, BPO became imperative to help manufacturers meet the needs of their customers while cutting costs. Put simply, BPO is when one company hires another company to perform a task. However, it’s about more than simply performing a set of menial tasks. Rather, the contracted company is duty-bound to adopt both the operations and the responsibilities of the company that contracted them. In order for companies to have a successful BPO experience, they have to keep the following in mind:
- Focus on the outcome, not the operating cost. While the manufacturing company must be cost-effective in their manufacturing process, they must also maintain the integrity of the actual process, and the goods themselves. Therefore, it’s more important to have a good product than the lowest price.
- Manage the BPO with an end-to-end solution for more seamless integration.
- Make sure that the service provider matches the industry. For example, if your company manufactures products for the automotive industry, so too should your service provider.
- Ensure that you, as the contracting company, do periodic diagnostics to make sure that your BPO processes are operating as smoothly as possible. Think of things like an assessment of inventory, potential gains and losses, and the presence (or absence) of working capital for investiture, which are all important considerations before deciding to go full-scale with BPO processes.
Most organizations conducting BPO have a state-of-the-art software system, like Vanguard Predictive Planning, in addition to domain experts on staff, to help the process operate smoothly. Your internal teams should have market-leading supply chain planning capabilities as well. The demand signal, which your BPO relies on, must be as accurate as possible. If the demand forecast is off, even the best BPO partner will perform sub-optimally. For more information on how Vanguard Predictive Planning can help you with your BPO and its ecosystem, contact us today.