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Top 5 Benefits of Business Process Outsourcing to your Supply Chain

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  • Top 5 Benefits of Business Process Outsourcing to your Supply Chain

    What supply chain functions are currently outsourced within your organization?

    Today, the current economy has presented a variety of opportunities for businesses to outsource many supply chain functions and responsibilities traditionally done in-house.
    Business process outsourcing (BPO) is a method of outsourcing that involves the contracting of operations and responsibilities of a specific business functions or processes to a specialized service provider.
    Within the context of a company’s supply chain, these business functions could include carrier contract negotiation, freight audit and payment, fulfillment, and many others. A Logistics Service Integrator (LSI), sometimes call a 4PL (4th Party Logistics Provider) takes the role of independently managing a company’s outsourced functions, utilizing their expertise to bring the most value to the organization.
    Below is a list of 5 benefits companies are able to realize through outsourcing.

    TOP 5 Benefits of Business Process Outsourcing

    1. Best in Class Capabilities

    Best in class service providers make significant investments in technology, methodologies, and people – because what you outsource to them is their business. Their expertise lies in the experience gained by working with many clients in similar industries and having faced similar challenges. The combination of specialization and expertise gives businesses the benefits of both while avoiding the cost of investing in technology and infrastructure to support the function. With the right partnership in place, businesses can quickly realize the benefits of a new or reengineered process through dramatic improvements in critical performance measures such as cost, quality, service, and speed. The areas best suited for outsourcing are often those that are not core to the company’s business as these will be the areas not prioritized for needed attention and improvements from a company’s already limited available resources. By outsourcing the non core function to a Best in Class provider, the company can begin to see the benefits much sooner and at a lower cost.

    2. Better Use of Company Resources

    Outsourcing enables an organization to redirect its resources, most often in the form of people and IT resources, toward activities which are closer related their core business. Outsourcing lets a company focus on its core business by having operational functions assumed by an outside expert. Freed from devoting energy to areas that are not its area of expertise, the company can focus its resources on what it does best and as a result better meet its customers' expectations.

    3. Reduce Operating Costs

    Organizations that try to do everything themselves may incur significantly higher research, development, marketing, training, and deployment expenses, all of which hurt profitability or are passed on to the customer. An outside provider's lower cost structure, which may be the result of a greater economy of scale or other advantage based on specialization, reduces a company's operating costs and increases its competitive advantage. Costs are reduced through smoothing out demand variability since the outsource company bears the majority of fixed costs. Outsourcing reduces the need to invest capital in non core business functions. Instead of acquiring the resources through capital expenditures, they are contracted for on an "as used" operational expense basis.

    4. Reduce Business Risk

    Significant risks are associated with any capital investments a business organization makes. Dynamic markets, aggressive competition, complicated government regulations, changing financial conditions and technologies all change extremely quickly. Keeping up with these changes, especially those in which the next generation requires a serious investment, is a very risky proposition. Outsourcing providers make investments on behalf of many clients, not just one, so the shared investment spreads risk, and reduces the risk a single company has to bear.

    5. Company Lacks Necessary Resources

    Businesses outsource because they do not have access to the required resources within the company. This can be in the form of a lack of intellectual capabilities or more tangible assets such as sufficient systems or staffing. Outsourcing is often the most viable option for building or improving a needed capability. It is critical to remember that outsourcing doesn't mean abdication of management responsibility nor does it work well as a knee jerk reaction by a company in trouble. When a function is viewed as difficult to manage or out of control, the organization needs to examine the underlying causes. If the requirements expectations or needed resources are not clearly understood, then outsourcing won't improve the situation; it may in fact exacerbate it. If the organization doesn't understand its own requirements, it won't be able to communicate them to an outside provider.

  • #2
    Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

    Thank you for that informative post ! Well that's actually more on the outsourcing process of the the business for development sake.

    Comment


    • #3
      Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

      Thanks very much for the valuable knowledge on Business Process Outsourcing for supply chain management.

      Comment


      • #4
        Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

        Wow,this is complete ! Nice content

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        http://www.szyashang.com/en/Cp.html

        Comment


        • #5
          Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

          In an ideal scenario, reducing operating costs would be achieved but there have been a lot of cases wherein outsourcing actually cost a company more. I'm not saying that it'll always cost you more but it is entirely dependent on the company you outsource to and the sort of contract that you have with them.

          I think critical areas for a successful outsourcing program would be:
          ->Understanding company goals and objectives
          ->A clear strategic vision and plan
          ->Selecting the right vendor
          ->A properly structured contract
          ->Open communications with affected individuals/groups
          ->Short-term financial justification

          Those are just some I'm listing off the top of my head. It was a great article though; very relevant!

          Comment


          • #6
            Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

            Very informative. I think that a lot of what you said people can relate to and it's actually very helpful. But after all, it might nto work for everyone though. Sometimes, it might not beneficial for me for a season, but after all, it's great. Very informative post, thank you for it.

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            • #7
              Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

              Better use of company resources. I think that is the most common error that employees have been committing. There are resources that are lying around, waiting to be used but are not used. This includes appliances and gadgets that are now working. A good example is a light bulb in the pantry that is not working. And if you let it be like that for a long time then that resource is there but is not being beneficial to the company. That usually happens in delivery vehicles particularly the dilapidated ones that are not properly maintained.

              Comment


              • #8
                Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                Wow, very informative, great information especially for a newbie like me.
                Thanks again.

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                • #9
                  Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                  The greatest benefit outsourcing can bring to companies abroad is that it reduces their overall cost. Operations and overhead costs can drain a company's resources and time-consuming long-winding backoffice processes usually add to these financial challenges. With outsourcing, companies can get rid of these backoffice departments and relegate the cost of operating an office and hiring staff to outsourcing companies, which usually doesn't amount to much when converted to dollars or pounds.

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                  • #10
                    Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                    Well @xTinx is correct in that it reduces costs, and with that you are free to spend elsewhere. I remember in my first business when I saw the figures for the first time realizing how much those little numbers add up to when they accrue week after week. I think that is one of the things that comes with decisions like this, and why most businesses consider this as a part of their overall strategy for maximizing profits.

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                    • #11
                      Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                      Yes, I totally agree with those 5 points which when explained has shown the merits of the of these conclusions. One of the important considerations in this scenario is the outsourcing of the labor component where most of the workers are engaged through an outside source on a contractual basis. This arrangement relieves the management from having to cover the cost of benefits which would have been due to a directly employed labor force. By this mode of operation, the company is able to save a considerable amount of money.

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                      • #12
                        Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                        Thanx for sharing good article.

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                        • #13
                          Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                          Outsourcing can mainly help you with managing a business risk efficiently. It could improve your products. It could also helps you with product supply planning. It could help you too with your business workflow by an automation process and lastly, it can lower your business cost likewise there could be an increase on your profit as a whole.

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                          • #14
                            Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                            Great post it was awesome and nice information for this post on Benefits of Business Process Outsourcing to your Supply Chain!
                            Thanks for sharing this Post!

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                            • #15
                              Re: Top 5 Benefits of Business Process Outsourcing to your Supply Chain

                              Great, informative update on supply chain management.

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