The Potential of Business Process Outsourcing in Supply Chain Logistics
This is a guest post by Ofer Tirosh.
Figure 1: Image Source: GlobalData – Showing the growth forecasts for Business Process Outsourcing in varying markets from 2018 to 2023
What are the pros and cons of business process outsourcing in supply chain logistics? Will it make the business operate more smoothly or will it hamper efficiency and threaten operations? The answer is it depends on what processes are outsourced and how diversified the operations are.
This has been made all the more evident given the recent disruptions created by global medical crises and domestic and international social unrest.
Is it time to diversify your operations and actively engage third party service providers? Is it time to consider allowing for the use of remote employees? If so, what is the best means for accomplishing this, ensuring business continuity, and not going bankrupt in the process?
Understanding Business Process Outsourcing and its History
Business process outsourcing is considered by many to be the outsourcing of “non-essential” business operations, but is that really the case? Legal services are routinely outsourced not because they are non-essential but because many companies do not have the resources to hire their own legal departments.
The same is true with accounting services and increasingly popular for IT solutions. What about the logistics supply chain though? It would not be unreasonable to presume that the Logistics Supply Chain is among the most common examples of business process outsourcing in action.
All of these particular examples are also very critical in terms of business, so there should be no mistaking business process outsourcing as being limited or restricted in terms of the essential nature of the processes being outsourced.
Figure 2: Image Source: McKinsey & Company – Report providing means to retain customer loyalty during disruptions to business operations.
Even so, the combination of the technical revolution, automation, and recent disruptions have forced businesses around the globe to reconsider the possibilities and necessities of business process outsourcing.
Business Process Outsourcing in the Global Supply Chain for 2020
For a time, there was some hope that the Covid pandemic would just go away, yet there are an increasing number of experts warning of a second wave. Governments around the world are once again calling for a renewed series of lockdowns and even quarantine measures to be put into place.
Those businesses that did not learn from the first go round will once again be fast with a disruption in business operations and issues of concern with business continuity and, very likely, suffer a decline in customer retention capabilities all because they were not diversified or did not actively engage in vertical integration within the supply chain.
Vertical integration is the ability of independent subsidiaries within the supply chain to be capable of accepting more core responsibilities through the merging or takeover of relevant companies. These core responsibilities may remain separate, but the individual facilities or subsidiaries should also have the capacity to duplicate or replace the core responsibilities of other facilities at the same time.
Vertical integration is perhaps a more ideal solution, but will not always be a viable option, especially among many of the smaller business interests conducting operations as part of the global logistics supply chain.
Business process outsourcing, however, allows for the use of third-party service providers, in virtually any field, who are located in virtually any area of the globe that may be desirable or beneficial to ensure business continuity.
Business Process Outsourcing and its Advantages
Among the many advantages of business process outsourcing (BPO) is the ability to have a virtually limitless labor pool at your disposal. The idea of having a selection of employees from virtually anywhere in the world may seem to be a bit of a stretch at first but is a reality in the digital age we live in.
To fully enjoy the benefits of BPO, there must be an analysis of data to determine which services businesses can outsource effectively and to consider what the economic and other advantages of business process outsourcing are for the individual company and its subsidiaries or other partner organizations.
As was previously noted, there are many business processes that are routinely outsourced to third-party service providers. Legal services, accounting, information technologies, and even logistics support services are among the most common. The digitization of the world we live in, working together with the technological revolution, has opened the doors to BPO and expanded the opportunities and benefits for companies and consumers alike.
There are an increasing number of businesses that routinely outsource not only manufacturing but also the assembly of parts and other forms of industry that were previously, by need, performed only in a very limited facility in a very limited capacity.
The question, given the expansion in capacity for business process outsourcing, and the means by which it can be used to mitigate any disruption to business operations, is “How can business process outsourcing be converted into a viable business strategy in order to ensure business continuity?”
Figure 3: Image Source: BusinessWire – While global shipping incidents are down, Business Wire also notes that there may be coming disruptions to business operations due not only to the coronavirus but also the continued economic downturn being further exacerbated by both political unrest and division. Business process outsourcing and redundant strategic operational planning can ensure business continuity even during difficult times.
Business Process Outsourcing for Reserve Operational Planning
In a June 2020 report, USA Today noted that not only the Coronavirus but also continued social unrest in the United States are adversely impacting job growth and the overall economic recovery. Disaster can strike virtually anywhere at any time, and it seems that this year is going to be even more exceptional in that regard.
Reserve Operational Planning is the process by which companies can be prepared for any disruption to operations and have an active plan in place with numerous options for the immediate, or at least quick, recovery. This is a seemingly important part of business but is also made easier through strategic planning and the increasing ease with which companies can utilize business process outsourcing.
The concept of a strategic cash reserve is not new. Most successful business operations will build and maintain a strategic cash reserve in order to ensure business continuity. What about the concept of a strategic reserve strategy though? What can be done in order to mitigate any potential losses caused by disruptions to business operations?
The answer is that more businesses need to consider the possibility for interruptions to business continuity not only in terms of customer services but also in terms of business operations as well. The creation of an operational reserve strategy needs to become more commonplace.
Again, the prevalence of business process outsourcing for virtually all aspects of business operations means there is no real excuse for not having an operational strategy to mitigate disruption. While 2020 has been an extraordinary year in many ways, there is an abject lesson to be learned in terms of the potential for disruptions to business operations and insight to be gained to alleviate these problems in the future.
First, we all faced the global COVID-19 pandemic, disrupting production, logistics, and virtually every other aspect of business in China, the United States, and, indeed, around the world. We then saw massive unrest in the major cities of the US, often forcing closures to be extended merely out of concern for the physical safety of personnel and to avoid loss to operational facilities.
Economic unrest, social discord, natural disaster, and even man-made disasters all have the potential to disrupt entire systems and shut down business operations completely. While the services of a business analyst may be required for this undertaking, the ease with which business process outsourcing can be implemented these days should give it an active role in ensuring business continuity.
Here are four steps businesses should take to avoid or help mitigate future disruptions:
1. Determine all aspects of business operations that can be successfully outsourced – Make a list of all of the business functions that are currently outsourced and others that may be outsourced, regardless of whether or not they are during the present course of daily operations.
2. Determine those areas most likely to experience any type of unrest that may interfere with business operations – These days that may very well include the entire world, but there are always going to be some areas that are more prone to unrest than others. These areas will often include developing nations that are otherwise favorable to the financial and productive capacity of business operations.
3. Create a list of potential resources for implementing business process outsourcing for all aspects of operations – Yes, this is going to be an ungainly task, and it may be difficult to ascertain and compile all of the relevant information in detail. This is part of the reason that a proper business analyst should be considered to create the relevant reports for the establishment of strategic operational reserve planning.
Conversely, however, in the event of disruption to operations, it will greatly reduce the amount of time necessary to move those operations into different areas. This should serve to reduce the potential for severe disruptions to operations that may place the entire business at risk of closure.
This work may involve active negotiations with numerous additional companies that are capable of absorbing the operations that have been disrupted in other locations. However, most of these companies will happily entertain negotiations that may eventually lead to an expansion of their own operations and the growth of their independent companies.
4. Create a plan for the implementation of operations in these distant locations – While this will not reduce the potential for disruption to an absolute zero, it will provide a definitive measuring point for the forecast of down-time and interruption and a clearly defined and realistic solution to customers who may be adversely impacted by the disruption to business operations.
Customer loyalty is much easier to retain with constant communications and, even more notably, the conveyance of accurate and relevant information regarding the resumption of operations.
These lists should not be limited to singular locations but offer numerous options with notations regarding which areas will take longer to establish and commence operations, which areas are more or less expensive, and other data relevant to business continuity and reducing the risk of loss and disruption.
The Benefits of Redundant Systems in Strategic Operational Planning for Business Process Outsourcing
Redundant systems are common to operations, most notably in the form of redundant systems for manufacturing and production. This same principle of redundant systems remains equally important for strategic operational planning, most especially during difficult times and for any events that may inhibit business continuity.
The continued expansion of business process outsourcing should be viewed as an opportunity, especially for any business that has international or global operations already in place. The planning process may be challenging, but it is most certainly not an impossible task. The ready availability of business process outsourcing and its advantages for business continuity make it a worthwhile challenge that should put any business a step ahead of their competition.
This was a guest post by Ofer Tirosh.
Author Bio
Ofer Tirosh is an entrepreneur and the CEO of Tomedes, a translation agency. His primary focus is on globalization through localization strategies and language services.
