| What supply chain functions are currently outsourced | | | | company can focus its resources on what it does |
| within your organization? | | | | best and as a result better meet its customers' |
| Today, the current economy has presented a variety | | | | expectations. |
| of opportunities for businesses to outsource many | | | | 3. Reduce Operating Costs |
| supply chain functions and responsibilities traditionally | | | | Organizations that try to do everything themselves |
| done in-house. Business process outsourcing (BPO) is | | | | may incur significantly higher research, development, |
| a method of outsourcing that involves the contracting | | | | marketing, training, and deployment expenses, all of |
| of operations and responsibilities of a specific business | | | | which hurt profitability or are passed on to the |
| functions or processes to a specialized service | | | | customer. An outside provider's lower cost structure, |
| provider. | | | | which may be the result of a greater economy of |
| Within the context of a company's supply chain, these | | | | scale or other advantage based on specialization, |
| business functions could include carrier contract | | | | reduces a company's operating costs and increases |
| negotiation, freight audit and payment, fulfillment, and | | | | its competitive advantage. Costs are reduced through |
| many others. A Logistics Service Integrator (LSI), | | | | smoothing out demand variability since the outsource |
| sometimes call a 4PL (4th Party Logistics Provider) | | | | company bears the majority of fixed costs. |
| takes the role of independently managing a company's | | | | Outsourcing reduces the need to invest capital in non |
| outsourced functions, utilizing their expertise to bring the | | | | core business functions. Instead of acquiring the |
| most value to the organization. | | | | resources through capital expenditures, they are |
| Below is a list of 5 benefits companies are able to | | | | contracted for on an "as used" operational expense |
| realize through outsourcing. | | | | basis. |
| TOP 5 Benefits of Business Process Outsourcing | | | | 4. Reduce Business Risk |
| 1. Best in Class Capabilities | | | | Significant risks are associated with any capital |
| Best in class service providers make significant | | | | investments a business organization makes. Dynamic |
| investments in technology, methodologies, and people - | | | | markets, aggressive competition, complicated |
| because what you outsource to them is their business. | | | | government regulations, changing financial conditions |
| Their expertise lies in the experience gained by | | | | and technologies all change extremely quickly. Keeping |
| working with many clients in similar industries and | | | | up with these changes, especially those in which the |
| having faced similar challenges. The combination of | | | | next generation requires a serious investment, is a |
| specialization and expertise gives businesses the | | | | very risky proposition. Outsourcing providers make |
| benefits of both while avoiding the cost of investing in | | | | investments on behalf of many clients, not just one, so |
| technology and infrastructure to support the function. | | | | the shared investment spreads risk, and reduces the |
| With the right partnership in place, businesses can | | | | risk a single company has to bear. |
| quickly realize the benefits of a new or reengineered | | | | 5. Company Lacks Necessary Resources |
| process through dramatic improvements in critical | | | | Businesses outsource because they do not have |
| performance measures such as cost, quality, service, | | | | access to the required resources within the company. |
| and speed. The areas best suited for outsourcing are | | | | This can be in the form of a lack of intellectual |
| often those that are not core to the company's | | | | capabilities or more tangible assets such as sufficient |
| business as these will be the areas not prioritized for | | | | systems or staffing. Outsourcing is often the most |
| needed attention and improvements from a | | | | viable option for building or improving a needed |
| company's already limited available resources. By | | | | capability. It is critical to remember that outsourcing |
| outsourcing the non core function to a Best in Class | | | | doesn't mean abdication of management responsibility |
| provider, the company can begin to see the benefits | | | | nor does it work well as a knee jerk reaction by a |
| much sooner and at a lower cost. | | | | company in trouble. When a function is viewed as |
| 2. Better Use of Company Resources | | | | difficult to manage or out of control, the organization |
| Outsourcing enables an organization to redirect its | | | | needs to examine the underlying causes. If the |
| resources, most often in the form of people and IT | | | | requirements expectations or needed resources are |
| resources, toward activities which are closer related | | | | not clearly understood, then outsourcing won't improve |
| their core business. Outsourcing lets a company focus | | | | the situation; it may in fact exacerbate it. If the |
| on its core business by having operational functions | | | | organization doesn't understand its own requirements, it |
| assumed by an outside expert. Freed from devoting | | | | won't be able to communicate them to an outside |
| energy to areas that are not its area of expertise, the | | | | provider. |