Before we get into BPO (Business Process Outsourcing) and Supply Chain Management, let's look at the most recent (and probably the most significant Supply Chain break). The Covid 19 Pandemic. Here's a close look from the New York Times:
"When the pandemic struck in early 2020, people and businesses were quickly forced to restrict their activity, sending the global economy into a brief but damaging free fall. As offices and stores closed, and factories from Asia to Europe and North America halted production, companies laid off workers en masse. That took spending power - an economic life force - out of people's hands.
"With fewer goods being made and fewer people with paychecks to spend, manufacturers and shipping companies assumed that demand would drop sharply. But a far more complicated situation unfolded, challenging the global supply chain management.” [1] A skyrocketing demand for PPE, Personal Protective Equipment. So China ramped up the production of PPE and shipped them around the globe. But that created another problem- empty shipping containers are now piled up worldwide. So now there's a shortage of shipping containers in the one country that needs them the most: China.
"China's factories were pumping out goods in record volumes. Despite the worry that economic devastation would destroy spending in many countries, the pandemic merely shifted the demand: Instead of eating out and attending events, Americans bought office furniture, electronics, and kitchen appliances. The pandemic sharply accelerated a trend that had been advancing for years: the shift toward online shopping. From April to June 2020, as the first wave of the virus spread, Amazon sold 57 percent more items than it had a year earlier." [2]
"The spending in the United States was also encouraged by government stimulus programs that mailed checks to households, part of a record-setting effort to resuscitate the economy. Households collectively received hundreds of billions in recovery aid. As demand increased, a wave of factory goods swiftly overwhelmed U.S. ports." [3[ With a flood of container ships arriving on the west coast, once, there were 100-vessel queues off the ports of Los Angeles and Long Beach.
"Even once unloaded, containers piled up on docks unclaimed, because of a shortage of truck drivers needed to haul cargo to warehouses. Truck drivers had long been scarce, with wages steadily eroding over the years amid grueling working conditions. Businesses across the economy struggled to hire workers: at warehouses, at retailers, at construction companies, and for other skilled trades." [4]
Shortages begat shortages. A lack of computer chips disrupted auto production and medical devices. Consumers got the message and started ordering more supplies.
"Even as the pandemic catalyzed it, the crisis has roots in a production model pioneered by Toyota at the end of World War II and disseminated throughout the business world by consulting companies like McKinsey.
"Under the model called "just in time" manufacturing, companies stockpile as few raw materials and parts as possible instead of buying what they need as they need it.
"That works only when they can get what they need when they need it. For years, some experts have warned that the global economy is over-reliant on lean production and faraway factories, exposed to the inevitable shock. The pandemic has seemingly validated that view." [5]
[1,2,3,4,5] By Lazaro Gamio and Peter S. Goodman, The New York Times, December 5, 2021
Since you probably lived and suffered through the Pandemic, you likely know most of this, but seldom is the story, and warning as straightforward as it is here.
So, what is the supply chain? Simply put, it's gathering all the raw materials needed to make something, getting it to the manufacturer, and then getting the completed product to the consumer. More entities are involved in the chain than mentioned here, but this is basically what it is.
You should know that almost every company, large or small, outsources some part of its supply chain. It's simply because other companies can do the logistics better, more efficiently, and cheaper than they can. Managing the supply chain can get tricky when there are multiple entities involved in moving a single product. Still, Supply Chain Management companies have been doing this for a long time, and they have the know-how and experience in Supply Chain Management.
The benefits of outsourcing Supply Chain Management are many and significant.
Cost - BPO contracts with Acme Widgets to handle their supply chain. This means that the entire Supply Chain Management is under the BPOs control, and they're responsible for its execution. They can do it cheaper because they have a team of experts on the other side of the globe that know the process inside and out. They've been doing it for years. They're constantly training and improving their craft.
Efficiency - Since the BPO does just this one thing, they are very good at it. This is their sole source of income, so they want to do the best job possible. They have a reputation and want their enterprise to flourish, so they are very motivated to keep you happy.
Tech - Supply Chain Management is a highly competitive marketplace. Like many other business sectors, hardware and software are constantly being improved and new methods introduced. Staying on the leading edge requires using the best equipment possible, and BPOs are ready to make that investment.
Scalability - (And this is a big plus) BPOs can scale up or down based on your needs. If you have a busy season, a BPO can bring on more staff; they can slim your team down when it is over. That's a flexibility most individual companies don't have.
There are plenty of advantages to partnering with a BPO for Supply Chain Management, but there are some things you should consider before making a deal with one.
Control - If you are a very "Hands-On" manager or owner, you may have a little trouble relinquishing control over your supply chain operations. The upside to partnering with a BPO is the money and time you will keep in exchange for that control.
Contractual Issues - You're used to dealing with contracts and making deals. There's nothing substantially different about a contract with a BPO, but there are nuances you should be aware of. Have your attorney take a look.
Hidden Costs - As with any deal, there could be some costs that aren't in plain language. Make sure you know exactly what you'll pay and what exceptions to the standard prices are. No one wants to be blindsided or surprised.
Cultural Differences - Different cultures do business differently. Work hours may vary, and work days may go. Make sure you know the differences you'll encounter when you partner with a Supply Chain Management BPO.
Obstacle - Sometimes the negotiations of a contract go smoothly; other times, not so much. Use your crystal ball, look down the road, and yell if you see anything. But seriously, there can always be unexpected obstacles in the future. Just know that something will go wrong somewhere and sometime.
Quality - If you think the quality of your products or customer satisfaction is going to be compromised, quickly act to fix the issues. If it's a simple misunderstanding, straighten things out. If it's more serious, resolve the issue or void the contract for cause.
Yes, and Yes. Many businesses would not be able to function without BPO.
The Ford Motor Company manufactures Ford cars. They design, produce, and distribute all of their cars and trucks. They then sell them to local dealers (about 9,955 globally), who sell them to eager buyers.
But Ford, like most manufacturers, does not make every part themselves. They outsource many components to other, smaller manufacturers.
And so there are Original Equipment Manufacturers (OEM).
If Ford had to make all the parts and subassemblies themselves, the sheer weight of employment, the number of factories, and logistics would probably be impossible for a single company to manage.
So Ford can design and build the cars, something they're good at, and buy the radios, wheels, tires, and interiors from a supplier.
This makes for an efficient supply chain managed by a Supply Chain Management BPO.
Here's another example: a company that makes vacuum cleaners outsources its customer service to a third party. This makes sense since expertise in manufacturing vacuum cleaners has little to do as a skill set, with customer service. This is called Contact Center Outsourcing.
And since each company is doing its best, the benefits would include reduced costs and greater customer satisfaction.
Outsource Your Supply Chain Management
If you have a Supply Chain (and who doesn't?), take a hard look at it and imagine what kind of savings you could realize by outsourcing its management.
If the answer to these questions is "yes, " you need to get in touch with a BPO that can help. Call or email Rely Services for a talk about how BPO services can solve your Supply Chain Management issues.