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Goods start as raw materials procured from suppliers and end as purchased products delivered to customers’ doorsteps. The process overseeing all these complicated steps is supply chain management (SCM).
Unfortunately, companies can face various challenges in their supply chain, such as insufficient stock, poor packaging, low-quality items, and shipping delays. Business process outsourcing (BPO) helps with these concerns by streamlining operations, reducing costs, and boosting profits.
This page covers the benefits of outsourced supply chain management. Read on to see if this strategy is right for your business.
Six Key Benefits of Outsourced Supply Chain Management
Let us first discuss what BPO is and what SCM is:
- BPO involves contracting functions or tasks to third-party service providers. For example, you can hire BPO service providers to handle your order fulfillment, inventory management, and product shipping.
- SCM entails managing all activities, including procuring, producing, and distributing goods or items. It starts with obtaining raw materials and ends with delivering finished products to the customers’ doorsteps.
The global SCM BPO market was worth $28.9 billion in 2023 and could reach $73.35 billion by 2033 at a compound annual growth rate (CAGR) of 9.7%. According to Future Market Insights, some of its benefits include:
- Reducing overall costs
- Satisfying consumer demand
- increasing flexibility
Discover other benefits of outsourcing the supply chain below.
1. Significant Cost Reduction and Cost Efficiency
Outsourcing allows you to reduce labor and operating expenses. Partnering with a reliable service provider can even boost your overall efficiency. This benefit also applies to outsourcing SCM for business functions such as material acquisition, warehouse management, and product shipping.
Cost efficiency is indeed one of the benefits of outsourced supply chain management. You can capitalize on economies of scale by partnering with an efficient and reliable BPO service provider. Doing so allows you to decrease costs and increase production simultaneously.
2. Access to Specialized Expertise and Advanced Technologies
Companies, such as retail enterprises and e-commerce businesses, must stay on top of their SCM operations. These operations include data entry, order processing, inventory management, and product delivery. As your market expands and your customer base grows, you should consider tapping into a vast talent pool and modern technologies.
Accessibility is one of the benefits of outsourced supply chain management. A reputable BPO provider can give you access to a workforce that can handle data management, order fulfillment, logistics, and shipping. It can also leverage digital tools and innovative technologies such as automation, analytics, and cloud-based solutions for business growth.
3. Enhanced Flexibility and Scalability in Supply Chain Operations
Businesses in particular industries, such as manufacturing, face fluctuations in meeting customer demand. They often encounter peak and off-peak seasons where they need more or fewer people for their SCM operations. Business flexibility and scalability are crucial benefits of outsourced supply chain management.
Outsourcing allows you to scale your business up and down. You can hire a BPO service provider to handle your customer service and logistics during peak seasons on a per-project basis. Then, you can easily and quickly terminate the contract during the offseason.
4. Streamlined Procurement and Supplier Management Processes
Efficient and effective procurement is a critical component of a successful supply chain. What good is your business if you do not have suitable suppliers and the raw materials they provide? You must partner with the best third-party vendors to optimize these processes.
A streamlined procurement process with reliable suppliers is one of the benefits of outsourced supply chain management. BPO providers often have established relationships with multiple suppliers. Partnering with the right provider guarantees better negotiation power, improved contract management, and reduced lead times.
5. Optimized Warehousing and Inventory Management
Warehouse and inventory management can significantly influence a company’s bottom line. Businesses need an organized and efficient warehouse to stock raw materials and finished products. They also require a diligent, accurate, and efficient workforce to track the flow of goods or items. That said, BPO is the key to meeting these requirements!
Optimized warehouse and inventory management is one of the benefits of outsourced supply chain management. Outsourcing lets you utilize dedicated warehouse facilities to store and secure all your products. A reliable BPO partner can also help implement advanced strategies such as just-in-time (JIT) inventory, demand forecasting, and efficient monitoring.
6. Improved Transportation and Logistics Management
Business enterprises ensure the right products arrive on time at customers’ doorsteps. This objective requires proper planning and execution for the efficient transportation and storage of products from start to finish. Working with a third-party logistics (3PL) partner is vital to SCM operations.
Improved transportation and logistics management is one of the benefits of outsourced supply chain management. Outsourcing lets you access an extensive carrier network, negotiate favorable shipping costs, and employ route optimization techniques. As a result, you can expect improved transit times, reduced freight costs, and enhanced overall efficiency.
The Importance of Communication and Collaboration with Outsourcing Partners
A clear business process outsourcing guide has proven effective in maximizing efficiency and productivity and minimizing labor and operating costs. The benefits of outsourced supply chain management discussed above are just a few examples of what businesses gain from proper planning.
According to Zippia, 57% of businesses claim that SCM gives them a competitive edge. Supply chains offer them a wide range (71% of respondents) of customized (76%), reliable (73%), sustainable (69%), and quickly delivered (76%) products.
Hiring reliable BPO partners for your SCM operations is crucial for business success. However, outsourcing requires constant communication and collaboration. Work with service providers regularly while delegating your procurement, inventory management, logistics, and shipping processes.
Ownership of your supply chain processes enables you to control your business. However, you should still allow the provider to streamline various parts of your operations while reducing operating expenses. Doing so is a viable solution for maximizing outsourcing’s potential while minimizing risk.
For communicative and collaborative outsourcing engagement, consider the following recommendations:
- Create a service-level agreement (SLA). It should include your operational objectives, key metrics, work scope, standard operating procedures (SOPs), specific clauses, and contract breach ramifications.
- Set key performance indicators (KPIs) for SCM. These include daily performance, cost reduction, production service rate, inventory turnover, production time, lead time, rate of return, and return on assets (ROA).
- Choose service providers with top tech priorities. These include automation, artificial intelligence (AI), data analysis, Internet of Things (IoT), and cloud computing. Digital tools and technologies can help ensure robust communication and collaboration.
- Ensure regular monitoring and constant interactions. Conduct regular check-ins and meetings with BPO providers for performance reviews, forecasting, reporting, and decision-making.
The Bottom Line
Among the benefits of outsourced supply chain management is access to a vast pool of talent, technology, and tools. Partnering with a BPO service provider also helps optimize operations, reduce expenditures, and increase profitability.
Whether you run a startup, small business, or large enterprise, outsource supply chain management to unlock a world of possibilities for your business. That will ultimately lead to your business growth and success!
Ready to outsource your supply chain? Unity Communications has what it takes to streamline operations and reduce expenditures. Let’s connect today to see how we can make this vision a reality!