Manufacturing Marvel: How BPO Increases Productivity in the Industry

Original equipment manufacturers (OEMs) face a dilemma: should they produce components internally or opt for business process outsourcing (BPO)? The decision is multifaceted, considering cost, quality, control, and compliance. 

However, engaging with a sole manufacturing source—whether outsourced or not—seems to be the best strategy to enhance cost efficiency and bolster profits in the current fiercely competitive market.

This article outlines the role of BPO in manufacturing, how it increases productivity, and its benefits.

The role of BPO in Manufacturing

Outsourced manufacturing, or contract manufacturing, involves hiring a third-party company to produce goods on behalf of another company. Manufacturing processes can be accomplished within a country’s borders or internationally through nearshore and offshore outsourcing. The latter option can help businesses reduce costs and save time.

The worldwide contract manufacturing market was valued at $246.51 billion in 2022 and is projected to reach $512.74 billion by 2030. Studies suggest a compound annual growth rate (CAGR) of 9.58% from 2023 to 2030.

So, what is BPO’s role in manufacturing? BPO plays a significant role in the manufacturing industry as it provides various services that help companies streamline their operations, enhance efficiency, and focus on their core competencies. 

Here are some key roles of BPO in the manufacturing industry:

• Supply chain management. Outsourcing tasks related to supply chain management, including procurement, vendor management, and logistics, can help streamline operations and reduce costs.
• Assembly and sub-assembly. Subcontracting assembly and sub-assembly processes can be cost-effective. It is especially helpful in managing components that don’t require in-house expertise or variable production volumes.
• Packaging and labeling. Product packaging and labeling can be outsourced to specialized packaging companies, allowing manufacturers to concentrate on production processes.
• Quality control and inspection. Quality control and inspection processes can be outsourced to ensure products meet industry standards. Third-party inspection services can provide unbiased assessments of product quality.
• Product testing. Testing and validation of products can be outsourced to laboratories or testing facilities with the necessary expertise and equipment.
• Prototype development. Outsourcing the development of prototypes and samples can be beneficial, especially for small and medium-sized manufacturers without dedicated prototyping capabilities.
• Tooling and mold making. Tooling and mold-making processes can be outsourced to specialized tooling manufacturers, reducing the need for in-house tooling expertise.
• CNC machining and precision engineering. Computer numerical control (CNC) machining and precision engineering tasks can be outsourced to specialized machine shops with the required equipment and skilled technicians.
• Maintenance and equipment servicing. Routine maintenance and servicing of manufacturing equipment can be outsourced to ensure that machines are in optimal condition without diverting in-house resources.
• Facility management. Outsourcing facility management tasks, such as janitorial, security, and general maintenance services, can allow manufacturing companies to focus on core production activities.
• Data entry and documentation. Administrative tasks, including data entry, documentation, and record-keeping, can be outsourced to manage paperwork and ensure accuracy in regulatory compliance.
• Customer service. Outsourcing customer support services, such as order processing and product inquiry resolution, can enhance customer satisfaction and allow the manufacturing company to concentrate on production.
• Information technology (IT) support and maintenance. Outsourcing IT-related tasks, including software development, network management, and system maintenance, can ensure manufacturing systems operate smoothly without requiring an extensive in-house IT team.
• Environmental and regulatory compliance. Compliance with environmental and regulatory standards can be complex. Outsourcing compliance management tasks can help manufacturers stay current with changing regulations.
• Human resources and payroll. Administrative functions such as payroll processing, benefits administration, and human resources management can be outsourced so that the company can focus on its core manufacturing business.

Reasons to Leverage BPO in Manufacturing

Manufacturing companies must determine if outsourcing is feasible or appropriate for their needs. The primary motivation for outsourcing is to leverage highly specialized contract manufacturing services that would be impractical to handle internally, particularly without incurring substantial fixed costs.

Outsourcing has become popular due to its ability to reduce expenses and enhance operational efficiency. In fact, BPO can reduce costs by up to 70%. 

Here’s a look at the other benefits of outsourcing:

• Guarantee safety and quality standards. Ensuring products meet top-tier quality, safety, and compliance standards is crucial. A reliable manufacturing ally has a robust quality management system (QMS). They also have effective risk management plans and proper accreditation from ISO, FDA, and other relevant organizations.
• Cut equipment expenses. Machinery and software often require substantial investments with uncertain returns. Outsourcing manufacturing eliminates concerns about significant equipment purchases and ongoing maintenance, depreciation, and fixture costs. It allows companies to redirect working capital to more impactful areas.
• Streamline processes. Efficient processes are critical when designing and manufacturing a product. Opting for a single-source contract manufacturing organization (CMO) can decrease the need for supplier audits, reduce variability, and consolidate accounting.
• Acquire specialized manufacturing processes. Products frequently incorporate components or assembly processes demanding specialized technical procedures or machinery. Small businesses might lack access to specialized requirements due to costly expenses. They can collaborate with existing specialty manufacturers.
• Accelerate speed to market. Outsourcing specific tasks, such as prototyping or data analysis, can expedite product development cycles, reducing time to market for new products. This speed can be a competitive advantage in rapidly evolving industries.

Tech tools BPO firms use to manage outsourced manufacturing

BPO vendors managing outsourced manufacturing leverage various tools and technologies to streamline processes, enhance communication, and improve stakeholder collaboration. 

Here are some common tools and technologies used by BPO companies to manage outsourced manufacturing:

• Enterprise resource planning (ERP) systems. ERP systems integrate various business processes and facilitate collaboration between the client company and its outsourcing partners.
• Supply chain management software. Specialized supply chain management software helps plan, optimize, and control the end-to-end supply chain processes. These include inventory management, order fulfillment, logistics, and demand forecasting. These tools improve coordination between the client company and its suppliers.
• Collaboration platforms. Collaboration platforms, such as project management tools and communication software, facilitate real-time collaboration between the manufacturing company and the BPO partners. Examples include Slack, Microsoft Teams, and Asana, which help share information, updates, and documents efficiently.
• QMS tools. QMS tools are essential for monitoring and managing quality control processes throughout the manufacturing and supply chain. These systems help track quality metrics, conduct inspections, and ensure compliance with industry standards and regulations.
• Document management systems. Document management systems enable secure storage, retrieval, and sharing of documents and data. These programs are crucial for maintaining documentation related to specifications, compliance, contracts, and other critical information throughout the manufacturing process.
• Advanced analytics and business intelligence tools. BPO organizations use analytics and business intelligence tools to analyze large data sets, identify patterns, and derive actionable insights. These tools help make informed decisions, optimize processes, and predict manufacturing trends.
• Internet of Things (IoT) devices. IoT devices can be deployed to monitor and gather data from manufacturing equipment, providing real-time insights into production processes. This data can be used for predictive maintenance and process optimization.
• Collaborative product lifecycle management (PLM) software. PLM software facilitates collaboration on product design, development, and manufacturing processes. It helps manage product data, version control, and communication between different teams involved in the product lifecycle.
• Electronic data interchange (EDI). EDI systems facilitate the electronic exchange of business documents, such as purchase orders and invoices, between the manufacturing company and its BPO service providers. This tool improves the speed and accuracy of information exchange.

The bottom line

Leveraging BPO in manufacturing is a strategic move that can enhance efficiency, reduce costs, and provide access to specialized skills. It allows manufacturing companies to focus on innovation and core competencies, ultimately improving their competitiveness in the global market.

When considering outsourcing, manufacturing companies must carefully evaluate potential partners, ensuring they have the expertise, infrastructure, and quality standards necessary to meet the company’s requirements. Maintaining effective communication and a collaborative relationship with outsourcing partners is crucial for success.

Let’s connect if you want to learn more about outsourcing.