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Outsourcing Your Business Requirements is an Effective Cost-Cutting Measure in 2016

17th Aug 2016
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Ever since the 1990s, BPOs have seen a booming rise in business. BPOs were introduced to assist companies, and to cut down on labor costs. However, reducing the cost of operations isn't the only role a BPO plays. It is also an effective tool for strategic planning. This is exactly the reason why, this sector has received undivided attention from businesses of all kinds.

Even though it began concentrating on large companies, the BPO industry has more recently shifted its attention towards small and medium-sized enterprises (SME). These SMEs have deduced how important it is to outsource at least some of their processes, if they are to reduce the amount of financial resources they end up spending on employing skilled labor. Outsourcing these activities to BPOs not only help them cut cost, but also ensure spend management and effective business functioning.

It is quite obvious that all organizations, irrespective of the nature of business, will have to spend on overhead costs. These mandatory expenses include government regulations, taxes, payroll, accounts, and HR. Many SMEs lack adequate finances to pay for such expenditure. This is where a BPO steps in, reducing the financial burden that a business is likely to shoulder.

Even after more than two decades, it is surprising that some companies are still unaware of the advantages—both in terms of financial savings and strategic planning—of outsourcing their operations. It is always a good idea to introduce outsourcing into a business, in order to gain deeper insight into the business. However, excessive outsourcing can prove to be a bane instead of a boon, since it makes the supply chain more complex than usual and manufacturers find it difficult to strike a balance between costs and profits. Yet, most firms in recent times have taught themselves to use outsourcing optimally to gain maximum advantage of the services.

These are the ways in which outsourcing will prove to be an effective cost-cutting measure in 2016:

  • Outsourcing, through Design for Manufacturability (DFM) and Lean Production can help cut down on both indirect as well as direct labor costs.
  • When coupled with functional quality programs, this business strategy can also help reduce quality costs considerably.
  • Outsourcing involves certain processes such as automatic resupply techniques and standardization. These auxiliary functions help in minimizing procurement, material and IT-related expenses.
  • Product development expenditure can also be reduced when outsourcing is done along with portfolio planning and modular designing.
  • BPOs can diminish the burden of employment laws, restricting expenses incurred on recruitment and staffing. Salary is also fixed by the outsourcing agency, thus helping the client save costs.
  • Outsourcing brings together people with different expertise and experience levels and thus saves costs by allowing resources to be allocated appropriately.

Reaping these cost benefits is not an easy task. The manufacturer has to keep in mind that expenses need to be curtailed at every step of the supply chain. Getting an efficient outsourced supply chain is not always plain sailing. They might not be skilled in lean production, standardization and DFM. Hence it is crucial that certain processes are carried out in-house to ensure control of speed, efficiency and cost.

Though cost-cutting isn't the only reason for the engagement of BPOs, it definitely is a significant one, especially in 2016. This is because a strategy such as outsourcing has the ability to transform high fixed costs into variable costs, thus giving an opportunity for the money saved to be used as capital for investment.

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By Siddharth Sharma
23rd May 2017 12:04

Thanks for posting a good article. BPOs were introduced to cut down on support costs, but are now used to provide excellent customer service. GizmoSupport is one of the leading outsourcing service providers in India for around 12 years that helps to improve customer experience by providing excellent bpo services in multiple languages. Read More:

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