By Avi Maharaj, National Finance Manager at Programmed Process Outsourcing (PPO)
In the fast-moving consumer goods industry, nothing is more important than enabling flexibility and efficiency to meet varying supply and demand with ease. Through Business Process Outsourcing (BPO), it is possible for businesses in the FMCG industry to reduce headcount using technology while increasing output, lowering costs, and reducing the security risks associated with moving consumer goods. By becoming an extension of the business, assuming total responsibility for specific processes, BPO providers can support industry players in continuously improving and optimising efficiencies, helping to overcome increasingly challenging operational circumstances.
Many hands do not light work make
When it comes to efficiency, bringing more hands-on deck is not the solution. Take one of SA’s largest e-commerce fulfillment enterprises as an example. Despite 450 heads on site running two shifts, production was a struggle. This is problematic in the FMCG sector, particularly in consumer clothing and technology, as consumers expect rapid turnaround and an accurate, hassle-free experience. Although not an overnight fix, by implementing BPO it was possible for this enterprise to reduce its headcount to under 90 individuals over four years, while drastically improving performance and output at the same time. The biggest challenges for this particular company? Over-staffing, poor management, and a lack of process flow in which efficiency was further hindered by an antiquated warehouse management system.
In-house performance pitfalls
For most businesses in e-commerce, the biggest challenge comes in when certain processes (like warehouse management, transport, logistics, inventory management) have grown to the point where it’s no longer a core function, but it is indispensable. While it may not be that specific company’s core function, it is for a BPO provider. By taking over certain operational processes, whether it’s receiving, picking and packing, dispatch or stocktaking, there is massive potential to streamline these business areas that are currently underperforming due to inefficiencies.
A BPO provider completely assumes responsibility for every facet of the outsourced processes, including the labour component, which means that clients no longer require massive resources on site, nor do they need to handle any Human Resources or Industrial Relations matters themselves. In this way, a BPO provider relieves the client of a large portion of risk and responsibility, allowing the client to focus on the actual core components of their business.
A business model that hinges on productivity
In an e-commerce ecosystem, warehousing and distribution of products are critical. There is a lot of variabilities, as it is the market that determines how stock moves off the shelves. However, there is only so much that we can achieve in this space using technology, and there will still be a human element required to pack, check, and deliver. This is where the BPO model can give businesses the flexibility they require to meet such varying demands, easily. The traditional model was to have a full complement of staff, day in and day out, who get paid the same hourly rate regardless of order numbers. Under such conditions, motivation becomes a problem. The BPO model varies headcount according to orders that need to go out, and workers are paid on a productivity basis. The more the individual worker produces, the more they can earn which is an effective incentive. This means that the client gets the benefit of greatly increased productivity levels, without the permanent salary cost or any of the related employer obligations.
BPO: it’s an ongoing process
It’s tempting to think of BPO as an easy efficiency solution that’s plug-and-play, but in reality, there is a lot of work required in the background to develop a complete understanding of forecasts to do resource planning. Every touchpoint in the process must be examined for improvement opportunities, whether it’s better management or more technology enhancements. In this way, the BPO provider becomes an essential part of their client’s business – not by providing a quick fix to their problems, but as a partner in long term, continuous incremental improvement.
Please note that Avi cannot act as spokesperson where live media is concerned.