Beyond Procurement Outsourcing: Supply Chain/Direct Materials BPO (Part 1)

There’s often a thin line (sometimes blurry) about which direct materials functions reside in procurement or supply chain. The line becomes even fuzzier when you begin to introduce additional functional elements such as environmental health and safety (EHS), materials management, vendor management inventory, supplier compliance, and general supplier management.

Defining certain areas of direct materials procurement business process outsourcing (BPO) and supply chain BPO are also fuzzy. For example, is what Achilles does for supplier on-boarding, qualification, auditing, and certification for utilities or energy companies a supply chain managed service or a procurement one? Tough question.

Everest Group, however, has attempted to draw a fixed line, defining exactly what’s procurement BPO and what’s supply chain BPO. In a recent report, Supply Chain Management (SCM) BPO – Beyond Procurement Outsourcing (PO) (subscription/purchase required), Saurabh Gupta and his colleagues do a thorough and commendable job of examining the direct materials and supply chain market.

They also define it. Saurabh’s definition is that “SCM BPO encompasses planning and management of all activities across the entire product life cycle, including source and 
procure, make/manufacture, deliver, and returns, along with support activities such as Master Data Management (MDM) and 
Reporting, Analytics & Compliance support (RAC).” The report itself delves into specific segments of the SCM BPO market: Deliver, MDM and RAC (reporting, supply chain analytics, and compliance support).

Everest Group does what good analyst survey research should do in such a format – it sizes the market, explores the leading players, digs into the capabilities required to enable each area and offers perspective into growth drivers. According to Saurabh and his team, the supply chain BPO market is still in its relative infancy. It has a “value proposition identified buy largely untapped” with “early market adoption.” Looking at supply markets, there are a limited number of providers with experience across all the SCM segments. This contrasts with procurement outsourcing (PO), human resources outsourcing (HRO) and F&A outsourcing efforts, among other segments of the BPO market.

Everest Group subscribers or those interested in the report can download it here: Supply Chain Management (SCM) BPO – Beyond Procurement Outsourcing (PO)

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