Beyond Procurement Outsourcing: Supply Chain and Direct Materials BPO (Part 2)

The total number of FTEs dedicated to supply chain BPO relative to procurement BPO in the providers surveyed by Everest Group might surprise readers (hint: it’s lower for the former than for the latter, but not by much). As Everest Group gets into the relative scale of SCM BPO segments, the largest area of FTE focus is order management and fulfillment, followed by logistics and inventory management. Returns, MDM and RAC (reporting, supply chain analytics, and compliance support) have fewer FTEs dedicated to them in the provider community.

One area of procurement BPO that overlaps with direct materials procurement is compliance support. By Everest Group’s definition, this encompasses legal compliance, environmental/social compliance, trade compliance, financial compliance, product compliance and process/contractual compliance. Our research in the regulatory and environmental areas suggests growing interest in a range of third-party software, content and services to enable compliance.

We recently presented on the topic and suggested the following:

  • The past five years have seen a surge in negative headlines that can be traced back to risk factors in company supply chains in the environmental and regulatory areas—a range of new regulatory requirements compounds the challenge of monitoring suppliers more closely.
  • Procurement and supply chain organizations are increasingly responsible for preventing future issues by becoming proactive in the management of supplier and product-level information.
  • This newfound focus requires a paradigm shift away from the traditional procurement/supply chain enterprise applications, which BPO is ideally suited to handle.
  • Content will become as essential as the underlying software platform in the future, as will the need to provide validated information on suppliers and ingredient/substance/part level information.
  • Validating and making sense of information (through virtual and physical audits, credential management, analytics, dashboards) becomes critical as well.

 

Which BPOs will step up to the regulatory, environmental and social compliance tables? It remains to be seen. But it is clear that if you support Everest Group’s definition of supply chain BPO, then it will be those providers with a particular strength in the area—instead of procurement BPO.

Those interested in the Everest Group report referenced in this post can download it here (subscription or purchase required): Supply Chain Management (SCM) BPO – Beyond Procurement Outsourcing (PO). You can also read Part 1 of this post here.

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