'Due to BPO profit of business unit increases' Explain the statement.
Answers
Explanation:
Business Process Outsourcing, popularly known as BPO, is the business strategy where one company hires another company to perform a certain task for them, i.e. they outsource a certain job.
Say for example a manufacturing company will outsource their supply chain management to another company who specializes in supply chain management. So it essentially entails outsourcing one or more non-core business activities or processes to an external service provider. So there are two parties involved, the client company (the outsourced) and the external service provider or the vendor (the outsourcer)
One point to note that only non-core activities are usually outsourced. The companies do not part with their core competencies, they maintain all their focus on these like manufacturing, marketing etc.
However non-core services like after sales service, customer relations, supply chain management, real-time accounting etc. can be outsourced to BPOs.
Advantages of a BPO
1. Flexibility
Outsourcing non-core activities to a BPO allows a company to be far more flexible. Firstly, the company does not have to invest in additionally fixed assets and can convert them to variable costs. It also increases flexibility in resource management of the client company and helps in adapting to changes in the environment much faster.
2. Cost Effective
Outsourcing some of the business processes and activities can be very cost effective for the client company. They save on investing in fixed assets and fixed costs. And they can redirect these funds for their core activities.
Also outsourcing to developing countries proves to be very cost saving for these companies. For example, if any large MNC was to outsource their IT services to India, they would save an average of 30% of the company’s expenses. This is quite a significant difference.
3. Speed
One of the biggest advantages of BPOs is that they increase the speed of the business processes outsourced to them. They have a very good response time and the clients can focus on the core activities. This fragmentation of activities speeds up the whole process and is very important in cases like customer service.
4. Skilled Manpower
When you outsource one of your business activities to a BPO, you are insured of exemplary services provided by skilled manpower. So if you outsource your supply chain management, rest assured your supply chain will be handled by skilled supply chain managers who are experts in their field. Same goes for IT services or accounting etc.