Familiar Business Process Outsourcing (BPO)
Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of operations and responsibilities of specific business functions (or processes) to a third-party service provider.
Most people are familiar with the more common subsets of BPO such as RPO (recruitment), LPO (legal), KPO (knowledge), logistics (3pl) and of course ITO (information technology). BPO is typically categorized into back office outsourcing – which includes internal business functions such as human resources or finance and accounting, and front office outsourcing – which includes customer-related services such as contact center services.
The “New” Outsourcing… Workforce Process
A new form of BPO which is becoming more popular is WPO (Workforce Process Outsourcing) or MPO (Manufacturing Process Outsourcing). WPO involves the contracting of labor where the service provider is responsible to meet service levels at a transactional cost. The WPO provides the labor, management, and some support functions for a cell, department, or entire facility. The business or manufacturer is typically responsible for the facilities, inventory, equipment, quality assurance and logistics. The specific responsibilities are worked out while negotiating the “Statement of Work.”
Traditional Temporary Labor Models vs. WPO Model
Temporary labor has become a mainstay for companies looking to maintain flexibility and control labor cost as well as decreasing employer liability exposure. Temporary labor is a cost plus solution where the staffing provider adds a mark up to the hourly wage. Temporary labor has been effective in maintaining flexibility but has not provided full protection against liability nor is it always an effective cost control strategy. Temporary labor typically is not accountable for productivity or quality. Moreover, the temporary staffing company often does not share the cost of training the temporary workforce. Therefore, the cost of low productivity, bad quality and high turnover is the burden of the manufacturer or business. On the other hand, the WPO model provides liability protection, absorbs the cost and responsibility of training and retention, and assumes responsibility for meeting quality and productivity standards.
A Look at Third Party Logistics (3PLs)
A 3PL is a firm that provides a one stop shop service to its customers of outsourced (or “third party”) logistics services for part, or all of their supply chain management functions. Originally 3PLs focused on logistics which was primarily transportation, warehousing and distribution and charged the client on a cost plus model.
Over the years their clients have started pushing more and more value added services (VAS) down to the 3PL. VAS falls outside of traditional supply chain/logistics expertise and is often labor intensive. Typically it is also billed at cost plus and the 3PL has little incentive to be efficient. If you couple their lack of expertise and resources with the lack of incentive, you end up with a inefficient and costly labor model. Also in the 3PL outsourcing world, manufacturers and businesses lose operational control of having product within their own facilities, inventory systems, and direct line of sight.
Workforce Process Outsourcing (WPO): A Hybrid Providing “Across …
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