November 21, 2012

Beware of Discrete BPO in Supplier Management

According to a recent survey KPMG predicted that BPO (Business Process Outsourcing) will increase over the next six months as businesses react to the “recovering economy”.  I am not sure if this portends the future, but a quarterly report from the professional services company found that 59 percent of outsourcers surveyed expected to meet increased demand, an increase of 8 percent from their previous report. With this optimism for growth in tow, traditional BPO areas like data collection, validation, cleansing or even help desk should expect to see a spike in demand.

If we are so lucky that the economy does improve, what does this trend mean for supplier management? Do more companies plan to manage their for efforts like supplier on-boarding and supplier management with BPO? From our experience this is happening today, but we caution how you consider your BPO the approach. A real world example of W9 collection paints the picture of understanding how not all BPO models are equal –

Say as part of a wider supplier management initiative an organization wants to update or validate their W9 forms for their 6000 independent contractors or freelancers. In collecting W9s, there is also a need to validate  Taxpayer Identification Numbers (TINs) and legal names with the IRS so that they are accurately listed in a supplier/vendor master. Given the number of contractors in a given organization, this can be a tedious process and may be ideal for BPO.

One way to manage this is by using a discrete BPO approach that focuses solely on outsourcing the “low skilled” task of collecting the W9 data and validating the TIN data to an outside party (that is also likely offshore). The value of the service in this scenario is based on trade-off that these resources will cost less than using internal resources, but hopeful that they are knowledgable enough to complete the task at hand with a high degree of accuracy. While using this discrete BPO approach  may save money in the short term, it may result in more challenges down the road that  include –

  • Added time and effort in getting W9 information given missing emails
  • Isolating sourcing and/or procurement as part of the supplier data collection process
  • Lack of depth in information given data collection process being incomplete
  • Increased incidence of duplication if the process is managed remotely on a separate platform or spreadsheet
  • Setup takes too long due to time differences or insufficient ability of the resources provided
  • Overall data collection is taking too long due to lack response from vendors

A smarter alternative is using BPaaS or Business Process as a Service.  A BPaaS approach would include similar tasks for collecting the W9 information and validating TINs, but also provide a wider more comprehensive servicing of the areas related to the organization’s supplier on-boarding and qualification processes, with resources skilled in supplier management and data collection. BPaaS also extends the notion of SaaS, by using one vendor to leverage both the BPO services and the use of supplier management technology.

Given the W9 example used earlier, using BPaaS provides a mechanism for –

  • Easier inclusion of the procurement or sourcing team as part of the W9 validation project
  • Decreased time to collecting W9 information and validating TINs through a consistent process workflow
  • Improved ability to collect relevant information and relevant data action plans
  • Improved ability to identify missing or out of date information as part of a larger supplier profile
  • Extension of the process for supplier to self-service through the supplier management technology

If one provider can demonstrate its technical team can work in tandem with its consulting delivery team then the odds are the clients will be better served in going to a single BPO provider for areas that can or should be outsourced.  BPaaS thus represents a sound approach for organizations looking to harmonize key processes by reducing the burden of time spent for resources doing tasks that take away from strategic initiatives, while providing a means to leverage and extend a BPO provider as a strategic technology and services partner.

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