Feasibility of "KPO" Outsourcing of High Value Added Manufacturing Processes in Hi-Tech Companies
Knowledge process outsourcing(KPO) may be defined as outsourcing of high added value process where the achievement of objectives is dependent on the skills, domain knowledge and experience of the people carrying out the activity. It is being claimed that KPO is one step extension of BPO (Business Process Outsourcing) which is outsourcing of low value added services to a partner company.
Is it possible for a Hi-Tech company to outsource high value added and critical processes like Design, manufacture of critical components, etc. to global outsourced partners to achieve business benefits? Let's look at what are pre requisites for this and the pros and cons of this and evaluate.
Prerequisties for the Outsourcing Partner for High Value added Processes:
1. First and foremost requirement is the trust and faith in the outsourcing partner that the Hi-Tech company is able to establish. The Hi-Tech company should be able to share with confidence future plans like new products, innovations, etc. with confidence that this will not leaked to competition. Document and agree on the security requirements.
2. Availability of sophisticated machinery, good technical skills, skilled manpower with the outsourced partner to manage all requirements. It also entails the ability of the outsourced partner to respond quickly to equip themselves with such machinery and skills understanding the urgency of the Hi-Tech company.
3. Proven capabilities to deliver as and when required to meet market and production deadlines. Also ensure that they are compliant with all statutory laws.
4. Tactical willingness and culture in the Hi-Tech company to engage the Outsourcing partner in high value added processes.
Once the above factors are analyzed and the Hi-Tech company feels that it makes sense to enagage the Outsourcing Partner in High Value added processes it should start with a small representative set of processes that are outsourced. They should watch the results for some time and then decide on the effectiveness and comfort with the outsourcing before deciding on the next steps.
The benefits envisaged from this are:
1. Leverage from global economy the best in class manufacturing processes and materials
2. Reduced product costs
3. Improved Return on invested capital / assets
4. Reduction in time to market
5. Increased market responsiveness and flexibility to changes
The points to watch out for are:
1. Increased risk to High-Tech companies since High Value added processes are not fully under their control.
2. Tight control on quality and delivery reliability.
3. New required capabilities/ skills may not be available with the Outsourced partner.
Hence the Hi-Tech company needs to set up robust monitoring mechansim to ensure that any anomalies / delays are flagged off at the earliest so that necessary corrective actions could be taken. The Hi-Tech Company should also provide the Outsoucing partner with visibility to its plans so that both parties are fully synchronized in their plans and help them be more responsive to demand, effectively compress order cycle time, reduce inventory and excess or expedited resource costs.
