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Process excellence through Outsourcing

The gains from outsourcing are innumerable to even starting a list. Outsourcing raises the typical company's access to expertise and knowledge, resulting in an overall increased capability in the business process or function. Companies benefit from functional and enterprise-wide change that positively impacts process performance.

Most services provided by BPO vendors are offered on a fee-for-service basis. This helps a company in becoming more flexible by transforming fixed costs into variable costs. A variable cost structure helps a company respond to changes in required capacity promptly and does not require a company to invest in fixed assets, thereby making the company more flexible. Outsourcing may provide a firm with increased flexibility in its resource management and may reduce response times to major environmental changes.

Business Process outsourcing is driving a business transformation spanning all industry sectors and finance and accounting (F&A) outsourcing is emerging as a dominant process in the recent years. F&A outsourcing enables to protect core employer base and take advantage of specialized services. From recording transactions to financial reporting to control and risk management, it is no longer limited to transaction management but full-fledged F&A process outsourcing.

The industry has realized that F&A outsourcing is indeed about much more than pure cost savings. The other benefits are finance efficiency, process excellence, access to specialized team, 24/7 information access, control mechanisms are strengthened, and so on. Improved and organized accounting helps handle business growth and explore new avenues. The biggest value from outsourcing is increasing customer value, shareholder value and business value.

Outsourcing manages all the functions from transaction processing to reconciliation management, Accounts Payable and Accounts Receivable, general ledger accounting, cash flow analysis to full finance health flow analysis. When it comes to handling your accounting function, it’s all about accuracy, confidentiality, faster turnaround, financial efficiency and cost savings.

The main benefits from outsourcing are gains in process excellence, an enhanced ability to focus on the core business and reduced costs. It can respond effectively in a changing environment and increase productivity and efficiency of the processes and optimize costs. Similarly outsourcing helps in setting priorities and aligning tasks towards the business goal and helps in keeping a track on the source of problems and find quick solutions.

The combination of the best business practices with industry standards, along with efficient technology and domain knowledge helps driving process excellence. Leading BPO service providers apply the principles of Lean Six Sigma to remove defects and disparity and to reduce inefficiency. Their ability to deliver continuous process improvement is an important part of the value they deliver to their clients.
It helps to increase a company's flexibility. However, several sources have different ways in which they perceive organizational flexibility. Therefore Business Process Outsourcing enhances the flexibility of an organization in different ways.

BPO contributes to a company's flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic restraints. It increases organizational flexibility by increasing the speed of business processes. Using techniques such as linear programming can reduce cycle time and inventory levels, which can increase efficiency and cut costs. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company.

A company may be able to grow at a faster pace as it will be less constrained by large capital expenditures for people or equipment that may take years to amortize, may become outdated or turn out to be a poor match for the company over time.

Indeed, outsourcing has significantly affected how many companies do business. Not only does it offer huge savings, it also enables many companies to establish or expand operations in other destinations. This business solution can really offer a lot, but it does not mean that outsourcing is a one-size-fits-all solution. As with any other business strategy, it still comes down to what the company aims to achieve, and analyze whether or not outsourcing is the effective solution for their requirements.

Process excellence should be fully integrated with your chosen BPO provider’s operations and should span the entire organization. Developed through ongoing training and skills development, process excellence should be ingrained in the corporate culture and should support performance management and improvement at all levels.

In Acubor’s experience, deploying a well-planned framework for process excellence has delivered tangible, lasting success in dozens of client engagements. We believe there are 7 key factors that have helped us to set and exceed uncompromising standards of performance and customer service, on time — every time. They are:

• Continuous Improvement: BPO Focus.
• Dedicated Business Units: Your organization with your expertise.
• Transitioning and project management expertise: ensuring successful migration and implementation.
• Experience and expertise in building scale with complexity: Servicing your needs with competency.
• Execution excellence: Focus, Speed and Reliability.
• Centers of Excellence: Drivers for standardization, improvement and best practice sharing.
• Re-engineering and adding value: Proven benefits and cost savings.

Success Story
One of the renowned names in the industry as a manufacturer, exporter and supplier of cement in Nepal which produces and distributes six brands of cement, this company practices end to end process from production to distribution, huge number of invoices are generated daily.
The company used traditional system to maintain accounts. Company was not able to have control on its financial data and thereby not being able improve its decision making process. This was further causing a problem as company was at odds to calculate per unit cost of production, it varied hugely because the data at hand was faulty.

Our Solution
To get to the core of the problem and identify the exact solution that would work best for the company. We analyzed data thoroughly and very minutely to know where things off track.
We used an analytic application, which models business processes to determine cost, profitability and drivers. We implemented a real time Activity Based Costing System to find out the accurate cost per bag of cement produced. This approach helped client to find the costing of each unit of product manufactured in factory and also helped in determining cost variation due to use of different ratio combination of raw materials by using ABC analysis.
We also designed a real time financial reporting system for the management and government. With this solution, this organization is now making informed decisions that streamline processes, deliver revenue growth and reduce costs across the organization.

Changes
After our intervention, the company was able to take a sound decision and arrive at an appropriate cost for the product. This organization now can work easily on following matters:

• Determine all the direct material and direct labor costs associated with each product.
• Group overhead costs, including manufacturing, selling and administrative costs, into four categories:   output unit-level costs, batch-level costs, product-sustaining (service sustaining) costs, and facility-   sustaining costs.
• Identify cost activities that may have a causal effect on the costs incurred.
• Group the costs at each cost level that are affected by the same activity into cost pools.
• Determine cost rates.
• Assign overhead costs to the products or services based.