Before moving on to discussing Production Outsourcing KPI, there is a need to define outsourcing. Outsourcing is a business strategy in which a company - called a client - dumps a task to another company - commonly termed as the Business Process Outsourcing company - and lets it handle the task on the client's behalf. For example, one company may think that it is too much of a hassle to hire people for employment. What this company does is to pay another company to handle the hiring process for them. They provide the BPO company with their specifications - employee background, educational attainment, skill set, etc. - and they pay the BPO company for their services.
This is applicable to many manufacturing industries that do not want to concentrate on the actual manufacturing of the goods. Many clients want to focus their energy on research - on developing their products to keep up with the changing times. Therefore, what these companies do is to contract a BPO company to do the actual manufacturing process while they research for newer things that will improve the product.
Off shoring, on the other hand, is a totally different thing but it is oftentimes confused with outsourcing. Off shoring is a business strategy in which a company builds its manufacturing plant or factory in a different country. The company still manages it, but only in a different country. This is normally done if the company wants to cut costs on labor and taxes. In reality, many manufacturers of famous brands of designer clothing, fast food, and even electronics, are doing this. Just look at the labels of your stuffs and you will see where these things are manufactured.
The first Key Performance Indicator that is always used in the outsourcing industry is productivity. In many cases, this is often called Service Level. There is a specified amount or number of products that need to be produced by the hour or every day. These numbers are checked against the expectation. Outsourcers or BPO companies must ensure that they meet the demands of the client because if they don't, the client is very likely to pull out and find another one who can complete the job based on it specifications.
Another common metric in the BPO Key Performance Indicator is Quality. Obviously, this is something that customers buy. Quality is also equated to brand name. It is for this reason that many people significantly prefer a brand for another. Clients are very specific about this and are very strict because they do not want a substandard output or product to be released to the market. What with all the warranties that they issue, they do not want to have any other extra expense because of poor quality. In many instances in the production outsourcing KPI, there are clients who may provide leniency to this. However, one should watch out since no client will find it acceptable to have products of poor quality based against their specifications. The more substandard output there is, the more money and resources are wasted.
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