Outsourcing with a heart | BLOG
For your information BPO is meant to mean Business Process Outsourcing. In simple terms, its where a business outsources part of its non core business process whether in production, operations or marketing to other specialty companies.
Outsourcing Case Study
I was traveling from Nakuru to Nanyuki. At a small town midway, I saw a young man waving at me. Some instincts told me to stop and hear his story. However being in business, I have realized that money come with people and I have learnt to listen to them. As I halted, he came running and asked me if I could offer a lift to his wife and child. With a child, I couldn’t deny. We chatted along the way and one thing really struck me. She said that she used to run a business with her husband until the post election crisis messed them up. To cut the story short, she was looking for kshs 1,500 to start a business. “1,500?” I asked surprisingly. “Hiyo ata ni mingi. Ningepata 1,000, niko mbele” She replied.
Now, Kshs 1,500 to me is small. Its part of what I use in a day. But to her, its her whole business, her life and that of her family. Now, 90% of that money was to go to buying stocks for resale.
Some years ago, I was traveling and working in India and I came across the vast business outsourcing industry. Its quite eminent and the big companies are doing a great job in lifting up small and medium businesses by outsourcing part of their processes to them. Some case studies are quite amazing since they integrate well with the corporate responsibility concept in Business. There is this milk company that used to outsource its package assembly to an NGO that supports destitute women. Win win, the company gets the packages done and the women get an income. Another polish company used disabled people to assemble watches. And somewhere near home, in south africa, a company that manufactures winding radios has outsourced its assembly to a special civil group and prisoners.
If companies could come up with policies that allows them to do outsourcing of part of their business to small businesses, I guess the economy and the society could gain enormously. My passenger woman made me realize that if only the big businesses would provide products to the small juakali businesses, the issue of capital would not arise. However, as a businessman, I understand the implications that would arise if I would offer the woman products on credit. First, there is no trust, I barely know her and if she goes away with the products, I would not know where to get her. Second, her business is a survival business and it is run informally making its continuity doubtful. Third, the magnititude of the business doesn’t guarantee family needs uninterruptions in business. If an emergency occurred, the woman doesn’t have an insurance for medical emergencies or any savings or investments. So the most probable thing she will do is to use the borrowed stock money. However she shrugged the latter saying “In juakali business, God is usually with us and big emergency do not occur”
I had goods worth over Kshs 100,000. And I usually give credit for goods worth as little as 1500. If this woman gets and sell these goods in a day and gets a 20% margin. She takes home Kshs 300. If she eats Kshs 150 and reinvests Kshs 150, it will take her 10 days to raise the capital. For micro finance, they provide the 1,500. What I am suggesting is that these small entrepreneurs could get interest free capital inform of stock from manufacturing business. The business could do outsourcing to the retailers. But due to the intricacies involved, the companies wouldn’t trust them. That’s why we should see the civil society and community mid-sized traders take initiatives to organize these small entrepreneurs and guarantee them. Since they know the juakali entrepreneurs, it would be easy to track and monitor them. In an organized way, I believe that the outsourcing concept would work. It has actually worked.
Outsourcing in Kenya is gaining momentum with a couple of companies getting customers from europe and america. The western businesses have started gaining confidence in Kenya and are considering outsourcing here. In a couple of years to come, outsourcing will definitely be a multi-billion industry in Kenya.