“The only difference between a rut and a grave are the dimensions” – Ellen Glasgow
Introduction
We procure electronic goods through online portals like Amazon. For our daily needs, we purchase groceries from the nearby market. For marriages, many specialized activities like makeup, decoration, food catering, photography etc. are outsourced. The economic prosperity of many developing nations is dependent on business process outsourcing (BPO) like IT from developed nations.
Objective
Both Outsourcing and Bought Out Parts (BOP) are an integral part of any manufacturing organization. Each has its key objective and purpose. Depending upon the criticality of the process and product, the organization decides whether to procure from a supplier, manufacture inside the organization or outsource to a competent agency.
At times the terminology for purchase process (BOP) and outsource processes are used interchangeably. The key objective is to understand their meaning and differences clearly.
Definitions (ISO 9000: 2015)
Outsource (Cl 3.4.6): Make an arrangement where an external organization performs part of an organization’s function or process.
Outsource (IATF 16949 Cl 3.0): Portion of an organization’s function (or processes) that is performed by an external organization.
Detailed Information
| S.No. | Bought Out Parts (BOP) | Outsource |
| 1 | Component or subassemblies that are purchased from an outside supplier rather than being made inside the organization | A portion of an organization’s function (or processes) that is performed by an external organization
|
| 2 | Complete component/raw material is purchased from the supplier for further processing inside the organization | External organization (outsource) is outside the scope of the management system although the outsourced function or process is within the scope |
| 3 | Core activities | Non-core activities done due to low capacity/competence, high cost of processing, inadequate space etc. |
| 4 | The purpose of outsourcing is to lower the cost, improve efficiency, gain speed, make operations more flexible | |
| 5 | Example: Bulb, wiring harness, CRCA sheet, Chemicals, PCB, raw material, plastic component etc.
|
Example: Prototype building, Tooling, Product Design, Heat Treatment, Electroplating |
| 6 | Documented process, select type and extent of controls to escalate or reduce the type of controls based on supplier performance, service risk, mitigate risk, Conform to statutory and regulatory requirements |
Common points
- Supplier selection process
- Supplier performance monitoring
- Supplier quality management system (QMS) status
- Supplier development process
- Incoming inspection or other controls
Present Challenges
- The controls implemented on the outsourced suppliers are not always documented and effective
- The focus for the supplier development is primarily on the bought Out Parts Suppliers rather than outsourced suppliers
- In many organizations, supplier performance monitoring is conducted on BOP parts suppliers and not on the outsourced suppliers?
References:
IATF 16949: 2016
ISO 9000: 2015
ISO 9001: 2015
ISO 37500: 2014: Guidance on Outsourcing
Industry Experts
This is the 137th article of this Quality Management series. Every weekend, you will find useful information that will make your Management System journey Productive. Please share it with your colleagues too.
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