Business process outsourcing versus automated document processing for logistics businesses
How do freight forwarders and other logistics businesses make the right choices when it comes to processing the vast number of invoices and documents they have to deal with on a daily basis?
Should they pass document processing tasks to business process outsourcing (BPO) providers? Or could there be a better way to automate those tasks internally?
It's clear that spending on automation is on the rise. Earlier this year, EY released a survey of business leaders by EY that showed 41% of respondents said they were investing in accelerating automation.
In this article, we compare options and costs to assess what's right for freight forwarders.
What are business process outsourcing and automated document processing?
Business process outsourcing (BPO) is the contracting of defined business tasks to a third-party supplier so that the client can reduce or eliminate the internal processing of those tasks. BPO suppliers employ staff to perform limited roles, saving their clients time and money in employing and training their own staff to do the same work.
Automated document processing is the process of extracting, validating and classifying data from documents, by means of automated tools that can process information much more quickly than humans can. An example is computerised reading of data from freight invoices and transferring of that data into a TMS such as CargoWise. The most efficient type of automated document processing is based on industry specialist machine-learning models trained with industry specific source data.
What are the real costs of outsourcing business tasks to a third party?
It makes sense for freight forwarders and other logistics businesses to outsource tasks to third parties when doing so will save them time and money. But doing this can come with challenges. Let's look at the potential impact on businesses that go down the BPO route:
- Lack of control of outputs: Clients state their requirements to BPO suppliers but are unlikely to have enough control over such relationships to be able to define exactly what outputs the suppliers deliver back to them. Any given BPO will not be an expert in the client's exact business and its business processes, and so some degree of bespoke tailoring is likely to be missing from the BPO's output, as it works to support the needs of multiple businesses.
- Communications problems and delays: As with any third-party relationship, external communications are prone to delays that are less likely to occur within internal departments. BPOs may not be completely familiar with the communication methods and terminology used by their clients, and this poses the risk of misunderstandings and problems in the processing of client data.
- Lack of expertise: There may be technical elements of the data capture process that mean the BPO's staff need to be trained in order to collect and process the information accurately. This would normally be done internally if the client were to use its own staff to handle the data, but supplying such training remotely to a BPO's staff presents an additional time and financial cost that the client may not have prepared for and might not be able to accommodate.
It's important to note that outsourcing tasks to a BPO does not protect the client against the mistakes that occur when performing manual data entry. A BPO will use its own staff to do the work of the client, and that will invariably lead to errors in the data being read, recorded and processed.
Here's the typical BPO process explained
To summarise, this means that the following needs to happen for BPO to be effective:
- Identify the BPO: The client spends time assessing the suitability of candidate BPO suppliers before engaging one to undertake the work.
- Train the supplier: The supplier's staff need to understand the documents they are expected to process, as well as learning about how to deal with exceptions and other rules specific to the client.
- Set up email: The supplier is not part of the client organisation and so a processing pipeline to redirect emails from the internal server to the third party system must be setup.
- Read, understand and process data: The supplier's staff need to invest the time performing the manual actions that the client's staff would otherwise have done. This manual data entry includes navigating the client's preferred TMS (e.g. CargoWise) to ensure that all information is recorded accurately.
- Error checking and review: Both the supplier and the client should be satisfied that the data entry tasks have been performed to an agreed level of accuracy. Any mistakes may cost the client more to fix than if the work had been done internally, and such errors risk jeopardising the supplier's commercial relationship with the client.
With all this in mind, it's understandable that many clients might look for a better solution.
One clear way to do this would be for the client to invest in AI-powered document automation software so that they could quickly process their own documents far faster than by relying on staff (either ones they employ themselves or those they indirectly source via a BPO supplier).
But what if there were another way that would give clients a way to entrust the work to a third party and for that third party to take advantage of automation?
The BPO supplier could be the one to adopt the automated data capture approach, thereby making their own savings and providing a more efficient service to the original client.
What are the benefits of automation in document processing vs BPOs?
Automation of document processing offers several benefits versus the traditional model of BPOs:
- Cost savings: Document automation software can process more documents per operator than a human-powered team alone. Any upfront investment in a document automation solution will deliver ROI quickly.
- Better control: Automated solutions, particularly ones powered by AI and machine learning, will deliver outputs in a format that match the needs of the business. AI-powered solutions are pre-trained on millions of documents, and improve the more they are used and the more documents that are processed.
- Speed of implementation: Specialist document automation software does require good data and a set training period, usually 2 - 3 weeks depending on documents provided, but it is still much quicker to implement than setting up a document email pipeline and training teams of third party agents to understand and process the documents.
- Fast scaling: While it is slow to scale up human operations (and can be even slower to scale them down if jobs are at stake), it's much easier to scale automated solutions up and down in line with demand.
- Improved accuracy: Automated solutions will not tire and aren't subject to the same errors that invariably affect human teams.
Let's put this in context by looking at a comparison table of BPO versus a modern, automated machine learning alternative such as that provided by Shipamax:
Can BPO suppliers use AI to get better document processing results?
In short, the answer is yes. There will always be complex and nuanced tasks that BPOs will need to pass to human teams so that they can adequately meet the needs of their clients.
But this needn't be the case every time. When clients want a cost-effective, accurate way of capturing their invoices and other documents, there is no need for a smart BPO to use its staff to carry out the task.
Instead, automating the work means that the BPO provider can deliver faster, more accurate results to the client while the client need not change any of their processes. Moreover, the BPOs that do this reduce their workload per client, thereby allowing them to serve more clients and hence become more profitable in their own right.
In short, BPOs that develop their systems to include automation, AI and machine learning are best placed to remain competitive in markets where there is an ever-increasing need to reduce the burden of manual data entry.
Let's sum up
While outsourcing to traditional BPOs can deliver benefits to freight forwarders, doing so still means investing time and money. There is a need to search for, interview and onboard third parties to help with document processing tasks, as well as spending time to review and validate the work.
Increasingly, shipping and logistics businesses are streamlining their work by using AI-powered automation software to perform data capture on their invoices and other logistics documents.
This automated data capture and processing can happen either at the client end or via the BPO. Either way, a systematic removal of manual data entry methods leads to reduced risks and lower business costs.
At Shipamax, we use AI and machine learning technology to help freight forwarders process documents faster and cheaper than is possible with traditional BPO solutions. Get in touch for a free demo today.