A good analogy of the service industry – which comprises roughly 80% of the UK economy – is a restaurant: there is a kitchen in the background, with chefs producing food. There are consumers of that food but the kitchen staff do not deliver the food to the diners: that is the job of the Waiters. The waiters are the visible presence.
Another is a car dealership, where a consumer will buy their new or used vehicle from an agent and not the people who actually put the car together.
The service industry – that of Management, Consulting and Broking companies, for example – works in roughly the same way. Managers, Consultants and Brokers (like Waiters and car dealerships) can be thought of as “middle-men”: those that deliver the goods and services of others from a source of origination.
These middle-men deal in tangible and intangible products: manufactured and imported goods; stocks, shares and other financial products, such as insurance. The latter has come to prominence in recent times with the rise of price-comparison websites. These companies and their websites are excellent examples of re-selling the products and services of others, who have chosen to out-source a business process: sales in this instance.
Business Process Out-sourcing (BPOS) is simply part of a three-tier business model, where producers of goods and services out-source a business process to a third party to reduce costs. These out-sourced processes can be accounting, marketing, IT, telecoms or sales. This article is concentrating on the latter but can equally apply to any process to demonstrate the concept.
By out-sourcing sales, a manufacturer of tangible goods or intangible products eliminates the salary – and sometimes commission – and indirect costs of in-house sales staff. This is the most obvious benefit to the producer (the chefs in the restaurant analogy above).
The middle-men, the re-sellers, Managers, Consultants and Brokers of that manufacturer’s goods then package them up with those of other producers and offer a one-stop solution to the consumer: the waiters serving the diners in the restaurant analogy.
The benefits of being a re-seller are that those Management, Consulting and Broking companies acting as the middle-men have virtually no overheads of their own – especially in the manufacturing industry – as they have no capital commitment on equipment.
The benefit to the consumer is that they don’t have to scour a diverse market for various goods. Instead, they can employ a service-provider to effectively be their personal shopper, whilst they themselves concentrate on their core business and responsibilities. This increases the efficiency of the consumer because they have effectively out-sourced a business process in the form of buying goods and services to a middle-man.
So “middle men” are often dispelled as being unnecessary but Managers, Consultants and Brokers are exactly the middle-men who benefit both producers and consumers, often reducing costs (certainly indirectly) and improving efficiency, whilst at the same time maintaining the competitiveness of markets.
There are still many examples of a two-party transactional business relationship, wherein the consumer buys direct but the three-tier model is more prevalent than many people realise.
Certainly as far as producers and Brokers are concerned, there is a symbiotic relationship: the two are co-dependent and neither need to be exclusive to the other. The producer can use the services of many out-sourced sales agents and the broker can offer the services of many producers to the consumer, or end-line buyer.
Symbiosis is the basis of the author’s company: London Print Brokers are an out-sourced sales process for their trade-only suppliers and a one-stop procurement solution to their customers.
Steve Laker – Having spent 22 years in the industry, Steve Laker has extensive experience of printing. Print processes and technology; print procurement and management; sales, marketing and …
Business process modelling