Logistics outsourcing sector showing promise as BPO slows

With earnings and employment in the business process outsourcing sector having hit a plateau in the last year, logistics is said to be emerging as the next driver of foreign exchange earnings and jobs.

Wayne Sinclair, president of the Global Services Association of Jamaica, GSAJ, says there is an increased demand for real estate for logistics outsourcing in Jamaica, in tandem with the fall-off in demand for call centre space.

“The increasing need and demand for logistics outsourcing is a global phenomenon. As you would be aware, Amazon, for example, is now shipping directly to Jamaica. And as Jamaica continues to build out its logistics outsourcing capability, we in the BPO industry are aggressively incorporating those kinds of operations into the BPO space and the BPO narrative,” Sinclair told the Financial Gleaner.

Logistics outsourcing involves the contracting of a third party to provide warehousing, transportation, inventory management, and order fulfilment.

Sinclair said the thrust into the logistics side of outsourcing will require workspaces to be configured differently and additional training of workers.

“One of our strategic objectives as the GSAJ is the upskilling of our talent and moving up the value chain. So we’re offering higher value-added services, not just the traditional call centre, answering calls, chat, that kind of thing, but also aggressively working with Jampro and other agencies to promote the development of logistics outsourcing as well,” Sinclair said. Jampro is the government’s investment marketing agency.

The GSAJ, formerly known as the Business Process Outsourcing Industry of Jamaica, represents the interests of the information communications technology and the outsourcing sectors.

In 2023, the BPO industry employed an estimated 52,000 persons in Jamaica and earned about US$890 million ($136 billion). It is not clear if those numbers have remained steady, but the sector was cited as contributing to the historic levels of unemployment of 3.5 per cent in 2024.

Sinclair explained that there are also administrative functions in the logistics process, and that Jamaica is well placed geographically to do well in the sector.

“Jamaica is a great trans-shipment point for goods and services, not just to the Caribbean, but to Central America as well. And of course, people will be needed to take the orders, track any issues with shipments, that kind of thing. So there’s an administrative side to it as well. The more exciting growth prospects from an outsourcing standpoint is going to be in the area of logistics, which is why you’re seeing the increase in warehousing,” he said.

The GSAJ expects new investors to be attracted to outsourcing, and that the look of the workplace will be different.

“An additional set of players are going to be coming into the logistics sector of outsourcing, because it does involve slightly different processes. Also, the production floor – which in the traditional BPO are desks, chairs and computers – now becomes a warehouse. You’re talking about things like robotics, people taking stuff off ships, moving boxes into places, trucking, and that kind of thing,” he said.

Gloria Henry, vice-president of BPO and logistics at the Port Authority of Jamaica, said third-party logistics was already quite active in Jamaica. In addition to foreign companies like Amazon, small companies handle local logistics for larger entities such as GraceKennedy, Lasco, Berger Paints and PriceSmart.

“What we are trying to pursue in relation to outsourcing is third-party logistics, which is where logistics processes are outsourced by third-party service providers. This third-party service provider may take on distribution, whether it is all aspects of managing inventory for a third-party entity, or customer service as it relates to clearing goods from the port, delivering to customers, managing the transportation logistics, or packaging/repackaging services,” said Henry.

“Amazon, for instance, uses a lot of fulfilment centres, and these are third-party logistics providers. So when you buy something on Amazon, it’s not necessarily coming to you from Amazon, but from a warehouse that is operated by a third party,” she said.

Henry, who was president of the GSAJ for five years, including during the COVID pandemic, said Jamaica is looking to provide large-scale fulfilment centres where goods are shipped here, broken up into different quantities, repackaged and distributed across the region.

“Based on what is happening in the geopolitical space, Jamaica is very poised to support bigger participants in the nearshore supply chains, as people are looking to reorganise their distribution centres, whether it is for inputs, inventory, or finished goods they want to distribute to their customers. Jamaica has the capacity to play a key role; we have the port infrastructure that is ready and available, and Jamaica has the only functional port community system in the region right now, the PCS that is operated by the Port Authority of Jamaica,” she said. PCS stands for Port Community System.

However, Sinclair cautioned that it may be some time before logistics outsourcing impacts significantly on Jamaica’s economy.

“Let me be conservative and say we’ll start to see the real impact on GDP (gross domestic product) certainly within the next three years,” he said.

luke.douglas@gleanerjm.com