CS0405_CoverStory_Outsourcing
Successful outsourcing arrangements require a smooth, risk-free transition, because even the best intentions can be erased by a rocky start that threatens your business.
Carefully researched and implemented outsourcing ventures for your distribution center, contact center or other operational function can be profitable for those who efficiently leverage a service provider’s capabilities. How do you ensure that your chosen provider doesn’t damage your business through a clumsy implementation? Conduct an effective selection process, and plan a controlled, realistic transition. Here are 23 strategies to employ.
Do the Research
1. Nothing is more important than carefully checking a service provider’s references, talking to both current and former clients who’ve received similar services at the same complexity and scale that you require. Focus your questions on the transition. For example, ask about project management skills, project visibility, inventory relocation, and most importantly, systems interfacing and deployment.
2. Research shows that a cultural match between parties in an outsourcing relationship is key to the success of that engagement. The provider’s business philosophy and culture should closely fit yours.
3. The provider’s IT systems and facilities should be stronger than yours. Also, they should be readily available to meet your business requirements and easily adaptable to future supply-chain adjustments.
4. During contract negotiations, realize the provider holds an unfair advantage after the contract is signed, so allow for easy and inexpensive exits if the provider fails to perform adequately.
5. Look for excellent communication skills. The provider should be willing to sit down at any time to
discuss what you may not like about the existing agreement. Inflexibility is a clue that the provider doesn’t really want a strong partnership with you.
Plan the Transition
Enthusiasm from both parties usually is high after the contract is signed. But this period marks only the transitional phase, and yet it’s the most critical time in the relationship.
6. A bad start is the top cause of unsuccessful outsourcing ventures. Nothing destroys a new partnership faster than a provider putting your business at risk because of a poorly executed transition.
7. Both parties likely will make significant capital investments that require lengthy approval processes. Have your ducks lined up and avoid delays in transition by completing all approval cycles on time.
8. Allocate sufficient resources to ensure timely execution. Scheduled interruptions caused by you, the cataloger, will fuel excuses and erase accountability from the provider if the solution is not delivered in the promised timeframe.
9. Form a transition team of key personnel who will oversee the changeover, arming your new provider with the proper marketing and operational knowledge about your particular business. Difficult transitions often are related to the provider’s failure to fully understand and execute its client’s unique branding qualities, such as business differentiators and specialized fulfillment operations. These could include, for example, custom packaging and delivery capabilities, and unique contact center knowledge and behavior.
10. Decide if your customers should be part of the transition. If yours is a business-to-business (b-to-b) catalog, get your key customers involved in the transition, because you may be making major changes to their supply chains.
11. Use your Web site and contact center to better manage customer expectations during the transition. For instance, communicate a temporary suspension in your operations by posting a message on your homepage or through the contact center.
12. When all systems are integrated, inventories transferred and personnel trained, run a soft launch to ensure that all processes run correctly. For example, ship orders and process returns so you can verify that your packaging, presentation and fulfillment operations flow smoothly.
Common Problems
Every transition hits bumps, but some problems loom larger than others. Here are a few big ones to sidestep:
13. Avoid inventory transfer mistakes. Significant inventory issues will poison the initial weeks of operation, decreasing shipment quality and creating financial difficulties. Make book-to-physical adjustments before the transfer, and have the outgoing provider conduct a physical count prior to the changeover. Reconcile that count when the new fulfillment provider gets your inventory.
14. Beware of poor IT integration. Smooth operations require the accurate and timely flow of information between you and and your outsourcer. Bad integrations generally are caused by poor testing plans and procedures. So test all possible permutations on inbound and outbound orders, and ensure the integrity and accuracy of financial transactions.
15. Tackle major shipment backlogs. A poor inventory transfer and IT integration may lead to major shipment backlogs that can cascade into disaster for both you and your outsource provider. Make backlogs a top priority, because they impact everything from the contact center to your financials. Form a precise, managed plan for inventory relocation issues.
16. Be sure there’s a smooth integration between your Web site and your outsourcer’s. Problems here may send all orders to your contact center, lengthening your customer response time. Thoroughly test the integration on both ends during the soft launch, and fix all bugs.
17. Train your contact center outsourcer’s employees by providing product samples and critiquing calls. Your provider’s contact center is the front line of customer satisfaction, and if its personnel don’t effectively reflect your catalog company’s image, customer response and branding efforts can be adversely affected.
18. Be sure at launch that all packages arrive in good order. It’s unacceptable for the outsourcer to send damaged items to your valued customers. Your provider should proactively call some customers, getting feedback on the order’s condition and the service received. Don’t wait for reports on returned merchandise. By the time you get these, it’s too late.
19. Monitor the provider’s per-formance. Performance visibility is required to effectively monitor operations and detect problems. The provider should give you daily updates on all relevant key performance indicators, showing the on-time shipping performance, order accuracy, inventory accuracy, and contact center and IT performance.
Measure Success
20. When the transition is complete, answer these three questions to determine if it’s been successful:
* Did your customers notice an improvement or benefits? If not, or if they’ve actually experienced a negative change, then the provider isn’t doing its job.
* Did your bottom line improve? Most companies won’t sign an agreement if it increases their costs. The same holds true for an outsourcer. The provider’s invoice should give a detailed cost accounting of activities, illustrating all parts of the operation. But outsourcing’s hidden cost is that of managing the provider. If the outsourcer requires constant assistance with identifying or solving problems, it’s not doing its job.
* Have you built a platform to trigger growth? The provider shouldn’t inhibit your company’s growth, but it should supply the resources and room to expand as your business grows.
The Ongoing Relationship
For the ongoing outsourcing relationship to succeed, open and honest communication between parties is vital. All problems must be identified, discussed and solved, regardless of responsibility.
21. Offer incentives and disincentives, giving traction to long-term objectives. Providers should guarantee their performance and be financially reprimanded when goals aren’t met. Likewise, you should offer incentives for over-performance.
22. Fulfillment providers should raise the bar on service expectations in time and show continuous improvement. Frequently set goals for increased quality metrics and lower transaction prices. This always will manifest itself back to you, the client.
23. Finally, the overall engagement grows in strength and viability if the partnership attitude grows among the parties. Find a firm that is flexible and will go the extra mile, not only ensuring outsourcing success, but the success of your company.
Steve Graham is senior partner and chief technology officer at Plano, Texas-based PFSweb, an outsourcer of business process solutions. He wrote this article at the request of the Catalog Success editors. To contact him, e-mail: sgraham@pfsweb.com.
