http://www.outsourcingcentral.com/topic_type_det.asp?type=5&cate=4&post=256.
Business
Customer Services -- To In-source or To Out-source
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By Mark Biskeborn
Building up too many fixed costs can be hazardous to a company‘s agility to
weather economic waves. Unlike variable costs, fixed costs do not automatically
decrease as business volume decreases in slower economic periods. Companies
with too many fixed costs, not to mention capital investments in technology,
can become caught at a disadvantage; they can lose a considerable amount of
money and tighten up their cash flow during lean times. The variable costs, and
especially the fixed costs, associated to customer services and support
represents one area that managers typically consider not a high strategic
priority, often even a distraction from their intended core competencies. For
these reasons, managers often face the decision to outsource their entire
customer services and support operations to qualified managed service providers.
GET CONTROL OF COST-STRUCTURES:
As a manager of your customer services operations, imagine your ability to
determine exactly what your priorities are and how you make them work in terms
of:
• A “virtual“ business model in which you can outsource all or selective parts
of the on-line sales operations such as order taking, transaction processing,
fulfillment as well as post-sales customer services; this may even include a
network of multiple suppliers who competitively bid on-line, by price and just-in-time
availability, to furnish the parts and products you need to repair or refurbish
the products that customers return.
• The ability to determine your own cost structures in a very selective manner
is based on your own strategic priorities and your chosen focus of core
competencies.
• Outsourcing all of the fixed and variable costs of your post-sales customer
services and support from Contact Center all through the reverse logistics in
warehouse facilities including RMA and inventory processes for product returns
and disposition management including asset recovery, depot and field service
repairs, back again to product fulfillment.
• The ability to outsource these tasks to a single source, a single managed
service provider, using a single information system that integrates with your
own systems so that you have real-time access to all of the key performance
indicators, providing you with a 360-degree glance into every aspect of these
processes.
REAL-WORLD CASES:
Companies like US Robotics and eMachines have
determined their own preferred cost structures that align perfectly with their
strategic priorities and focused core competencies. Companies like these call
on 3rd party managed service providers, such as Alorica
http://www.alorica.com/, to keep their
cost structures flexible over the economic waves. For their customer service
and support operations, companies like these are able to focus on manufacturing
and selling their products. Once they sell their products through various
channels, their post-sales services are outsourced, enabling them maintain only
variable costs for their contact centers and returns logistics while still
improving the quality of service and customer loyalty, measured in satisfaction
ratings as well as in repeat purchases. They incur the service and support
costs only on an as-needed basis such as when a customer calls for help or
support on product usage. The managed service provider can respond to the
customer with a well-informed, personalized and rapid answer because an
information system is in place designed specifically for the processes outlined
above. This enables companies to outsource the processes, facilities as well as
the capital investments in technology and maintaining their own expensive
info-tech infrastructures.
CONSIDER THE MATH:
With an outsourcing approach, companies have more choices in how they execute
on their strategic priorities. In the case of customer services and support,
companies are able to convert IT, facilities, and equipment costs from a high
fixed cost to an a la carte – and lower – variable cost that align with the
economic waves. The example below is useful as a model to evaluate the In- versus Out- sourcing of the service operations. The
actual numbers depend on your organization’s particular circumstances.
Depending on the circumstances of the cost structures, it may be financially
beneficial to outsource all or parts of the operations.
In this model, we calculate relevant costs regarding customer services and
Support for operations from the contact center through returns logistics – the
warehouse.
The amounts are in $ ‘000‘s per relevant range of 30,000 calls and 10,000
returns per month.
We compare relevant costs to in-source such as:
Variable Direct Labor: $480
Variable Materials: $380
Fixed Costs: $930
Total Costs: $1,790
With the total variable costs to out-source all
Operations: $1,440
As a revenue generator that reduces costs by liquidating refurbished products,
online asset recovery reduces these costs by: ($220) for the in-sourced
operations and ($450) for the out-sourced operations.
This makes total costs: of $1,570 for the in-sourced operations versus $990 for
the out-sourced operations.
The difference between the two types of operations favors outsourcing because
this approach saves the organization $580,000 per month.
CONCLUSION:
Studies and surveys of companies indicate that they consider the most important
factors in a decision to in- or out-source are quality, dependability and cost.
All types of organizations, from pharmaceuticals to retailers, to manufacturers
as well as financial institutions and insurance companies can take advantage of
exactly how they structure their costs in order to meet their strategic goals
for this year and the years to come by outsourcing all or parts of their
post-sales customer services and support operations and logistics. In this
article, we considered some of the financial benefits of first analyzing the
“buy or rent“ decision for any part or all of the
operations and processes involved in the contact centers and their directly
related operations in warehouse facilities.
Add to these considerations, we reviewed the financial benefits of analyzing
the “buy or rent“ decisions for an single information system that draws data
from a single, unified repository and supports all the processes and operations
involved in the enterprise customer services operations.
Mark Biskeborn is the director of marketing at Alorica with more than 19 years experience in sales,
marketing and product management.
Author:Mark Biskeborn
Email:Website:http://www.alorica.com/