Outsourcing may be the most emotionally charged issue facing mail operations managers today. If it's a knee-jerk reaction by companies desperate to cut costs, or to get rid of bothersome employees, outsourcing will probably result in failure.
Myth versus Reality
Outsourcing is neither the magic bullet depicted by some vendors and consultants, nor the evil villain feared by many operation managers. It's a strategic tool for enhancing performance that should be considered by all companies. As with any strategy, it should be reviewed on a regular basis for consistency with the organization's mission, shifts in technology and vendor performance.
Let's dispel certain myths about outsourcing:
Myth Outsourcing is easy.
Reality Outsourcing requires significant planning and resources to be effective. This is especially true when transitioning from an internal operation to an outsourcing vendor.
Myth Outsourcing shows a failure in management.
Reality Outsourcing is an effective tool used every day by competent managers. Most shops outsource some functions, like couriers, presort or offset printing.
Myth Outsourcing can't be done in a union shop.
Reality Outsourcing exists in all environments. I visited a shop that was half union, half vendor. And it worked.
Myth Outsourcing will solve all my management problems.
Reality Outsourcing relationships need to be managed to be successful. The function may have been outsourced, but the responsibility for success remains internal.
Myth Outsourcing will solve any human resource problems that I may have.
Reality Outsourcing staff are people too. The vendor may have responsibility for the actual hiring and firing, but the customer will have to work with the employees.
Myth Outsourcing is guaranteed to save me money.
Reality Outsourcing may cost you more if not used properly. The manager must keep accurate records of service levels, volumes and charges to ensure the vendor is in compliance with the contract.
Myth Outsourcing is inevitable.
Reality Outsourcing is only one choice among many. Vendors will often cite statistics that show how quickly outsourcing is growing. However, there are also companies that insource after failed outsourcing attempts and many companies that decide to keep their internal operations.
Myth Outsourcing is a topic that should never be brought up with management.
Reality Outsourcing options should be reviewed on a regular basis. Putting your head in the sand will only guarantee that you won't see what hits you. Face the outsourcing challenge, and make the appropriate business decision for your company.
Deciding What to Outsource
When evaluating a function as a candidate for outsourcing, the three most important factors to consider are:
The core competency issue is often a topic of fierce debate. One could argue that an insurance company should outsource the mail operation because it's not directly related to insurance. On the other hand, mail is probably the most common form of communication between the company and its customers. A function is a core competency if it's a service your customers expect, if it has a direct impact on your customers' perceptions of the company or if it has a significant impact on the bottom line.
Subject matter expertise is much easier to determine. The management and staff must consistently display applied knowledge about the specific function. Further, the manager should be a proactive internal consultant who develops solutions for the business units. Also, the manager should be an active participant in industry trade associations and attain professional certification.
The main business driver that leads the majority of companies to outsource is financial. An external vendor may be able to provide the service at a lower cost than the internal operation. To make this determination, managers must be able to quantify the real costs of a specific operation. This · begins with keeping accurate measurements of volumes and materials. Then apply all charges, including indirect and overhead costs, to develop an accurate cost per piece.
Selecting the Vendor
After a process or activity has been designated a candidate for outsourcing, the next step is vendor selection. Key factors to consider in vendor selection are:
Not only should the vendor have expertise in the field you are outsourcing, say on-demand print, it should also have existing clients with needs similar to your own. Ensure that any references are companies in the same industry and are of the same size. It's important that the vendor have experience with the same challenges your organization faces today. Your operation shouldn't be the vendor's first time in the arena.
The rapid changes in technology have an almost daily impact on the world of document processing. You must be sure that the vendor understands these changes and has made investments in leading-edge technology. Determine if it has a strategy for keeping up with the latest trends and a budget for future investments.
Along with changes in technology are shifts in markets and organizational structures. You need to select a vendor that can keep pace with those changes. It must be flexible enough to ensure a rapid deployment of a new document type or delivery method to meet the needs of a new product or division.
Outsourcing a function is a strategic move for any organization. Ensure that you understand the vendor's business strategy and that it's compatible with your company's strategy. Take the extra step to ensure that you and your new partner are heading in the same direction.
If a company decides to outsource a certain function, that decision should be reviewed on a regular basis. And if a company decides not to outsource a function, that decision should also be reviewed on a regular basis. The organization should frequently examine its processes and reevaluate how to improve its impact on customer relationships. Also, shifts in technology, costs and corporate organizational structure can impact the decision to outsource or bring a function back in-house. The outsourcing decision is never a final one but one that must be periodically evaluated.
Mark M. Fallon is president and CEO of the Berkshire Company, a consulting firm specializing in mail and document-processing strategies. For more information, please visit www.berkshire-company.com.