As Business process outsourcing matures, and it moves from a pure cost reduction business decision to a collaboration of buyers and purveyors of services, the question arises; is everyone ready for the paradigm shift? BPO collaboration has been growing in importance for customers as businesses continue to strive for increased profitability through cost reductions, and increased demands on their vendors.
To be sure, lower operating costs are a basic customer requirement; no one outsources a business process with the objective of paying more. The trend, however, is going beyond the purchase of basic “your mess for less service.” Buyers of outsourcing services are requiring much more from their vendors…they want and need collaborative relationships that transform the entire value stream, not just the piece managed by the vendor. To achieve optimization of a business process requires the active collaboration across both organizations. It requires the melding of customer and the service providers cultures; the needs of both must be understood and leveraged, they must strive for excellence together. Some organizations are turning to Lean, Six Sigma, and a host of other continuous improvement methodologies to guide the improvement effort. This is part of the solution, the bigger challenge is the boundaries established within BPO contracts that drive decisions based on functional objectives and priorities which hinder and prevent processes from being managed from “end to end.”
The focus needs to be on the external requirements of external customers; in this way customers and outsourcers are focused on delivering products and services with the highest quality, lowest cost, and shortest lead time. Service Level Agreements (SLA) drive compliance; all too often are not tied to the operational requirements of the business, and most importantly, the external customer requirements. For example, SLAs often require orders to be entered into an ERP system within 24 hours of receipt. At the same time, the customer’s manufacturing division establishes their production schedule only once a week. The requirement of a 24 hour completion timeframe often means extra labor capacity for the vendor to meet the SLA. Ironically, the orders that were so dutifully entered into the ERP system, sit in queue for days waiting for the factory to set its schedule. This sort of misalignment happens all too often, and in the end, both the external and outsourcing customers pay more for their services.
To overcome this misalignment, both the service provider and customer need to insure that the talent or skill sets necessary for collaboration exist in both the customer’s and vendor’s organizations. Unfortunately, the basic skill sets that are needed for collaboration and continuous improvement are not universally resident in many organizations. If this is the situation with the customer, service providers must be ready to provide a collaborative road map, and have the skills necessary to improve business processes and operations with their customers from end to end. Service providers must be able to:
• Develop and facilitate the deployment of the collaboration strategy, and execute the change management plan to establish the proper change environment.
• Establish a continuous improvement infrastructure…project selection, benefits calculations, project management, etc.
• Deliver continuous improvement training.
• Deliver robust project execution…in essence, facilitating collaboration where the lines of responsibility are blurred.
• Understand the customer’s industry and processes… from end to end.
For the customer, this means a fundamental paradigm shift in the customer / vendor relationship. While continuous improvement can be purchased, a vendor cannot physically change the way people think, or change how a process works without the collaborative participation of process owners, staff, and the leadership team. To develop a successful collaborative relationship requires:
• A Leadership team that is willing to break the paradigm of the pure customer / supplier relationship.
• A burning platform for change…business as usual cannot continue; customers must become experts in transforming their organizations, BPO vendors cannot and should not be solely responsible for the success of the partnership.
• The development of a continuous improvement infrastructure—if it does not already exist—to facilitate end to end operational optimization.
• Training a cadre of staff with the skill in Lean, Six Sigma, project management, and change management to make operational improvements.
Tying this effort together, is the contract that the customer and vendor must have to begin the collaborative dance. This agreement must be crafted with an eye towards collaboration; roles and responsibilities, acceptance criteria, benefit calculations, and gain sharing all need to be part of the original agreement. The contract must also be written with the recognition that business environment will change; the change request process must be robust enough to facilitate the changes that will need to occur. A successful collaborative relationship means give and take, and the mutual understanding of what drives the interests of each partner for the relationship to be a win / win experience.