maseei 2(module 1)
TRANSCRIPT
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The future shape of business is
being redefined throughoutsourcing
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What is Outsourcing
Outsourcing means finding better ways of doing business.
It helps companies to look to the value chain forhigh leverage
areas and helps them to better utilise theirresources to
exploit these areas.
Outsourcing is a means to achieve competitive advantage by
focusing on core competencies.
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What to Outsource
CRM (Customer Relationship
Management)
SCM (Supply Chain Management) Back Office
Payroll
Billing
Accounting
Investor Relationship Management Share
Transfer & Fixed Deposit Accounting
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Why Outsource
Use the specialised services and
skills of the Outsourcing partner
Better utilise internal resources
Increased responsiveness to
customer needs
Decrease financial risks by reducing
capital investments
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In-house Vs. Outsourcing Key Questions
Speed and cost for transformation how
long will it take to transform the function
or process internally vs. externally? Management attention should
management devote a significant amount
of time and energy to this process?
Talent are we putting our best people,
with the appropriate skill sets, into these
processes?
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In-house Vs. Outsourcing Key Questions
Capital does the function win (or lose)the war for capital within the corporation?
Track record does the function have a
track record for meeting or beating itscommitments?
Accountability if the transformation isNOT successful, who will be held
accountable?
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Often a company will look to a contract
manufacturer to improve efficiency or reduce
labor costs. In Most cases the objective of outsourcing is a
targeted 20% cost reduction, with actual savings
coming from direct labor and variable cost.
while a seemingly low bid may look attractive,incomplete or misunderstood specifications can
result in an overhead nightmare.
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Outsourcing Opportunity or Burden
International outsourcing has become the easy way out for many
organizations seeking to stay competitive in a global economy,
whereas establishing a lean Six Sigma organization requires
sustained and consistent hard work. Proponents say
outsourcing is the only way costs can be cut enough to keep theorganization competitive. Ultimately, the decision to outsource
jobs should be based on both economic and value criteria.
Unless managers face the obligation to ensure that both the
organization and its suppliers are producing at the highest
quality levels and the lowest lean cost, the job is not being done.Only this cost base can determine the decision to outsource. It is
the quality professional's responsibility to challenge the value of
all activities throughout the organization that do not contribute to
a lean quality culture. The first objective should be insourcing
excellence. Outsourcing should be the last resort.
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Motivators for Outsourcing
The followings are the major reasonsgiven for taking outsourcing decisions
Difficulty of hiring skilled professionals(28.8 percent),
Lack of in-house skills to deliver thedesired levels of quality (20.3 percent),
Budgetary considerations (13.6 percent), Mandate from the management (11.9
percent).
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Risks in Outsourcing
Information Security
Loss of control
Compromising confidentiality
Monitoring costs
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Minimising Risks
Choose a service provider that has aproven track record - talk to customers ofthe service provider
Know your requirements, both current andfuture, and put them in the contract
Stay away from variable costs in thecontract like communication, travel etc.
Treat the outsourced relationship as apartnership and the employees andextended team members
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Minimizing Risks
Choose a service provider who providesyou with value adds, services or productsthat may not be in the contract.
Develop a strong partnership with thevendor
Secure a confidentiality agreement
Simplify the interface between the twoorganisations
Focus communications
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The Key Layers in Outsourcing
Strategy
Process Design
Operations
Systems
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The Key Layers in Outsourcing
Retain in-house
Strategy - governance, policy setting,
decision-making and direction Process Design - design, and
consultative activities
The Strategy and Process Design layersare typically retained with themanagement to ensure overall control ofthe activity
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The Key Layers in Outsourcing
Outsource
Operations - administration, clerical activities
and day-to-day execution System - technology, infrastructure and
transactional processing
It is these two bottom layers combined - Systemsand Administration layers that are mostappropriate for Business Process Outsourcing(BPO)
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Benefits
Service
Industry knowledge and expertise of the
vendor
Quick response time
Function Difficult to Manage or Out of
Control
They are great in a pinch ability to
increase resources whenever required
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Benefits
Costs
Pay only for what you need
The infrastructure is of the vendor
Economies of scale with the vendor
Reduce or Control Operating Costs
Outsourcing is a cost-effective way toincrease your resources.