Services Outsourcing

A Lecture-Presentation by Prof. Deepak Jakate

Supply Chain for Physical Goods

Suppliers

Recycling/Remanufacturing

Process and Customer

Product Manufacturing Distribution Retailing Customer
Service
Design

Material transfer Information transfer

Customer-Supplier Duality in Service
Supply Relationships (Hubs)
Supplier

Service Service
Provider Customer
Design

Material transfer Information transfer

 Single - Level Bidirectional
Service Supply Relationship
Service Customer >Input Service
Category -Supplier Output> Provider

Education Student >Mind Professor

Knowledge>
Health Care Patient >Tooth Dentist
Filling>
Financial Investor >Money Bank
Services Interest>

Financial Client >Documents Tax Preparer

Services
 Two - Level Bidirectional Service
Supply Relationship
Service Customer >Input Service >Input Provider’s
Category -Supplier Output> Provider Output> Supplier

Health Patient >Disturbed Therapist >Prescription Pharmacy

Care Treated> Drugs>

Health Patient >Blood Physician >Sample Lab

Care Diagnosis> Test Result>

Repair Driver >Car Garage >Engine Machine

Services Repaired> Rebuilt> Shop

Financial Home >Property Mortgage >Location Title

Services Buyer Loan> Company Clear Title> Search
Sources of Value in Service Supply
Relationships
• Bi-directional Optimization
• Managing Productive Capacity
- Transfer: make knowledge
available (e.g. web based FAQ database)
- Replacement: substitute
technology for server (e.g. digital blood
pressure device)
- Embellishment: enable self-
service by teaching (e.g. change
surgical dressing)
• Management of Perishability
Impact of Service Supply Relationships
Element or Link Before
Channel Structure Functional silos
Service Recipient Passive
Channel Integration Vertical (own the channel to
integrate)
Flow of Service Available waiting for demand
Flow of Information Pull: manual reporting of
(upstream) demand data results in
delayed management
response.
Flow of Information Little or no knowledge of
(downstream) resource deployment
Business Processes Predominantly in-house;
locally optimized for
efficiency
Demand Management Limited to use of
appointments and
reservations.
After
Process orientation
Active as a co-producer
Virtual (IT and other
mechanism permit integration
without ownership)
Activated upon demand
Push: high level of connectivity
and transparency with fast or
instantaneous access to most
recent demand data.
Real-time tracking and
dispatching
In-house for key processes,
others out-sourced for
flexibility; integrated and
synchronized to match supply
with demand
Proactive involving customer in
scheduling to achieve bi-
directional optimization
Impact of Service Supply Relationships
Element or Link Before After
Capacity Management Limited to use of part-time Creative use of cross-trained
employees employees, outsourcing, and
customer self-service.
Facilitating Goods High; in anticipation of Lower; owing to process
demand transparency
Service Delivery Inflexible; standardized and Flexible; personable with
impersonal customization possible.
Routing and scheduling Static; fixed daily schedules Dynamic; based on system
connectivity and process
visibility
New Service Design Marketing initiatives based on Virtual value chain design with
firm's perception of customer customer data base information
needs driving new services
Pricing Fixed Variable; yield management
promotes off-peak demand and
avoid idle capacity
International Focus on domestic market Global reach with Internet
Operations
Outsourcing Services
• Benefits
- allows the firm to focus on its core
competence
- service is cheaper to outsource than
perform in-house
- provides access to latest technology
- leverage benefits of supplier
economy of scale
•Risks
- loss of direct control of quality
- jeopardizes employee loyalty
- exposure to data security and
customer privacy
- dependence on one supplier
compromises future negotiation leverage
- additional coordination expense and
delays
- atrophy of in-house capability to
perform service
Outsourcing Process

Need Identification Information Search Vendor Selection

Problem Definition References Experience Cost
"Do-versus-Buy" Analysis Personal Contact Reputation Location
Involve Interested Parties Recommendations References Size
Specification Development Trade Directory

Performance Evaluation
Identify Evaluator Meet Deadlines
Quality of Work Flexibility
Communication Dependability
Taxonomy for Outsourcing
Business Services
Importance of Service
Low High
Facility Support: Equipment Support:
Property -Laundry -Repairs
-Janitorial -Maintenance
Focus -Waste disposal -Product testing
Employee Support: Employee Development:
of People -Food service -Training
-Plant security -Education
-Temporary personnel -Medical care
Service Facilitator: Professional:
Process -Bookkeeping -Advertising
-Travel booking -Public relations
-Packaged software -Legal
Outsourcing Considerations
Focus on Property

Facility Support Service

• Low cost
• Identify responsible party to evaluate performance
• Precise specifications can be written

Equipment Support Service

• Experience and reputation of vendor

• Availability of vendor for emergency response
• Designate person to make service call and to
check that service is satisfactory
 Focus on People

Employee Support Service

• Contact vendor clients for references

• Specifications prepared with end user input
• Evaluate performance on a periodic basis
Employee Development Service

• Experience with particular industry important

• Involve high levels of management in vendor
identification and selection
• Contact vendor clients for references
• Use employees to evaluate vendor performance
 Focus on Process
Facilitator Service

• Knowledge of alternate vendors important

• Involve end user in vendor identification
• References or third party evaluations useful
• Have user write detailed specifications

Professional Service
• Involve high level management in vendor
identification and selection
• Reputation and experience very important
• Performance evaluation by top management
Questions?
Thank You !
Deepak Jakate
Managing Partner
Envision Management Services
Supply Chain Excellence
Six Sigma
Training & Education
Business Consulting
Investment Advisory
Secondary Research

email : deepak.jakate@rediffmail.com
mobile : 09892700607