Forecasting: Why Do Outsourcing Relationships Forget?
One of the fundamental processes all outsourcing relationships must use is forecasting. Forecasts of volumes are essential to ensure the vendor has adequate information to manage staffing and scheduling.
Effective forecasts typically include expected volumes over 2-6 months – enough time to hire and train new resources. The forecasts should managed at a very granular level – call center operations should forecast in 30 minute intervals for each day in the forecast, while back office operations that handle daily batch processing systems should forecast volumes at daily intervals. Effective forecasts also look at historical trends. For example, your volumes might be lower on Fridays, except the last Friday of the month due to your billing cycles. However, the Friday after Thanksgiving, which is not the last Friday of the month this year (2007) could be either a thunderously busy day or simply a non-working holiday. Historical trends are very important.
More importantly, forecasts shouldn’t should be seen as a mathematical exercise. Input for your sales and marketing teams is essential! New products and marketing campaigns are notorious for hammering unprepared operations units. Checking with your IT team could also be important, in case there are any scheduled system outages in the future.
If you’re an operations expert, this should be a no brainer. Many contracts require it. Some contracts have monetary penalties for failing to meet forecasted volumes. Others waive service level penalties if actual volumes are greater than expected.
However, despite contractual obligations, we are absolutely stunned at the number of outsourcing relationships that do not forecast. One operation we’ve looked at has been operational for over seven years and has been plagued by timeliness and inventory issues. The teams had never forecasted, except on monthly intervals (just for budgeting of vendor fees). Looking at historical inventory aging, transaction volume, and staffing/scheduling reports indicated that interday and interweek variations in transaction volumes were not met with variations in staffing capacities. Doh! This created inventory issues every week!
In upcoming articles, we’ll address staffing and scheduling issues, but if you have questions, please let us know!
Related posts:
Comments
2 Responses to “Forecasting: Why Do Outsourcing Relationships Forget?”Trackbacks
Check out what others are saying about this post...[...] program will have between four and seven service level agreements and each should have three data points (remember: quarterly service level agreements are not effective). In addition, a variety… accuracy, scheduling accuracy and adherence, and training progress. If any service level is not [...]
[...] 60 days of the year for XYZ. The customer service vendor management team made a significant forecasting error and found themselves delivering a 3% service level over several weeks. Yes, that meant that [...]