360° Vendor Management

Scheduling: One Reason Outsourcing Deals Fail

We’re not rookies here at 360° Vendor Management. We’ve seen a fair number of outsourcing contracts serving different types of operations. While the fine specialty advisory and law firms will write lengthy white papers explaining why service level agreements, termination clauses, change management, and governance organization (or lack thereof) are the root of all evil, the nuts and bolts of day-to-day vendor management is where most outsourcing relationships go sour.

We recently shared our perspective on the importance of forecasting. Failure to forecast or the inability to forecast accurately is definitely a reason why vendors fail to perform, but you, the highly skilled vendor manager, can control that. Ensuring your vendor schedules staff to meet your forecasts is an entirely different challenge because it’s a level of detail that most vendor managers completely ignore, but is a key ingredient in the forecasting-scheduling-staffing triangle of workforce management. Our experience with vendors and in-house operations teams suggests that scheduling is biggest challenge to meeting timeliness goals.

What is scheduling? Scheduling is the mathematical process of building a model of employee availability that provides sufficient workforce capacity to handle forecasted volumes and achieve timeliness goals. Call centers have complex software tools that include a variety of factors: schedule adherence, absenteeism, training and other employee commitments, holidays and vacations. In our experience, this is the only type of operation that uses tools to handle scheduling. Typical back office operations simply count team members trained to handle certain types of transactions and schedule them for standard 8-hour days/40-hour work weeks, occasionally including 2nd, 3rd or swing shifts. They rarely account for absenteeism, training and other employees requirements (e.g., 1:1s, team meetings, etc.), or schedule adherence. Employees simply arrive at approximately the right time and leave when their shifts end, taking lunches and breaks when then choose or at regular times, regardless of transaction inventories.As a vendor manager, it is your responsibility to ensure your vendors meet performance expectations. Hence, it is essential that you spend time ensuring that your vendors’ workforce schedules don’t exacerbate performance issues. You might say, “That’s the vendor’s job!” or “That creates a coemployment issue!” or “That’s a level of detail I don’t have time to manage!”

Well, you are wrong.

The vast majority of outsourcing vendors simply employ full time employees that work traditional work days and weeks. The vendors will force you to pay for extra staff to handle peak weekly (or hourly!) transaction volumes, which means that you pay for the extra staff when they aren’t needed for low volume periods. That’s money out of your pocket. Furthermore, traditional 8-hour work weeks don’t reflect most operations intra-day or intra-week transaction volumes. Therefore, transactions end-up as aging inventory, threatening your timeliness goals. Lastly, most vendor “set and forget” their schedules, even when inventory backlogs really stack-up. They use expensive overtime to manage backlogs.

Don’t get us wrong - scheduling is not the only reason when outsourcing vendors fail to perform. However, it is one of the key reasons vendors’ performance lags behind your expectations. When you surrendered your operations to your vendor, you didn’t transition your responsibility to meet your company’s customers expectations. Trust us, your customers don’t care if it’s you, your vendor, or the US Postal Service’s fault.On the other hand, scheduling isn’t an intensive responsibility for a vendor manager once the process is set-up. On a monthly basis, just before schedules are finalized, vendor managers should review their vendors analysis of the prior month’s scheduling performance (including turnover, absenteeism, training, schedule adherence, etc.). The key metrics to analyze are planned capacity, actual capacity, productivity, and daily transaction timeliness. Afterwards, the vendor manager should ensure that adjustments are made to proposed schedules for coming months.

The vendor manager should also take the time to ensure the vendor is managing for forecasted attrition. Do not wait for the employees to leave… you must always have hiring and training in process to ensure you have adequate capacity. We’ll dedicate an entire article or two just on managing vendor attrition in the future.

If you have comments or ideas, we’d welcome your feedback - let us know what you think!

This entry was posted on Thursday, November 22nd, 2007 at 5:49 pm and is filed under Forecasting, Outsourcing, Scheduling, Vendor Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.