Onsite Vendor Management in a Global Outsourcing Environment

Operations teams have historically organized themselves very effectively around their core operations centers.  Dedicated training, quality, reporting, and operations professionals were located very closely to the daily riotous call center and back office operations.  With little argument, close proximity ensured clear lines of communication, close collaboration, and the ability to quickly bring the right talent to daily operations issues.

As Phil mentions in his article on globalization, your focus as a vendor manager or outsourcing executive is on the global labor market. Now that your operations are located in India, Jamaica, Central America, or the Philippines, effectively managing operations from North America or Europe is far greater challenge. Your domestic teams are asleep during the action, or they are separated by thousands of miles and significant cultural differences. In addition, reading real-time or daily reports does not give you the same information that a walk through a call center floor does, where you can see opportunities to improve efficiency and keep the peace among agents. It’s simply more difficult to manage operations from a distance. If you have not considered an alternative management model, maybe you should. In this article, we will address some of those opportunities.

Before we dig much farther into the subject, we think it is important that you are well grounded in the core functions of vendor management. Brad Rubin recently shared some of his perspectives on the core functions of vendor management. He addresses the high level concepts and, although we believe there is significant overlap between the areas of governance, relationship management, and performance management, it’s a fairly solid way to understand the core foundations of outsourcing vendor management. With that said, we prefer the COPC’s Standard for Vendor Management, which they provide free of charge. Their far more granular approach to focusing on key performance drivers of vendor management is outstanding, and we encourage you to consider leveraging their many years of experience with operations management standards setting.

Now that you are well grounded in the core functions of vendor management, there are three major organizational models that you should consider:

Centralized – A centralized model consolidates all vendor management responsibilities into a single vendor management organization (VMO). The VMO serves internal customers and is essentially “on the hook” for delivering pre-established performance standards by effectively managing vendors to produce high quality, consistent results. Essentially, work force management, training, forecasting, daily operations management, quality, contracting, and performance management functions all exist in the VMO.

Center-Led – In this model, the VMO has responsibility for some core functions, but relies heavily on other internal organizations to support them. For example, forecasts may come from the company’s centralized WFM team who relies on the VMO to ensure the vendor provides adequate staffing. Another examples include relying on procurement teams to lead vendor selection and negotiation, or relying on internal quality teams to conduct quality audits of vendor performance.

Decentralized – In this model, the VMO has primary responsibility for vendor governance – planning enterprise-wide outsourcing activities, handling escalated executive-level vendor-company relationship issues, and establishing standards for vendor selection. Other internal teams manage day-to-day vendor management responsibilities.

All of these models are effective, especially when the size of certain outsourced operations are large enough for decentralized teams to have sufficient size to effectively manage the vendors. All of these models have inefficiencies, especially when centralization causes redundancy with other core functions (e.g., workforce management is usually centralized within a company and creating a VMO version of this limits effectiveness) or when strong leaders do not ensure that the VMO has the right processes and communication with internally decentralized groups. In general, we feel that a center-led model provides the best focus, but we’ve seen the other models work very well.

However, the growing demands for onsite vendor management puts significant cost pressures on companies. Relocating personnel to foreign countries can require significant costs and may expose a company to potential tax liabilities in foreign countries. Therefore, most companies avoid locating key resources close to vendor operations centers. As a result, significant vendor management issues continue and companies loose their ability to effectively generate high quality, consistent results, which they in turn mitigate by sending trainers and quality teams to vendor operations every few months for 1-4 weeks per visit, frequently to coincide with major operational or technology changes.

When the size of global operations reaches about 1,000 resources in a single location, it’s time to seriously consider locating key resources in these key locations. This is where the VMO model you use can either create opportunities or barriers to the effectiveness of these offshore company employees. Centralized models can effectively deploy resources to offshore locations because these resources work for the same team and therefore can be cross-trained and empowered to work with a variety of different types of operations and vendors in those key locations. On the other hand, decentralized teams will quickly find difficulty embracing and utilizing the power of offshore resources because they cannot easily align their objectives and the available time of the offshore resources. As a result, we strongly suggest that companies managing major outsourcing programs to consider some level of centralization to ensure that onsite vendor management can be effective.

For those who finally decide that onsite vendor management teams are right for their companies, consider the following items:

Focus Offshore Teams – The focus of offshore teams should be to resolve issues that cannot be easily managed onshore. Examples of this include training, quality, scheduling, and staffing. Also use the teams to run site security audits and to provide components of the overall business continuity plan.

Keep Offshore Teams Small – Start with a single person and grow gradually from there. Typically 1:500 to 1:1,000 is the right quantity of offshore resources because this ensures that offshore teams have time to manage significant issues, but that you use these precious and costly resources in the areas of greatest need. These are small, high performance teams that are brought into resolve major issues.

Maintain Broad Skills Offshore – Since the use of offshore teams is to resolve a variety of issues that cannot be effectively managed onshore, ensure that the offshore teams can address all the programs you have outsourced to the location, regardless of program, operation, or business line.

Empower Offshore Teams – Do not hamstring your offshore resources with limitations placed on them by domestic VMO teams. Since these are talented individuals and they have high quality, first hand knowledge of vendor operations, trust their judgment, while ensuring they have the bigger picture perspective that they will loose when embroiled in local vendor operational issues.

Protect Offshore Team – Foreign countries are not as safe as your country and resources deployed to such locations for long period of time are likely to “get comfortable” and stop observing certain safety precautions. As a result, ensure these resources understand certain rules. These should include requiring these teams utilize secure housing facilities, company-approved transportation, and that they avoid certain areas of the country – without exception. Local vendor management teams should be located at the outsourcing vendor’s facility. Furthermore, secure strong medical, dental, and vision resources should be procured for these teams. Lastly, plan for evacuation contingencies. Oh, do not to forbid fraternizing with vendor employees – romantic relationships can destroy your offshore operations.

Rotate Offshore Teams – It’s imperative that you rotate offshore teams. While you’ll undoubtedly want to leverage their local knowledge as much as possible, it’s essential that you extract teams from their local country and place them in another country or back in your domestic team in order to ensure that you can leverage these resources to their full potential. Overlapping teams for some period of time ensures quality hand-offs. Finally, rotation prevents offshore teams from going “native” and forgetting your company’s culture or providing inside information to vendors.

Deploy Offshore Teams from Inside - While you may be tempted to hire local resources to manage outsourcing vendors, avoid the temptation. These resources will never truly understand your company’s objectives, operations, or culture in detailed manner to effectively manage vendor-run operations. Internal resources have deep process and technology understanding that often times exceeds the vendors’ knowledge. As a result, the vendors get the benefit of that knowledge and skill. Local resources never have this opportunity.

Do you have thoughts on the subject? Let us know by commenting below or emailing us!

Related posts:

1. Insights on Procurement Outsourcing
2. Offshore Outsourcing Management – What’s the Problem?
3. Offshore Outsourcing Vendor Governance Organizations
4. Vendor Management and Learning Curves
5. Removing Key Vendor Personnel in Outsourcing Relationships