Exploring Third Party Logistics Call Centers To Reduce Costs
Every company today is looking for ways to save money without hurting sales and customer service. As the pressure on businesses to dramatically reduce costs continues, you need to explore whether third party logistics call centers is the right solution for your business. Does it make sense to outsource some or all call center and data entry functions as a way to improve your bottom line? Companies are also outsourcing these call center functions to avoid using capital to install a new order management system and telephone system.
We are not pushing domestic versus off-shore, but instead the analysis of what using a third party call center can do for your business. One of our clients outsourced 300,000 phone calls off shore, resulting in a substantial reduction in costs. How substantial? This client’s fully loaded internal cost per minute was $0.72, while a fully loaded off-shore cost per minute for this client was$0.42—and most of the customer service remains in-house. Additionally, the client’s 90,000 mail/fax orders cost was only $0.15 per order: scanned, transmitted to Asia, keyed overnight and available on-line for picking and customer service the next morning.
Clearly, you need to look at the potential savings of outsourcing. How should you approach doing this type of study?
Know your internal costs. In order to compare your internal costs versus third party outsourcing, you need to identify your fully loaded internal costs. “Fully loaded” includes direct and indirect labor, occupancy and telecom costs. This needs to be converted to a cost-per-minute basis, which is how outsourcing will generally be proposed and invoiced. You may say that you can’t control occupancy costs, however, there may be other uses for that space, if call center is outsourced.
Competitively bid out to multiple vendors. It goes without saying that you need to competitively bid the call center functions in question to a short list of qualified bidders; both domestic and off-shore. This is the only way to get the lowest costs.
Formalize an RFP (Request For Proposal). This should include:
- A pro forma for your business, meaning the types and volumes of transactions (actual and multi-year forward projections)
- Required services and functions
- Service level standards for total call length, abandonment rate, and average call service level standards
- Request references, boilerplate contract, and reports available
- Details about order management systems needs and systems integrations including eCommerce site, etc.
Decide what to keep in-house. You should keep your call center customer service internal. This gives you a way to monitor the service levels of the outsource company. It also gives you the opportunity to have control and be the “front line” for resolving customer issues.
Ask other critical questions. Among the things you’ll want to know:
- How will training be conducted about your product(s) and company policies?
- Is the third party provider PCI compliant and certified? To what level?
- How will you monitor your customers’ calls coming into the third party call center?
- Who are the company’s references? Come up with standardized questions to ask each of the references so you can compare their responses.
Domestic outsourcing has some advantages over off shore. Here are a few that I think are important:
- There may be an advantage in the area of English speech. However, I am greatly impressed with how well the Philippines has performed for some of our clients.
- Shorter travel distance means you can visit call centers more often.
- Understands US culture.
- Keeps jobs in the USA. This may or may not be as much of a factor for you.
Of course, domestic outsource providers’ costs may be higher than some off-shore solutions, but that is not necessarily a dead end. We have one client, a major non-profit with a high average order, that outsourced 100% of its direct orders domestically while keeping customer service in house. They were able to successfully renegotiate with their domestic outsource provider so that the costs were not so widely different.
If you’re interested in potentially using a third party call center and want to talk with a consultant, contact Jeff Barry at jbarry@fcbco.com, or call (804) 740-8743. F. Curtis Barry & Co. is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing on supply chain strategies, order management systems, warehouse management systems, inventory management, third party logistics, and to reduce freight costs.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
