Project Report on Business Process Outsourcing

Business Process Outsourcing

“Outsourcing is more like a marriage than a transaction. The key to success is confidence, trust and relationship. BPO results in win–win situation. The Company gets excellent service at reasonable cost while contractor/service makes a fair profile.” No contemporary business organization can ignore the power of BPO (Business Process Outsourcing). Most companies adopt outsourcing of various processes as one of the key strategy including remaining.

a) Cost competitive.

b) Flexible organization.

c) Less capital intensive.

d) Focused Attentive in the core area.

“Outsourcing has become a useful tactic to power Cost and gain competitive advantage”. By Elmuty D Kithawala (1998).
With a view to have maximum flexibility and trimmed and slim workforce, modern business in this global are adopts outsourcing as a strategic decision – rather than only cost compulsion. While own employees are deployed on key areas; tradition and non-traditional areas are outsourced. Such contracts are usually intended to last for longer period say 7 to 8 years.
This powerful and much talked about tool need to be handled carefully.

Importance of Outsourcing

Outsourcing is more like a marriage than a transaction. The key to success are confidence, trust and relationship. Successful BPO results in win-win situation. The Company get excellent services at reasonable cost while contractor/service provider makes a fair profile.
“Outsourcing system [Knowledge Process Outsourcing and Business Process Outsourcing] allows companies to contract for services that are not with in the scope of their expertise, so that they can focus their time, money and energy on wasting valuable resources trying to gain understanding of areas that are somebody else’s example".

By A. Campbell and K.S. Luchs in Core Competency Based Strategy.

The modern management thinking in the global area, puts Outsourcing as one of he key strategy to remain cost leader in the Industry. All the core areas are manned by own employees whereas other areas including non-conventional area for outsourcing are taken care of through contractors.

What is to be outsourcing?

1. Conventional Areas:

a) House keeping of Building and work areas.

b) Security of Plane and Township.

c) Car pool…

d) Catering, Hospitality and Canteen.

e) Horticulture establishment and Maintenance.

2. Non – Conventional Area:

a) Maintenance of Critical and Specialized Equipments.

b) Crane Maintenance.

c) Internal Material Handing with equipment/ manual.

d) Quality Lab Operations.

e) Packing of HR Coils.

f) Refractory Lining and Management.

g) Annual Maintenance Contract for Computers.

h) Annual Maintenance Contract Telephones.

i) Safety and Fire Fighting Team including operation of fire tender.

j) Commando type Maintenance Team specialized in shut down activities.

k) Environment Mortaring on specified parameters.

l) Waste Handling.

m) Health Management.

3. Emerging Areas:

i) Procurement activities.

ii) Accounting activities.

iii) Human Resource Functions.

iv) Management/total solution contracts.

Why performance evaluation is necessary ?

For a business organization the continuation of various activities is key to survival and sustenance. Every company has a right to strive for efficiency and continuously improve to become a world class company.

One of the popular management tool is Plan, Do, Check, and Act(PDCA).

Based on about tool, Performance Appraisals are made to determine.

	The quality and quantity of actual performance viz-a-viz provided in the contract.
	Adequacy and effectiveness of policies and
	Approaches deployed by the contractor

And thus identify the action necessary to get continual improvement evaluation of outsourcing contractors including fabric of workers deployed by them specifically from Industrial point of view is of paramount importance for an organization where various activities are outsourced.

Performance Evaluation helpful in many ways:

	Able to classify good contractors from the one who are below performing below normal can be either pulled up or weeded out.
	Outsourcing various activities followed by performance evaluation helps in effective outsourcing and thus remaining flexible. Despite being big organization which are thin. The best example of flexibility in the steel company was ability to take up billet production (value added production) through outsourcing during a temporary period when main product sale was difficult.
	Performance Evaluation helps in development of contractors to take up new and challenging jobs. The reliable contractors are partners and prove back bone for today’s business organizations.
	When contractor is aware that the performance is being evolution he tries for best efficiency. This helps in improvement in the overall performance and value addition.
	Specific advice can be given to contractor for improvement in the ar4eas of job performance, industrial relations, safety, statutory compliances, industrial hazards training to their employees etc. thus avoiding of subsequent magnified problems threatening to the complex fabric of business activities.
	Help in better understanding and thus building good relationship of trust and confidence. If also helps in future assessments of contractors for new works at tender stage.

Various Recommended Aspects of Performance Evaluation:

Suggested Model and criterion for evaluation:

a) The contractor/service Provider    100 points

b) Work Performance                      500 points

c) Safety Aspects                             100 points

d) Industrial Relations                       100 points

e) Environmental Obligations             100 points

f) Statutory compliances                    100 points

Total                                                1000 point

1. The Contractor/Service Provider: 100 points

The details regarding the persons who are behind the form, their qualifications and previous experience of handling the jobs or similar assignments. Their approach deployment towards day to day problem solving, balancing needs, expectations, pressures and requirements. Personal involvement of their key person\el in the contractual activities. Easy accessibility through various communication means and their response time. Participation in professional bodies, conferences, seminars relevant to their work or general management. Identification of critical success factors, sharing best practices and knowledge. Promoting social and cultural activities.

Dimensions of Performance Evaluation

	The Contractor
	Work Performance
	Safety Aspects
	Environment Compliance
	Industrial Relations
	Statutory Compliance

2. Work Performance: Ability to understand the objectives:

Whether the contractor and their staff understand the objectives and goals of the contract. In some cases where outsourcing has failed, the survey revealed that “they did not understand what they were supposed to do”

Required Skills and Behavior:

Whether the staff deployed by contractor have required qualification, experience and skills to do the given job. During Review, it is always better to have complete profile of workers on the job. In some cases, no new entrant is allowed unless interview is taken and he is exposed to various training related to job, safety and environment.

Actual Work :

Whether the quantity and quality of work/service delivered as per the agreement. This becomes more important in case contract provides for fixed monthly charges.

In case of maintenance, whether maintenance schedules have been followed. Service indicator such as

	Whether average mean time between to maintenance is increasing or decreasing,
	Total asset life cycle performance assessment versus cost,
	Productivity of equipments under maintenance cont4ract need to be assessed.

The performance evaluation system emphasizes the importance of defining the goals and objectives associated with any major outsourcing initiative prior to choosing a supplier and signing a contract. Obtaining the right advice, learning from the experience of others, and developing and applying appropriate benchmarks to the initial evaluation process are all-important steps. Benchmarks must reflect what is important to the concerned organization; they underpin the process of regular assessment of an outsourcer’s performance and can be a most valuable element in ensuring that the company continue to benefit from cost-effective, competitive, and high-quality service throughout the life of an outsourcing contract.

Jan Duffy, group vice president of Solutio9ns Research, says that

“Benchmarks may be difficult to develop and administer, but they can play a major role in sustaining a satisfactory relationship between buyer and supplier in an outsourcing situation. However, they do not replace the trust, confidence, and goodwill that are the foundation of every successful outsourcing partnership”

In case of critical movement of materials, whether timely movement has taken place and has not affected the smooth production.

Proactive Behavior and responsiveness:

At various occasions, how the contractor and their employees have behaved and how fast6 is their response to emergent needs.

Humber of complaints against the contractor relating to the work:

Number and type of complaints from the user department received during the review period.

Health of the Equipment/Tools and Tackles relating to contractor:

a) Whether the contractor has the system of breakdown maintenance of their equipments/Tools and Tackles.

b) Whether any preventive maintenance scheduled has been kept and being adhered to.

c) The age of the equipments/Tools and Tackles owned and used by the contractor.

d) Any standby arrangement to meet the emergency breakdown.

e) Arrangement with the diesel/fuel suppliers for ensuring continued availability in working condition.

f) Stock holding of urgent and critical spares.

Use of Material:

a) If the contract provides that material to be procured and used by contractor, the quality of material is to be assessed.

b) Determine whether contractor is optimizing the use of materials.

c) Proper material accounting is made and scraps if any is returned to the company.

d) Minimum inventory is kept-to avoid any stock out and thus threatening the stoppage of work.

Knowledge Management:

Methodology adopted for collecting of various information and sharing the same with the company

Image:

Any appreciation received;’ Suggestion given by the staff. General image of contractor.

Loyalty:

Duration of the relationship with the company. Number and value of orders obtained during the review period.

Price Competitiveness:

Sharing of information on various aspects of expenses, cost analysis, innovative methods to reduce cost. Sharing of savings, Bonus, Penalty clauses agreed in the contract.

3. Safety Aspects:

Company requires that the contractor will at all times work in a safe manner and not put themselves, company employees, any human being or materials at risk. The contractor and its staff is to be fully aware of the company policy on Safety.

	Whether contractor is qualified engineer or employs qualified personnel to take care of the safety of various workmen employed.
	Whether contractor is providing the personnel protective to each workmen and the records are being maintained for safety items like Shops Helmets, Goggles, Belts, Jackets, Dust Protectors, LegGuards etc.
	Whether the contractor and their employees are exposed to the safety trainings.
	Whether the contractor follows work permit system, hot work permit system as prevalent in the company.
	Special precautions for working in confined space and at heights. Medical check up of employees working in such condition

4. Industrial Relations

a) Whether contractor has kept a qualified personnel to take care of Industrial Relation aspects of his employees.

b) Whether contractor is paying at least the minimum wages as per State Government stipulations.

c) Whether the contractor has system to handle the grievances of employees, i.e. the Grievance Committee having some members amongst the employees is in place.

d) Whether payment of wages are being made on due date.

e) In case of critical work, whether the staff is residing nearby area.

5. Compliance to Environmental Obligations:

a) Whether the contractor is aware of various hazards in their work area and given suitable instructions to their employees.

b) Whether the contractor is aware of various areas earmarked for disposal of industrial waste (relevant to his work)

c) Whether the contractor / their staff has obtained adequate Training.

6. Statutory Compliances by the Contractors;

a) Registration under the labour laws.

b) Payment of minimum wages.

c) Payment of wages latest by 7th of each month.

d) Prohibition of employing anybody below 18 year of age.

e) Provision of Safety items like helmet, shoes and safety belts.

f) Provision is leaves to their employees.

g) Provision of uniform to employees.

h) Keeping of various statutory records.

i) Registration under Provident Fund Act.

j) Payment of Provisional Taxes.

k) Employees are covered by workmen compensation Insurance Policy.

l) Submission of various returns and forms to the statutory authorities in time.

m) Compliance of provisions of Payment of Bonus Act and Gratuity Act.

n) Provision of first and facility.

Ways in Which Outsoaring Management Can Improve Productivity

Market Gains

· Improved response

· Economic of Scale

· Improved sales

Outsourcing Increased

Management Profits

Reduced Costs

	Increased productivity
	Lower rework/scrap costs
	Lower warranty costs
	Improved Service

Implementation Aspects;

Evaluation Committee:

This committee will have representations from Contract Cell, User Department, Safety Department, HR Department and Environment Department.

Periodicy of Appraisal:

As a matter of procedure, Performance review need to be done once in a year, could be January every year” However , in case of poor performance, the periodicity can to basis.

Benchmarking / Trends:

Over the period of time benchmarking to be set in. The performance data wherever possible to be converted in numerals and records kept for understanding the trend.

Best BPO Partner Award;

The instituting of best outsourcing contractor award and its announcement in terms of improvement and efficiency. The best contractor may become the role modal for others to follows.

Feedback:

A feedback system need to be evolved to communicate all the outsourcing contractors who have been reviewed, about the areas for improvement.