Lecture Business management information system - Lecture 19: Managing operations

Managing Operations

Lecture 19


Today’s Lecture
n

Managing Outsourcing:
Organizational Structure
n Governance
n Day-to-Day Working
n Supplier Development
n


Today Lecture…
n

n

n
n

n

EASTMAN KODAK COMPANY
Case Example: Managing Outsourcing
HONDA MOTOR COMPANY
Case Example: Supplier Development
Offshoring

EXULT
Case Example – Offshoring
Outsourcing – The ‘Final Word’


Managing Outsourcing:
1. Organizational Structure
n

Managing outsourcing is different from managing internal
staff
¨ One reason = it is a joint effort between parties that
may not have the same goals

n

Typically, parties establish layers of joint teams.
¨ Top-level team: final word in conflict resolution
¨ Operational team: oversees day-to-day functioning


Managing Outsourcing:
1. Organizational Structure
¨ Joint

special purpose teams: created from time to
time to solve pressing issues
¨ Committees: oversee the use of formal change
management procedures
¨ Relationship Manager(s): look after the ‘relationship’

n Skills = different to those of e.g. a data center
manager


EASTMAN KODAK COMPANY
Case Example: Managing Outsourcing

n

First IS outsourcing by a ‘good shop’
¨ “Shocked the IS world”

n

Four suppliers (ESPs) – manage portions of IS:
1. Operate data centers and networks
2. Manage telecommunications
3. PC support
4. Voice messaging


EASTMAN KODAK COMPANY
Case Example: Managing Outsourcing cont.

n

Management structure:
1.

Management Board

n

2.

Meets twice a year, includes senior management
from both companies – Focus on strategic issues

The Advisory Council
n

Meets monthly, 15 members- handles technical
and operational issues


EASTMAN KODAK COMPANY
Case Example: Managing Outsourcing cont.
3. The Supplier and Alliance Management Group
n

4.

Manages long term outsourcing relationships &
contracts with large IT suppliers
The Relationship Manager

n

Focal point between itself and service provider –
ensures Kodak gets more than just delivery

EASTMAN KODAK COMPANY
Case Example: Managing Outsourcing cont.
5.

Working Groups
§

6.

Added to deal with specific technology areas.
Client Surveys

§

Sent out twice a year to 5,000 internal users


EASTMAN KODAK COMPANY
Case Example: Managing Outsourcing cont.

n

Kodak needs all these forms of co-ordination for
effective supplier management

n

Considered a ‘best practice’ outsourcing and
relationship model

Managing Outsourcing:
2. Governance
The foundations of governing an outsourcing relationship
are laid in the (LARGE) contract(s)
n Service Level Agreement (SLA)
¨ Responsibilities, performance requirements,
penalties, bonuses
n

Another important component of SLAs is metrics. An SLA
needs to be measurable to be of use
n It is only when trust in one another breaks down that they
turn to the contract. (Fig 8-4: Governance rules)
n


Service Level Agremeents



Managing Outsourcing:
3. Day-to-Day Working

nRecommendations to manage day-to-day interactions:
¨

Manage expectations, not staff
n Facilitation becomes the mode of working. Rather

than say “do this”, the approach becomes “how
can we solve this together”

¨

Realize that informal ways of working may disappear

¨

Loss of informal ways of working may add rigor


Managing Outsourcing:
3. Day-to-Day Working

¨ Integration

of the two staffs requires explicit actions

n

Does not happen naturally

n

Explicit policies are likely to be needed


Managing Outsourcing:
3. Day-to-Day Working

¨ Don’t

unduly restrict outsourcing staff access
¨ Joint celebrations
¨ Invite each other to meetings
¨

The best way to manage day-to-day is communicate
frequently
n

Preferably ‘face to face’!


Managing Outsourcing:
4. Supplier Development
n

Topic that is receiving increased attention

n

Buying parts and services that go into one’s own
products and services

n

Assisting one’s suppliers to improve their product and
services by generally improving their processes

HONDA MOTOR COMPANY
Case Example: Supplier Development
n

Not an IT related example (manufacturing) but a good
one!

n

This automobile manufacturer conducted pioneering
work in improving suppliers’ capabilities by pairing Honda
engineers with a supplier’s engineers to drastically lower
the cost of one part supplied to Honda

n

The results are like “walking around picking money up off
the floor.”


Offshoring
n

n

To round out our discussion of outsourcing, we turn to
a topic receiving much attention today: sending work
offshore
¨ Now = a big political issue

Late 1990s – Offshore outsourcing
¨ Started when labor markets were especially tight
due to Y2K
¨ Companies turn to offshore outsourcing because
labor costs are lower and there is ample supply of
educated people
n
Ireland, India, Philippines


Off-shoring vs Outsourcing


Offshoring
n

n

The trickle in the late ’90s has turned into a steady
stream of white-collar work going offshore
–
Application maintenance and development
–
Call centers
–
Customer service
–
Back office processing
–
BPO

–
Claims processing
–
Etc.
Manufacturers have faced international competition,
whereas service firms have (had?) not


Offshoring cont.
n

Offshore outsourcing differs in some unique ways from
domestic outsourcing
¨ Some areas to be considered:
1.
2.

Offshoring options are broadening
Both parties need cultural training to bridge
cultural differences
• Clients = cultural integration programs
• Providers = accent neutralization


Offshoring cont.

n

Offshore outsourcing differs from domestic
¨

Some areas to be considered cont.
3.

Communication issues need to be addressed
from the outset
• “Yes”
–
Asia = “I hear what you are saying”
–

West = “I can do what you ask” or “I agree
with you”


Offshoring cont.
•

Tips
–
Avoid colloquialisms such as sporting
analogies
–

–

Use short, concise sentences with
common words
Have the provider write a ‘statement of
work’ to gauge understanding

Offshoring cont.

–

–

Include on your team someone who know
their culture

Communication issues continue throughout
offshore relationships
Country laws need to be followed
•

4.

Get all commitments in writing