Long gone are the days when labor arbitrage was the sole outsourcing driver and “outsource your mess for less” was the primary model. Today’s leading companies are seeking lower costs, reduced business risk, enhanced customer service and improved business intelligence from their outsourcing engagements.
The optimal way to achieve these goals is to automate and optimize processes before they are outsourced. Many companies are uncertain how to undertake such complex pre-outsourcing initiatives, or lack the in-house capabilities and expertise to do so; and some simply do not recognize the fundamental inefficiencies of their processes, applications and systems. Thus, service providers must possess not only superior delivery skills but also behind-the-scenes business operations expertise and results-oriented methodologies to achieve optimal benefits and ROI for their clients.
Evaluating your Potential Provider’s Business Operations Qualifications
So how can you be certain your prospective provider possesses the business operations expertise to extend far beyond simple lift and shift of your processes to deliver real, institutionalized, sustainable and innovative results? Following are seven areas you must comprehensively address when selecting the initial group of providers to respond to your RFP, and during ensuing discussions for the final down-select process.
- Lean Six Sigma: To ensure your outsourced processes will be highly streamlined, efficient and devoid of non-value-add activities, (e.g., unnecessary or redundant steps), validate that the provider has a dedicated team of Lean Six Sigma and process improvement experts to deliver continuous process analysis and improvement, and the metrics it uses to measure the value it purports to provide.
- Process Flows and Documentation: Without highly detailed process flow maps and simple-to-understand documentation, operators will not know the exact procedures to follow to perform their work effectively and successfully. Confirm that the provider has the ability and knowledge to conduct comprehensive due diligence to develop these critical job enablers.
- Training: Training is a critical aspect of the provider’s success in delivering operational excellence. The approach should be based on proactive observation of the current state environment combined with the integration of process improvements that immediately deliver business value. Determine what method of training the company provides, e.g., classroom, WebEx and actual on the job, and ascertain that it has easy-to-access knowledge repositories.
- Regulatory Compliance and Audits: The increasingly complex and risk-laden regulatory environment has brought compliance with standards such as PCI, HIPAA and SOX to the forefront. Verify that the provider has established control points for each process it manages for its clients, has a continuous internal auditing program, works with an external, accredited audit firm, demonstrates dual-custody compliance and has secure check, cash and document processing environments.
- Security: Given the sensitivity of the client data your third-party provider will be handling, a fully secure processing environment is mandatory. Ensure that the company has physical access controls, CCTV in work areas, data encryption, offsite data backup, centralized event logging/reporting, and timely installation of critical patches utilizing a structured change control process.
- Risk Mitigation, Business Continuity and Disaster Recovery Plans:As your customers depend on you for continuous, unimpeded processing of their work, you must be assured that your third-party provider has proven plans in place to mitigate all issues arising from a disaster that could cause service disruption. Points to scrutinize with your prospective provider include:
(a.) If it has redundant systems and processing centers
(b.) How frequently it tests its business continuity and disaster recovery plans
(c.) Whether it tests its plans via actual simulation or walk-throughs and connectivity exercises
(d.) How it fared in the eyes of the client following an actual business interruption
- End-Customer Billing: Of course, details are very important for every transaction your provider processes for you, so you can correctly bill your customers. Make certain the third-party firm provides the requisite data on a daily, weekly or monthly basis to meet your end-customer billing needs.
BancTec’s Business Operations Expertise…In Action
Companies are always looking to reduce expenses and while entering into an outsourcing agreement is definitely a start in that direction, the real savings is realized through continuous process optimization. Here are a few examples of how BancTec has helped other companies conduct this analysis and maximize efficiencies.
A leading supplemental insurance company was utilizing 26 different applications to manage its remittance, indexing and reconcilement processes. A BancTec team led by a Lean Six Sigma black belt conducted a deep analysis of the current operating environment, and reduced the number of applications used by consolidating 22 of them into a single, streamlined “Smart Screen” interface.
Similarly, after comprehensive observation and analysis of a global banking company’s 13 in-scope processes – including bankruptcies, dealer reserves and consumer loans – we developed detailed process flows and procedures to assist in development of a proprietary application to automate and substantially simplify a wide range of functions.
By gaining specific insights relating to these seven behind-the-scenes business operations areas, you will be well armed to select the right external outsourcing partner for your unique needs.
The DMAIC (Define, Measure, Analyze, Improve, Control) improvement cycle is a core process used to drive Six Sigma projects. The following chart demonstrates BancTec’s use of DMAIC to analyze and determine the root cause of a client’s issue, resulting in an 86 percent reduction in rejects in a specific area of its operations.