After the 9/11 attacks and the subsequent anthrax scare, Océ Business Services Inc. noticed packages containing a non-descript white powder arriving in the mailrooms at Verizon Wireless. The service provider, which handles mail, shipping and receiving, and provides facilities management for the wireless company's operations, immediately notified its executives. It turned out the white powder was a mass mailing for a new aspirin.
Hurricane Katrina brought the Verizon mailrooms to a standstill, freezing "millions in assets inside mail envelopes and packages." Océ secured the mailrooms to protect the assets as well as Verizon's high-value documents and inventory. "Océ stepped up to the plate," recalls Terence Phalon, senior processing leader for Verizon. Océ quickly moved the mail off site and re-routed FedEx, USPS, and UPS deliveries.
The service provider, a documents processing outsourcer, is there for emergencies. But it takes care of the daily details, too. Its improved document processes and performance management systems generated savings of $1.5 million over four years rather than the projected $300,000 ? exceeding expectations by 500 percent.
Here is their story.
The original business challenge
The cellular company was not new to outsourcing. But it was not happy with the incumbent supplier that had been there six years. Service levels had fallen "drastically" and in some cases "had become a liability," Phalon recalls. So its first requirement was to find an outsourcing partner "that could make significant improvements in the service standards." These improvements included implementing more efficient workflow techniques through applied technology.
At the same time, the economy was inducing Verizon to drive down costs. It wanted to reduce staff, postage, and overnight courier costs.
Océ provided everything Verizon wanted. First, it specialized in managing one- and two-person sites. "This was a crucial component in our go-to-market model," explains Phalon. Verizon discovered Océ "offered a higher level of flexibility" than the other suppliers it considered. Phalon liked the Océ MAX Business Performance Management system, which allowed Verizon "to measure on our terms and see how they delivered expected value." Océ also understood Verizon's business, an important criterion.
The cultural fit was a good match. Both companies were growing. Both have an entrepreneurial bent. And the size was a match. "We needed a company large enough to provide services across a wide geography with the ability to set up new operations on short notice because of our growth," says Phalon. Verizon's new service provider had to have national reach with identical processes and the ability to turn on a dime.
Verizon knew it made the correct selection when Océ began the relationship "by putting skin in the game: guaranteeing a three percent annual savings," notes Phalon. The guarantee insured the supplier had an ongoing financial reason "to find more effective ways to operate."
The partners signed the contract in July 2004. The busy season started in October. "We required Océ to be up and running in 30 days," says Phalon. Of course, Verizon insisted Océ "keep the service levels up" during the transition.
As if that assignment weren't tough enough, knowledge transfer appeared to become a challenge since the former supplier was going to lay off or take many of the key employees who served and knew Verizon. But Océ was not about to let brain-drain happen. The supplier agreed to interview all the employees and bring some on board. "This was a win-win for both of us," says Phalon.
To make sure the transition went smoothly, Phalon formed a team from Verizon and Océ that traveled to each geographic area to meet Verizon's local regional facility directors. They explained the new processes and how they planned to implement them. That's when Océ deployed its transition process and began the assimilation process, which included interviews, background checks, testing, etc.
Ted Ardelean, director of marketing for Océ, says the reason for the transition's smooth success was "our detailed planning and careful implementation." That included documented procedures and comprehensive training. The result: "a seamless transition of 33 sites in 30 days that did not interrupt the business."
Even with all this planning, Phalon reports cultural change "was a big challenge." He says it was difficult telling Verizon employees "we're removing the people they had gotten to know."
Phalon says "strong" corporate governance practices "insure Océ and Verizon work together toward mutual goals with no surprises." Each of the four Verizon regions has quarterly management reviews. Océ's national enterprise operations manager is involved in the review.
The Verizon executive says the contract's "clearly stated metrics allow both companies to measure and manage our goals and obligations. Both partners synchronize using an action-item log with a set timeline for completion. The process keeps both organizations in tight lock-step that ensures the supplier hits SLAs and meets or exceeds goals.
Cost savings were "significant, exceeding all expectations by saving over $1.5 million over four years rather than the projected $300,000," reports Phalon. He points out Océ also "dramatically improved the overall service levels" while achieving these cost savings.
Océ was able to save money by improving processes. For example, it reduced shipping costs by changing overnight procedures to control use of courier accounts.
Océ consolidated Verizon's billing processes. It also provided employee drug and background checks, something Verizon wasn't getting pre-Océ. Outsourcing also provided "a deep bench to cover for individuals who called in sick."
Phalon says this outsourcing relationship has provided intangible benefits, too. "Océ puts a high premium on training, professionalism, safety, and business ethics. Their values have rubbed off on our people," says Phalon. He says Océ's employees "communicate their knowledge" on topics ranging from office safety to cultural sensitivity. "They share their best practices, which makes Verizon staff more efficient and better all-around employees. Océ brings benefits we could never have anticipated in a contract," the Verizon executive says.
Why this relationship works
The partners created mutually beneficial guidelines about the staff, which they believe "are the cornerstone of our success," says Phalon. For example, rewarding exceptional employees is important to Phalon. "Providing incentives helps the Océ employees become part of the Verizon family," he explains.
Phalon appreciates the fact that Océ's staff "became our eyes and ears." Because Océ's employees deliver mail throughout each site, they are often first to recognize hazardous materials and security issues. He says "from the beginning, they have had Verizon's best interests in mind."
Océ also has a stable staff. He says normal industry turnover "is approximately 35 percent." But Verizon's turnover has been "minimal."
Carlos Gamboa, enterprise operations manager for the supplier, says "Verizon's issues are our concern. We are eager to collaborate on new solutions and champion initiatives that conquer obstacles. As partners, we shared the same business goals from day one." He says his job "is to anticipate and plan for Verizon's needs ahead of time."
From the beginning, Phalon says Océ's strategy "was to form a long-term relationship of trust." Gamboa says trust "is the single value that drives mutual results." The OcÈ executive adds this trusting relationship allows Verizon to openly critique Océ. "That has pushed our performance," he reports.
Going the extra mile
A year ago, Verizon's IT department determined the company needed a more secure ID system for dialing in from remote offices or the field. The department wanted all employees to use a secure roaming device. Océ had to quickly deploy these devices to 100,000 geographically dispersed employees with 100 percent accountability. Océ worked with Verizon's IT department, set up the process, and got the job done in 60 days.
Océ also proposed that the partners create a procedures manual for Verizon support operations. The new manual details the responsibilities and procedures for each employee. "The manual's benefits are enormous," according to Phalon. It has become so important Verizon updates it annually.
The manual also outlines the procedures for disaster readiness and preparedness. "We didn't have a good plan about what to do when a hurricane comes," says Phalon. After the partners recovered from Hurricane Katrina, they implemented emergency processes for blizzards, tornadoes, and earthquakes as well as bomb scares and terrorist attacks. "Verizon is susceptible to threats. The first point of contact would be the mailroom," says Phalon. He says Océ put all the processes in place that Verizon now uses nationally.
Phalon says when a natural disaster strikes, Océ "has repeatedly gone above and beyond expectation to insure the safety of Verizon employees." Océ organized back-up sites and implemented relocation plans. "This allowed us to continue our workflow uninterrupted during a trying period," says Phalon.
But Océ hears the call even when there is no disaster. Phalon says Océ repeatedly has opened new call centers "within a short period of time."
Concluding, Phalon says, "We are happy to finally have a service provider that continually looks for ways to provide better services and reduce our overall costs. They've become more than a vendor. They've become our partner. This is why Verizon nominated Océ for the Verizon Supplier of Excellence Award chosen from thousands of Verizon suppliers."
Lessons from the Outsourcing Journal:
- A relationship built on trust allows the buyer to feel free to critique the performance of the supplier
- Allowing the buyer to increase the salary of a supplier's employee who is doing exceptional work can also increase overall performance.
- Large, national organizations need a supplier that can respond more quickly to market changes as well as crises like natural disasters or terrorist attacks.