Concol Customer Services: Outsourcing Analysis for OPER1160 Project

This project analyzes Concol Customer Services (CCS), an Internet Service Provider, facing an outsourcing decision for its online support desk. The analysis begins with a cost-benefit analysis comparing the current online support center with a Cape Town proposal, followed by an exploration of the pros and cons of insourcing versus outsourcing. The project identifies and explains five performance dimensions, including cost, insourcing, outsourcing, market competition, and changes in objectives and strategies. A weighted-point evaluation matrix is utilized to assess the two options, with each criterion assigned a relative weighting based on its importance. The project then recommends whether CCS should continue as is or outsource its Customer Services, based on the numerical and researched findings. Finally, the project provides four specific, quantifiable measurements for benchmarking the support desk's performance, including efficiency, customer satisfaction, and number of customers served, along with the reasoning for each measure and how it can be evaluated.

Running head: INTRODUCTION TO SUPPLY CHAIN AND OPERATIONS
MANAGEMENT 1
OPER1160 Group Assignment
FIRSTNAME MIDDLENAME LASTNAME
INSTITUTION
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Questions to Answer:
1) Analysis for the Case (27 marks)
Process: Based on your total cost analysis of Figure 1 and the findings from your research on the industry, list
and explain your choices for the five performance dimensions or criteria, then utilize a weighted-point
evaluation matrix to evaluate the two options. You are to select 4 additional criteria in addition to cost
based on your industry research.
a) A total cost analysis based on the above chart should be shown to justify costs. Totals and
conclusions must be clearly stated for the reader (3 marks). But, cost is just one of the five criteria
and should be included as such in the write-up.
In order to gauge the impacts of outsourcing of services, Concol Customer Services (CCS) must
perform Cost-Benefit Analysis (CBA). Cost-Benefit Analysis is done to estimate and sums up the value
of the benefits and costs of their services and determine whether it is worth venturing into. The
benefits of outsourcing are weighed against the costs associated with it. Cost-Benefit Analysis must
take into account estimated future inflation rates.
Comparing the total cost between the current online support centre and Cape Town proposal, we
use the following formula;
Total cost = Total fixed cost + Variable cost
For current online support centre;
Total cost= ( 50∗60000 ) + ( 2∗80000 ) + ( 3∗10000 ) + ( 28∗700 ) +(1.13∗800000)
¿ $ 4113600.00
For Cape Town proposal;
Total cost=2400000+ ( 1.07∗800000 )
¿ $ 3256000.00
From the total cost point of view, Cape Town proposal is worth venturing into. The total cost of the
Cape Town proposal is 20.8% lower than the current online support centre total cost. This means that
the projected profits are most likely to supersede the current profits.
The second criteria is investigating the pros and cons of insourcing and outsourcing. Insourcing
involves assigning tasks to employees within the organization to perform task(s) instead of external
organizations. Concol Customer Services when operating their support desk, there is efficiency and
quick feedback to customer queries. This is possible because the employees are controlled
effectively. Insourcing also enhances proper coordination between departments within the
organization. The employees assigned the task are already aware of their working environment
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making it easy to adapt to the new role. No time will be lost trying to adapt to the new environment.
However insourcing is prone to substandard services due to lack of proper supervision.
Outsourcing involves assigning job functions to a third party. Concol Customer Services are given an
offer by a firm in Cape Town to outsource their online support desk. Outsourcing in such instances
will benefit the firm in Cape Town more than Concol Customer Services. The firm in Cape Town will
enjoy lower costs, core competencies, high efficiency, access to skills, cash influx among others. On
the other hand, CCS will have the opportunity to expand their services to other firms. However, their
customers are denied the opportunity to be aware of the switch. This may lead to decline in the
number of customers of Concol Customer Services. Hence, Concol Customer Services will be
disadvantaged in the long run(Linton, 2007).
The new firm is a rival in the market to Concol Customer Services. When a rival firm shows interest in
acquiring services of a competitor, the ideal reason is to weaken the competitor. By eliminating
competition, the firm will be able to set the market trends. It is therefore in good faith to shy off from
the deal however attractive it may seem. Committing to the deal will mean that Concol Customer
Services will lose its dominance in the market. The rival firm will also acquire knowledge and skills
from Concol Customer Services. This has an overall effect on future performance of the firm which
may surpass that of Concol Customer Services.
Another criteria worth observing is the change in objectives and strategies of Concol Customer
Services. When CCS start outsourcing its services, it is expanding its services. This leads to diversion
from its core aim. This may in turn lower its customer satisfaction rate.
b) Then list and explain why you selected the four additional criteria that were researched. Explain
why each is important to consider when making this sourcing decision. Ensure that these dimensions
assist in differentiating between the 2 options. Be careful to avoid overlap between them. Each one
should be independent of the others. (12 marks – 3 marks for each of the 4 additional criteria)
Four additional criteria adopted are;
i) Insourcing.
ii) Outsourcing
iii) Market competition
iv) Change in aims and strategies.
Insourcing is important in ensuring that rivals are not able to acquire the company’s secrets. By
insourcing, the company’s secrets to good service delivery is guarded.
Outsourcing is important in decision making since it will involve transfer of services to other firms
making them competitively strong. Outsourcing can only be effective to both parties if their line of
production is completely distinct.
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Market competition is good in ensuring service delivery and product quality is maximized. In cases
where market competition is eliminated, monopoly creeps in making one firm a market trend setter.
Making rival competitors stronger is likely to lead to monopoly. Hence when making the decision,
Concol Customer Services must ensure that market competition is maintained.
Change in aims and strategies is likely to emerge if Concol Customer Services decides to outsource its
services. For instance, the firm will venture into outsourcing rather than internet service provision.
Less attention will be kept on the initial aims and objectives of providing better internet services.
c) Assign and explain a relative weighting for each of the five criteria. Explain why you chose to weight
them like you did? (4 marks)
When making the decision, the first criteria to be applied is market competition. The firm must start
with looking at the long term effect of outsourcing on its market demand. If outsourcing will lead to
increased competition and eventual collapse of the firm then the venture is not worth considering.
After deciding on the effect of outsourcing on the market competition, changes in aims and
objectives comes into play. This will determine if the firm will still stick to its aims and objectives or
expand its services to involve outsourcing. Once a decision has been made, the firm will then check
on the Cost-Benefit Analysis by focusing on total costs(Krause, 2009).
Total costs will be determinant of the cash flow in the firm. Total costs determines the sustainability
of the partnership. If the costs involved in outsourcing are higher than the original costs then the firm
should opt out of the deal.
Insourcing and outsourcing are the last bits of evaluation. The pros and cons of insourcing as well as
outsourcing are weighed at this point. The best alternative is reached at and decision to take up or
leave is made.
d) Assign a ranking to each of the two options (insource or outsource) for each of the 5 criteria,
explaining the reasoning for each of the rankings from your research. (4 marks) Then, utilize the
weighted matrix model to evaluate the two choices. (4 marks)
Weighted Decision Making
Options
Criteria Weighting Insourcing Outsourcing
Score Total Score Total
Cost 5 5 25 5 20
Competition 4 4 16 3 12
Chang in 3 4 12 4 12
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objectives
Service 2 4 8 3 6
Efficiency 1 5 5 4 4
Total 66 54
2) State your final recommendation (4 marks)
Should Concol continue on as is or outsource its Customer Services? Be sure to justify your answer based on
your numeric and researched findings in 1) above. (4 marks)
The best option for Concol Customer Services is to continue as it is. This will play a big part in preserving
their knowledge and skills of offering best services to their customers ensuring that their level of competition
in the market is retained. This will also motivate other firms to improve their services resulting to improved
services to customers.
3) Benchmarking the Support Desk (8 marks)
Regardless of the outcome from your analysis, management is looking for ways to benchmark or evaluate
their Support Desk. Your manager wants to know how we are going to specifically measure performance of
the online assistance whether we continue to insource or outsource it.
You must provide four specific measurements (preferably quantifiable) for different metrics to measure the
performance of your Support Desk. Your measures must contain reasoning on why these are important,
how each measure could be evaluated and how the measurement is to be done. You can’t manage it if you
can’t measure it. (8 marks – 2 marks for each performance measure)
Efficiency is the first measure of how the support desk performs. Efficiency indicates how many customers
are served within a certain time frame. How well are the customers served is also determined.
Time taken to respond to customer’s query is used to gauge how fast the services are offered. Fast
responses will be given high weights. Slow responses on the other hand given low weights.
Customer satisfaction by creating the option of weighting each conversation. The customer is given the
chance to comment on their experience during the conversation.
Number of customers served as per their requests is also used to gauge performances of the support desk.
The responses must be in line with customer queries.
References
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Krause, D. R., Vachon, S., & Klassen, R. D. (2009). Special topic forum on sustainable supply chain
management: introduction and reflections on the role of purchasing management. Journal of Supply Chain
Management, 45(4), 18-25.
Linton, J. D., Klassen, R., & Jayaraman, V. (2007). Sustainable supply chains: An introduction. Journal of
operations management, 25(6), 1075-1082.
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