PURPOSE/OBJECTIVE: This analysis will attempt to restructure our business model in order to accommodate challenges of the current economic recession. We, as a company, must identify business processes outside of core functions, which can potentially be outsourced in order alleviate some of the initial investment and overhead needed to support them. As previously stated, the focus needs to be outside those processes which are core to our establishment, and those which alleviate the most cost.
The cost consideration can be one of equipment/facilities needed to perform the job/activity, labor required, cost of materials, or any/all of the aforementioned combined. We must be thorough with specification of our performance objectives, type of contract used for each process based on its nature, evaluation criteria used to prospect vendors, single vs. multi-contractor vending, and the timeline necessary to complete all bidding and acquisition. In order for this venture to be successful, or have its best chance at success, we must close bidding, make all acquisitions/contracts, and go live within 90 days. OVERVIEW OF PROCESSES TO BE OUTSOURCED: Our business is simply developing and distributing a magazine whose topic is centered on travel. Our target audience is the middle-income population, and therefore proper consideration must be given to pricing of the product. Through our business models, we have established that this can best be accomplished through low production/overhead costs. Keeping true to our model, and with the help of a struggling economy, we will now be able to hold true to these objectives.
The recession has forced our hand in the consideration of outsourcing specific processes. This, coincidentally, has brought us to a consideration which possibly should’ve been considered from the beginning, as business process outsourcing is a great way to help us exact our primary objectives. Having said that, the core processes have been identified and are centered around the production of the main body of the magazine. This would consist of the articles, photography, advertising (space sold in the magazine), and editing of our product.
Therefore layout/design, publishing, printing, accounting, and distribution can all be considered for external processes. Fortunately enough, there are many potential vendors who can provide many of these services within the scope of a single contract. This allows us a negotiating tool with regard to bundling. Our preliminary research has indicated that layout/design, publishing, and printing are typically bundled through various organizations. There have been enough reputable vendors reviewed to make this a requirement from our standpoint.
Details will follow. Accounting and distribution will likely remain separate processes, however these are some of the least expensive processes to consider. * LAYOUT/DESIGN, PUBLISHING, AND PRINTING: As mentioned above, our goal will be to solicit assistance with these three functions as a bundled service from a reputable publishing house. * PERFORMANCE TARGETS/LEVEL OF SERVICE * Performance criteria for this particular group of services is somewhat difficult. There are some intangibles, with regard to the artistic and design qualities of the work.
Sufficient consideration and due diligence will be required in order to develop a method of gauging the “design” of the production. Refer to timeline… * Publication should be free of error by printing to within ;X per XXX. Co-editing will likely be a function negotiated as an addition measurement of quality. * Units will be produced at the rate of XXX per month, and must be ready for distribution by the 7th day if OCONUS, 21st day if CONUS, of any given month. * TYPE OF CONTRACT * Fixed-pricing will likely be our approach to bundling these ervices. One may be inclined to opt for unit pricing based on the production of a certain number of units, but we must consider the creative value of designing the layout of the magazine, and the task of publishing. Based on this observation, fixed-pricing will establish a value of the creativity and publishing aspects, while giving proper consideration to the cost and profitability of actually printing the units. We may even choose to sub-divide the contract into two phases to address each aspect of the production separately. * EVALUATION CRITERIA Use of current technology for integrative solutions, compatible with current Windows-based software. * OCONUS or CONUS acceptable, with proper consideration given to working with US firms (international, dealing with US currency and business practices). * Relevant experience in magazine design/production, up to and including the travel industry in particular. * Verifiable references with established magazines. * Ability to support the overall production of XXX units per month. * SINGLE vs. MULTI-VENDOR SOLUTIONS * Here, the idea of single-contracting vs. ulti-contracting will likely be based on the vendor’s in-house abilities. With fix-priced contracting, it is safe to assume that multi-contracting will be likely and acceptable. However, due diligence may be able to identify enough prospective vendors which offer single-contracting (all in-house), and use this as a bargaining chip not only within those contract negotiations, but with those who are using the multi-contracting approach. Inevitably, single-contracting will be cheaper, lending bargaining power when speaking to multi-contracting firms. * TIMELINE TIMETABLE as over 90 DAYS|
DAYS 1-3| D3-10| D11-15| Make or Buy Decision/Identify Outsourced Processes| Initial Detailing of Scope/Material Specifications. Metrics to be Measured, How, and When| Pre-Qualify Prospective Vendors, Prepare RFP| D16-30| D31-60| D61-90| Distribute RFP, Qualify Reponses, Identify Leading Prospects | Choose Vendor, Contract Negotiations| Begin Production of First Volume| * DISTRIBUTION: * PERFORMANCE TARGETS/LEVEL OF SERVICE * Responsible for retrieving and shipping XXX units per month. * Greater than 99% on time delivery to all CONUS clients, deliverable by the 1st day of each month. Greater than 99% on delivery to all OCONUS clients, deliverable by the 15th day of each month (unless OCONUS vendor, then by the 1st OCONUS). * Units are to be generally handled as mail, and delivered to mail receptacles unless otherwise specified. * All bundled deliveries are sold as divisible of 20, and are to be delivered as such. 100% of all bundled packages are to be accounted for as such. * TYPE OF CONTRACT * Incentive contracting will be a strong consideration. One would be inclined to entertain unit pricing based on the nature of the process, delivering xxx number of units to xxx locations.
However, proper consideration must be given to the due dates with which ever unit is to be delivered. Throughout negotiations, we may be able to blend unit cost (number of units delivered successfully and on time) with incentive for upholding the values of on time delivery and accountability. * EVALUATION CRITERIA * Strong reputation as a parcel/package handler. * Must have international representation. * Must have brown uniforms (Still paying attention?! ) * SINGLE vs. MULTI-VENDOR SOLUTIONS * Single will definitely be the selection.
We need to be able to hold one firm accountable for the distribution of our product. This is why all prospects will need international representation, and will need to be well established. If a distributor decides to sub-contract, the issue of accountability becomes skewed and obtuse. * TIMELINE TIMETABLE as over 90 DAYS| DAYS 1-3| D3-10| D11-15| Make or Buy Decision/Identify Outsourced Processes| Detail Scope, Establish Metrics, Pre-Qualify Prospective Vendors, Prepare RFP| Distribute RFP, Qualify Reponses, Identify Leading Prospects | D16-45| D46-75| D76-90|
Choose Vendor, Contract Negotiations| Identify Client-list to Vendor, Establish Acceptable Methods/Routes| Make First Volume Distribution| * ACCOUNTING: * PERFORMANCE TARGETS/LEVEL OF SERVICE * Annual internal/external audit reports * Proper use of all taxation guidelines, accepting no penalties based on negligence * Monthly statements and reports used by management for decisions due by 5th of the following month * All financial statements distributed with detailed and accurate information * Employees paid on time 100% All expenses and accounts payable kept current to statement requirements * Bi-annual inventories conducted with the use of current/on-hand reports provided * TYPE OF CONTRACT * Rate-based pricing will most likely be employed considering labor hours, number of reports, etc… Special consideration must be given to the scope to which the firm will be held accountable to. Budget, taxes, data entry, inventory, finance management, bookkeeping, data security and archiving, payroll, and journal records are all likely to be considered for outsourcing with a single firm.
Therefore, price will be our number one concern. With the extent of these services, the tab could quickly get away from us. Legal review, while necessary in all contracting efforts, will be paramount here. With scope well defined, and duration somewhat undetermined, rate-based pricing should work well. * EVALUATION CRITERIA * Must observe all current GAAP and SOX requirements. * Must have verifiable experience dealing with the publication and distribution of magazines or other like mediums. * Cost evaluation will be a must.
Our budget it XXX for these services, and research has identified that this is competitive * Use of current technology for integrative solutions, compatible with current Windows-based software. * SINGLE vs. MULTI-VENDOR SOLUTIONS * Single-vendor is only acceptable approach. * TIMELINE: The goal will be to have our accounting structure in place before contracting vendors for the other services mentioned. This, due in part, to the idea that accounting will need to have tracked such transactions. Special emphasis on speed, with due diligence in order to pick the proper vendor, will be the focus.
Having said that, the goal will be to have a firm onboard by the 30th day. Some slack may be picked up through the time developing with other contractors. If this is the case, we may be able to have more time in choosing an accounting firm. TIMETABLE as over 90 DAYS| DAYS 1-5| D6-15| D16-30| Make or Buy Decision, Initial Detailing of Scope, Audit Trails, Reporting, Communication Hierarchy| Pre-Qualify Prospective Vendors, Prepare/Distribute RFP, Qualify and Identify Leading Prospects| Choose Vendor, Contract Negotiations| CONCLUSION: We set out to get an idea of what this company can do to stand up and be success. Over the next few days, and as the timelines insist, we must continue due process in deciding which of these business processes can be outsourced, ultimately leading to our success. We have time allotted to thoroughly review the make or buy decision process, which through a discovery of information and true evaluation, will lead to our selections and progress.
Design, publishing, and printing are all typically bundled through various publishing companies. In addition, the labor, equipment, maintenance, and facilities needing for accomplishing these tasks are extensive. These are by far the most taxing to our company and must be given priority in our endeavor to outsource. Distribution can be as simple as FEDEX, UPS, DHL… there are several well-established, internationally renowned companies who cater to just such distribution. Accounting is going to need the most attention in the long run.
Due to our time constraints, this decision will have to be very closely monitored in the coming week. We need to keep our processes in place until a decision, acquisition, and transition can be made. If, in the coming weeks, we determine that it is not feasible to outsource this process at this time, we can potentially go live with the other processes are re-visit this business process later. This would obviously lend more time to due diligence, and ultimately choosing the right relationship. Accounting is not to be decided hastily.
Overall, our decision to at least consider arranging business process outsourcing has great potential. The overall cost of producing this magazine is staggering. We are familiar, with the research conducting throughout formulating our business model, that this venture requires a great deal of capital. Now with the recession, we must explore other options. In the last twenty years, outsourcing has become a popular way to alleviate some of these financial burdens, allowing for more focus and resources on the core processes.
