1. SSP New Trends in Outsourcing
John Strange
Blackwell Publishing
New Trends in Outsourcing
Overview of Presentation
• Outsourcing
– What does it mean?
– Why is it important?
– What is really core business and, thus core competence?
• What are the trends?
• What are the critical success factors?
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New Trends in Outsourcing (cont’d)
• Blackwell Publishing Case Study
– Composition
– Copy editing
– Cost comparisons
– Problems experienced
• Strategies for success?
• Future thoughts………?
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2. My experience……………..!
• Blackwell Publishing (1993 - ): Academic, Scientific and
Medical Publishing
– Responsible for global production strategy
– Books & journals
– Outsourced ‘composition’ and ‘manufacturing’
• Pearson Longman (1978 – 1992): Educational Publishing
– Responsible for ‘Schools Division’ production strategy
– Administration and systems for Group as a whole
– Special focus on composition and pre-press
– Books
– Outsourced ‘composition’, ‘reproduction’ and ‘manufacturing’
• Prior to 1978
– 8 years in a small holiday guide publisher
– 3 years in sales (printing company)
– 3 years in works/factory management (printing company)
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Blackwell Publishing
• Revenues £200m
• Academic, Scientific, Technical and Medical Books and Journals
• Around 750 Journals (for nearly 600 Societies) per annum
• 600+ New Books per annum
• Over 900 employees
• Offices in UK, US, Australia, Japan, China, Denmark, Germany
• ‘Production’ in UK (Oxford and Edinburgh), US and Australia
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Outsourcing
• What does it mean?
– The delegation of one or more business functions (or processes)
to a third party, who in turn delivers services to agreed criteria
• Some other associated terminology
– Offshoring: the utilisation of a third party that is ‘offshore’ (i.e. not
domestic), normally to a region where labour costs are lower
• Why is it important?
– As domestic costs rise (especially labour costs), one is forced to
try and locate parts of the world, where you can buy services at
a lower cost and, sometimes better quality with reduced lead
times.
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3. Outsourcing (cont’d)
• Identify – what is really core business and, thus core competence.
Then focus internal resources on this -which can then deliver:
• Cost savings
• Reduced lead times
• Similar (or better quality)
• Consistency
• Scaleability
• Areas that can be outsourced
– Copy editing
– Composition
– Manufacturing
– Customer services
– Technology (support and development)
– Some aspects of Finance (e.g. purchase ledger)
– Rights and permissions
– 24 x 7 help desks
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Trends in Outsourcing?
• Offshore outsourcing becoming very common (? the
norm)
– Europe far more experienced than US!!!
– Concerns about loss of jobs domestically, but ……..?
• Increasing breadth of outsourcing offerings
– Vendors beginning to offer end -to -end solutions
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What are the critical success factors?
• Be very clear about: What you want to outsource
Why you want to outsource
How you want to outsource
• Define clearly the deliverables:
– The processes and procedures
– Acceptable lead times
– What you will supply
– The costs Service
– Payment terms Level
– Communications
– Disaster recovery plans Agreement
– Assessment procedures
– Arbitration
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4. What are the critical success factors? (cont’d)
• Determine whether you wish to work directly offshore
or, via a vendors’ domestic office
• Create an RFP (Request for Price)
• Prepare cost comparisons (currency?)
• Evaluate the short list of suppliers carefully
– Visit them
– Ask tough questions
– What is their management team (and experience)?
– What are their human resources policies?
– Is there likely synergy between us?
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What are the critical success factors? (cont’d)
– Do they have the appropriate technology
environment/expertise?
– Take up references
– Do they work for any of your competitors (if yes, who?)
– What is their turnover/revenue?
– ? The value of their largest account (not who but how
much)?
– Do they make a profit (and, will they from your work)?
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Blackwell Publishing case study
Strategy is to consolidate our supplier base on a global
basis (currently produce journals in UK, Australia and US)
- Improve buying power
- Reduce support costs
- Medium to large suppliers (provide a reasonable R & D)
• Composition
– Used China for Books (since ’80’s)
– Used India for Journals (since ’94)
– Start with competitor activity
• Elsevier : very controlled workflows
: primarily owned journals
– Identified some potential suppliers in India
– Initial meeting with them separately in UK
– Then I visited them in India (look and listen carefully)
– Prepared an RFP (based on UK journals)
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5. Blackwell Publishing case study (cont’d)
• Got each vendor to complete
– Company profile
– Human resources practices profile
• Complete cost comparisons (in £)
• Requested what discounts were available for increased volume
(must apply to all pages)
– Can have retrospective rebate scheme on value (£ or $) per annum
• Carried out some trials (on previous papers)
– Measured accuracy and feedback results
• Further visits (from other colleagues in Production) to India
• Encouraged the vendors to meet us in UK (increasing exposure)
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Blackwell Publishing case study (cont’d)
• Began with some ‘live’ work on a few journals (managing expectat ion
levels carefully)
• Look to work increasingly electronically (to minimise courier costs)
and (in our case) direct (to maximise the financial benefits)
• Prepared an SLA (Service Level Agreement)
– Not so much a contract – more a ‘statement of intent’
• Careful not to rush to increase the volume too quickly
• Also at this point, moved to China
– Strategic (disaster recovery)
– As it happened, I encouraged vendors in China I had worked with for
many years on Books to expand into Journals
• Then we extended to colleagues in US and Australia
• Remember: you do not get anything for ‘free’
– Provided lots of training, support and feedback (360o)
– Have annual Supplier Meetings (exchanging strategic directional plans
for next 2-3 years)
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Blackwell Publishing case study (cont’d)
• Copy Editing
– Quite ‘politically sensitive’ within BPL
– Becoming increasingly a commodity
– Important to meet your customers expectations (but not
exceed them – if they won’t pay for it etc)
– Define carefully what is meant by copy editing and, most
important, what standards you require
– Then identified which of our 5 Indian suppliers we would
work with initially
– Obtained costs
– Carried out some trials; feedback; more trials etc
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6. Blackwell Publishing case study (cont’d)
– Specified (internally) the workflow benefits (as well as the
savings)
– Began with some UK titles in STM
– Provided lost of training and support
– Feedback critical
– Now the default
– Expanded into China
– Suggested a methodology
• (Indian manager: Philippines manager)
– Improving all the time (especially the quality of English
from graduates)
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Blackwell Publishing case study (cont’d)
• Cost comparisons
US UK/ India China
Europe
Copy Editing 100 90 50 50
Composition 100 85 45 40
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Blackwell Publishing case study (cont’d)
• Problems experienced
– Both India and China have a ‘service orientated’ culture
• Good, but…..
• Must emphasise ‘assume nothing’ (always ask if not absolutely certain)
– Tendency to say ‘yes’ which might mean ‘no’ or probably ‘don’t know’!
– Develop a rigid test plan and, stick to it (practically no exceptions)
– Scaleability is a big strength, but….. (must plan in advance and, give
sufficient notice)
– They do experience large turnover of staff (often with little notice!)
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7. Blackwell Publishing case study (cont’d)
• English language (be careful)
– UK v US…..!!
(Hindi, Tamil, Mandarin…..!!)
– Instructions (verbal or written) must be 150% clear
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Strategies for success?
• Manage the expectations carefully
• Need support from senior management (CEO downwards)
– Will not be a smooth ride (things will/do go wrong)
– Not pain free
• All about risk management to optimise benefits
• Choose carefully what you decide to outsource
– Don’t be too optimistic/aggressive
– Identify some small/safe wins (then use these successes as
ambassadors within your organisation for further expansion)
• Manage change (of workflows, culture etc) very carefully
• Measure performance: agreed KPI’s
– If you can’t measure it, you can’t expect to improve it
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Strategies for success? (cont’d)
• Don’t allow yourself to be rushed (whatever the CEO says!)
• Will need additional overhead costs (travel, training etc)
– From the savings!
• Visits – go and see for yourself
– Once satisfied, share with colleagues
• Ensure you have a clear idea of HR policies for all your
vendors (pro-actively share with internal customers)
• Document what you want (Service Level Criteria)
• Ensure crystal clear instructions
• Holy Grail – true electronic workflow (work aggressively
towards this)
– Don’t make FedEx, DHL etc even richer!
• Share your strategies
– Regular supplier meetings
– You are all in this together
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8. Strategies for success?
• But there are huge benefits
– Improved process
– Increased productivity
– Lower cost-of-sale
– Reduced lead times (on average)
– Improved service levels (which are sustained)
– Excellent innovation
– Scaleability
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Future thoughts………?
• Strategic priorities will change from a tactical outsourcing
action plan to a central sourcing strategy (for all operations)
• Outsource suppliers will offer more end-to -end solutions e.g.
customer services through to on -line delivery
• Early adopters of outsourcing will develop offshore operations
to further drive down costs
• Technology development and support will primarily be
offshore
• Publishers will be smaller, more highly focussed (retaining
higher skilled, better paid employees)
• Largest growth in outsourcing will be customer services,
finance, HR, technology and more production management
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Conclusion……….!!
Companies know that if they don’t outsource,
somebody else will. If competitors act and you don’t
respond, then you are putting your business at risk
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