Document Logistics at Deutsche Post World Net - Case Study Example

Document Logistics at Deutsche Post World Net Contents Contents 1 Question 1. 1 Question 2. 7 Question 3. 9 Question 4 11 References 13 Bibliography 16 Question 1. Analyse the results of the study on document logistics outsourcing in the banking insurance and health insurance sectors. Address opportunities and threats of these sectors as well as the opportunities and threats for DPWN. Develop recommended courses of action? The term outsourcing normally refers to a process in which business processes of an organization are contracted to a third party. This third party is usually a different organization. Modern day organizations are increasingly resorting to outsourcing as it helps them to cut down on the costs of operation (Outsourcing Advantages, n.d.). Outsourcing also gives firms an opportunity to cut down on processes that do not add value to the organizations (Sarder et. al. 2006). Outsourcing also poses challenges of which the most important being issues related to maintenance of quality. It also poses labour related problems as labour unions fear large scale job loss due to outsourcing etc (Craumer, M. 2002). It is a popular belief that outsourcing leads to loss of jobs, which in not true for most of the cases as outsourcing also creates new jobs. The jobs that were lost in the parent firm would be replaced by the jobs in the outsourced vendor (Rajan, n.d.). Outsourcing also presents legal challenges before any organization. Legal issues like dispute settlement, heterogeneous nature of laws in different nations do serve as an issue in outsourcing (Offshore Outsourcing, n.d.). Most of the organizations of the present day world believe outsourcing as a means of entering into a strategic alliance where both the firms are mutually benefitted (Sinha, Subhadra. n.d.). Firms undertaking outsourcing should take into account certain steps. A firm trying to outsource its business process must understand that for proper alignment of business processes the organization culture of the organizations are same. It also needs to take into account the support available from the top management towards the ability to involve a third party in its business process (Juniper, 2008). Government rules and legislatures are yet another area which a firm needs to analyze before making as call on outsourcing its business processes (Sathish, BK. n.d.). The case states about the challenges and opportunities of outsourcing in the banking and health insurance sectors. The most important issue faced by health insurance companies was of confidentiality and privacy of data. Insurance firms were reluctant to share their data with an outsourced agency. They were also in a dilemma as to how much cost benefit they would avail by undertaking outsourcing. As the case reports the health insurance companies were also sceptic about the huge volumes of data that would be transferred to the outsourced agency. These companies however stated that they would seriously consider outsourcing in areas such as handling courier and mails, scanning and processing of paid prescriptions and bills. This was because the problems of data confidentiality were not associated with these business processes. Another area where there was scope in the outsourcing industry health insurance cards. Most of the insurance companies did posses the technical knowledge regarding these cards. Printing of brochures was another area where the health insurance firms felt the need to outsource. The health insurance companies also had a number of service providers. These firms wanted to integrate all such processes. The labour laws prevalent in the country do not allow layoffs of any person employed in the insurance sector. They can relocate them to other departments and wait for them to leave the organization. Opportunities for insurance firms- Outsourcing of data to a third party service provider would mean a quicker installation of various processes. It would also reduce the upfront cost of capital. There would be limited areas of risk even if the work was outsourced in a different nation (Karunanidhi, Prabhakar. n.d.). Outsourcing would also enable the health insurance firms to concentrate only on areas of their core business. They could outsource some non core activities and hence would save manpower as well as money that would otherwise had been devoted to business processes that were not a part of their core functionalities. Firms like MetLife have outsourced all their legacy related business processes to third party vendors (MetLife, 2010). In spite of all the opportunities provided by outsourcing there are certain aspects with outsourcing that can serve as a potential threat. The most important among them would be the confidentiality of data. Hence reliability is an issue for major concern in this area. Secondly, there would be problems with regards to labour laws. Labour laws in certain areas do not permit lay off of employees in the insurance sector. Hence firms would face the problems of having surplus staff. Moreover, employees of an organization may also feel sceptic about outsourcing as they would fear losing their job in the process. Most of the employees would not prefer working as an employee of the outsourced agency since the monetary and other benefits would be much lower in the third party as compared to the parent organization. In addition the cost of savings would be offset by the margins of the outsourced vendor. Outsourcing would also mean dependence on the third party vendor which may sometimes lead to loss of competitive advantage for firms (Allen, et al. 2002). A vendor management team would also be required to manage the outsourcing process. Finally outsourcing would lead to the firm losing much of its control over day to day processes. In order to address this issue firms need to decide on which of the processes they can outsource. Considering the limitations of the health insurance industry where there are major issues concerning data, firms should outsource only such business processes where there are no data related issues. These could be areas like handling couriers, health cards etc. To address the problems of employees firms must try to ensure that the perceived gap in the benefits is reduced. It should convince its employees that would make them feel that switching over to the outsourced vendor would not hamper their career prospects. In order to address the problem of dependence firms can outsource their processes to multiple vendors to as to avoid dependence on a single vendor. Outsourcing also generates opportunities as well as threats to the third party vendor. DPWN gets the opportunity of getting business from healthcare insurance sector which is one of the fastest growing sectors. It also helps them understand the technical knowhow and industry dynamics without investing any substantial amount as an initial investment. DPWN face the problem of sudden closure of agreements with the main client. Since most of the firms are known to have multiple vendors hence firms may cancel their agreements which would lead to a considerable business loss for DPWN. DPWN also faces the problem of employee attrition which is also a major area of concern especially among employees who are relocated from their parent firm to the outsourced agency. The banking industry also faces the problems of data handling with regards to outsourcing. Banks contain highly sensitive data which can lead to disastrous consequences if not handled efficiently. Banks also face the problem of privacy. Banks are perceived to be highly confidential about their data. They are also faced with regulatory issues with regards to data handling (Basel Committee, 2005). Customers would lose faith in banks if they find out that some of the business process which includes sensitive customer data being outsourced to a third party vendor. It has also been observed from various sources that there is a high error rate in processes that are outsourced; this has become one of the major issues with regards to outsourcing of business processes in banks (Schniederjans, Cao. 2006). These problems can be overcome by introducing partial outsourcing especially in its back office processes. They put up multiple levels of authorization such that the final step would need authorization from a bank employee. In this way only entering of data would be outsourced with no real impact on data confidentiality. Banks in this way would save much of their costs and manpower which would have otherwise being lost in non core business activities like data entry. Customer support systems are also an area which offers tremendous scope for outsourcing. Most of the banks have now outsourced their customer care centres to third party vendors. Banks stand to gain a huge benefit from outsourcing their non-core business activities. Multiple levels of authorization would ensure that there is data confidentiality and that the customer confidence in banks in not lost as a result of outsourcing. Banks also save their valuable manpower as they can now only focus on their core business activities. Increased efficiency for a bank means greater staffs which poses a threat to their revenue margins. Outsourcing tends to give them a cheaper option of managing such processes with efficiency. (Barrera, 2004). DPWN also stands to gain as far as outsourcings from banks are concerned. Globalisation has led to many changes in the banking sector whose core focus is now shifting from merely lending and borrowings. Banks also provide a huge business opportunity as there are numerous banks in the market which have a high level of work that needs to be outsourced. DPWN can gain expertise which would help in generating future businesses. Question 2. “I would like to have a one stop solution”, an organisation manager of a leading German bank said concerning the future of document logistics outsourcing. How could DPWN integrate such a one stop solution globally? Outsourcing presents several challenges to banks as well as the third party to which the processes are to be outsourced. In order to develop a one stop solution for outsourcing banking service operations a co-ordination is required from both the vendor as well as the bank. This coordination would mean a reorientation of the organization processes. The third party vendor on its part must try to achieve efficiency in their processes so that quality of service offering is properly maintained (Moreto, n.d.). A banking operation involves a huge number of processes. DPWN needs to frame up a business plan that takes care of all such processes. These processes include customer service, data entry for various day to day banking transactions etc. DPWN must develop a technical knowhow to efficiently handle these processes. A major issue that is faced by banks is regarding privacy. DPWN should handle these processes in such a manner so that the privacy and confidentiality in maintained. Banks also face issues with regards to excessive outsourcing of operations to certain specific vendors. This may lead to creation of Systemic and concentration risk (Suzuki, 2005). Globalization also poses a huge challenge for DPWN. Banks are present across the globe. These are subjected to different kinds of regulations and also deal with a wide variety of people (Suhaimi, et.al 2005). A common problem with DPWN is that it needs to have an understanding of the local language if it wants to efficiently handle customer service operations. To address such concerns DPWN must try to make its presence across all such centres of the bank where local language is prevalent. This would ensure that customer service is handled in the best possible and efficient manner. DPWN must also upgrade its technology levels so as to avoid any technical issues. The firm must have a 24/7 strong workforce which is available throughout the year (Orgeon State University, n.d.). DPWN must provide high levels of training to its staff with regards to banking compliance so that there are no instances of fraudulent transactions. Outsourcing also presents legal challenges before any organization, these problems range from dispute settlement, contract laws and labour laws (Ghimire, n.d.). DPWN must design its business process in such a manner that a legal dispute does not hamper its business. It should understand the legal environment in any country before going into an agreement with a firm from that country. In order to handle back office operations efficiently, DPWN can try to create such a set up, which would contain multiple levels of authorization. The final level of authorization must be left to the bank. This way the bank would save its cost of manpower which would have been spent in non core activities like data entry etc. In order to have an efficient outsourcing process banks must also segregate their business processes so that there is a clear distinction between the work that would be done by the vendor and the task to done by the bank. Banks must have a dedicated cell towards managing the third party vendor. The legal documentation must be properly made. Banks must also frame up a comprehensive policy towards outsourcing their business processes to third party vendors (Radhakrishnan, n.d.). Banks need to device a system where only limited access to its database would be provided to the third party staff. They should design their business processes in such a manner that every final step would be need to be authorized by the bank. This would ensure proper compliance and prevent any kind of malpractice. DPWN on its part must try to hire experience individuals who have their experience in areas of banking. In order to lure such candidates DPWN must offer attractive remuneration packages so that they feel tempted to join them as an organization. DPWN needs to create such an image for itself amongst its potential staff that they do not feel as if they would hamper their careers by joining DPWN. It must also provide a comprehensive training to all its employees with regards to compliance. To summarize, a one stop solution for outsourcing requires co-ordination and implementation form both the third party vendor as well as the concerned bank. This would leads to a win-win situation for both the organizations without bringing about any malpractice or fraudulence in the system. Question 3. State the advantages and possible disadvantages which could arise for DPWN as a “one-stop solution” provider for document logistics. Compare them to the clients’ advantages and disadvantages of outsourcing to a full-service provider? One of the major issues in outsourcing is that firms look out for vendors that provide one stop solution. This is because of the fact that they can outsource their business processes to a single vendor. It would reduce the problems of integration which tends to magnify when there is multiple numbers of outsourced agencies. DPWN could stand to gain many points if it emerges as a one stop solution vendor. Firstly, firms would not have to find different vendors for different processes. DPWN would provide them with a one stop solution which meets all their needs. This would provide it with a strategic competitive advantage with respect to its competitors. Moreover, it would also lead to economies of scale for DPWN when it would handle multiple firms. The technical knowhow and the infrastructure needed to support one firm could be used by DPWN to handle outsourcing of some other bank as well. Firms to which business processes are outsourced also face certain issues. In the context of the given case, DPWN would face a number of issues especially if it tries to provide a one stop solution provider. The firm could face problems in hiring experienced people as most of the people do not view jobs in the outsourcing industry to be lucrative as compared to other jobs. It would also be difficult for DPWN to handle multiple areas of banking operation which are quite complicated and sensitive in nature. Moreover most of the banks have operations in multiple nations which have different banking laws. DPWN would face an uphill task in understanding and implementing outsourcing in all the countries that the bank operates. Clients would also face many advantages and disadvantages by outsourcing their processes to a single vendor. Outsourcing their business processes to a single vendor would mean that firms now would not have to look for different types of vendor for different processes. Moreover integration would be easier while co-ordinating with a single firm rather than different firms. Firms having a single vendor would only have to manage only with a single vendor rather than negotiating and managing multiple vendors. Outsourcing to a single vendor also has its share of disadvantages as well. A single vendor catering to all its business process would mean too much dependence on a single vendor. It has been observed in the industry that in such cases the bargaining power of the vendor increases to high levels which may prove to be disadvantageous to the firm. Firms would face tremendous problems if somehow the vendor fails to deliver its services as an outsourced agency. Thirdly, firms would also face the problems of data privacy. A single outsourced agency would mean that all the data would be available to a particular vendor which may prove to be a threat for the firm. Outsourcing like any other process has its share of advantages and disadvantages. Outsourcing is a complicated process which involves considerable opportunities and threats to both the parties involved in the process. In order to reap out maximum advantage both the firm as well as the outsourced agency must co-ordinate at all levels so that both the organizations are able to achieve their business goals. Question 4 Describe how and why banks are able to outsource more readily, despite the persistent issue of banking confidentiality, while health insurance companies still struggle with data security? The case referred to in this question clearly indicates that banks find it comparatively compatible to outsource their business processes as compared to health insurance companies. The reason for this can be attributed to the fact that banks have multiple levels of authorization. This helps them to keep a check on every business process. Banks have the final level of authorization with themselves which leaves the outsourced agency with limited or no powers. In this way banks save their precious manpower from non-core activities like data entry, etc which could be now diverted to their core business areas. Health insurance companies do not have such an option. Moreover there are a large number of processes in banks which are a part of its non-core activities. This is absent in case of health insurance firms. Most of the activities in a health insurance firm are a part of its core business activities which cannot be outsourced to a third party vendor. Insurance firms are known to be highly heterogeneous in nature. This renders generalization of optimum measures for various document logistics very difficult. Third party vendors also face the problem of lack of technical knowhow to manage key business processes of insurance companies like actuarial etc. Insurance companies also face greater problem with regards to labour laws as compared to banks. Insurance companies were not allowed to lay off workers. Since outsourcing would lead to reduction in jobs hence this proved to be a major hindrance for insurance companies with regards to outsourcing. Banks on the other hand does not face these kinds of problems. Lastly, highly strict government policies for insurance companies regarding maintaining insurance data prevent them from outsourcing their business processes to third party vendors. Insurance companies face the problems of confidence loss as they have access to highly important and sensitive data. Insurance companies are unwilling to outsource their business process of handling claims as it is one of their most sensitive business functions (Hood, Stain, 2003). In order to address such problems DPWN must adopt a process which tends to provide an end to end support system, wherein DPWN would provide the firms with providing a host of solution rather than point to point solutions (Accenture, n.d.). All these facts imply that Business Process Outsourcing is much more challenging in the health insurance sector as compared to the banking industry. References Accenture, 2010. Operational Excellence. [Pdf]. 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