June 2, 2016
In the last installment of the BPO series I talked a little bit about why an organization would want to consider offshoring one or more of their processes. It is not just about reducing payroll expense. We mentioned that retail accounting is ‘tricky’ with all of the deals and unique accounting practices. We also talked about the importance of simplifying the front-end processes to achieve accuracy and efficiency in capturing and reporting the data.
Today I would like to discuss a case study of a current customer of ours, one of the largest auto part retailers in the country. For purposes of brevity I am only going to go over two of more than ten processes that were eventually handed off.
In 2007, the retailer was given a corporate directive to cut costs. Due to the business nature of this retailer, accounting practices and transaction levels were a major effort. After looking at all areas of the company, the focus on cost savings in the accounting area was determined to be the right first move. Looking at off-shore processing, even if just from a payroll savings perspective, was a fairly easy calculation. Their cash application involved processing over 165,000 payment each month! This looked like the perfect place to begin but why? The idea was that it was the most difficult and if it could be successfully offshored then the rest would follow easily.
In 2008, they met with 4 different organizations, including ours, and eventually decided that we would be a good partner. An easy transition would have been to simply have our people log directly into their system in order to complete the work however, we didn’t stop there. No, with more due diligence, we were able to see a way to simplify the processes thus avoiding the need for higher skill sets and to expedite both the time and accuracy of data entry. Another very important piece was to how to parse the finished work directly into their ERP. Now, not only was the data more accurate and timely, it could now be passed into ERP sooner. So, the prototype was built and testing began (using mock scenarios) before finally going live in 2009. The auto parts team even visited our India campus for the final three weeks before implementation.
Once the cash app process was a success, vendor statement reconciliation and conversion to 821 EDI was next. Many vendors, especially smaller and international vendors do not have EDI capability. In this process, we were able to design a flow that allowed vendors to send statements in three ways: EDI, as well as, mail, email or fax. If not originated in EDI, then we had the capability to convert and upload directly into the system. Again, having a tremendous impact on work-flow, accuracy, timeliness not to mention payroll expense.
So, what was the result of the BPO initiative?
Our customer saw around a 65% cost savings, transaction processing turnaround time decreased by 2-3 days (all while maintaining a 99.9% accuracy rate), and we essentially turned their AP and AR departments into a 24-hour around the clock operation. Not too bad, if you ask me! This is what BPO is, and in the next installment I will show how you too can take your organizational processes and reduce the costs associated with them.