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Finance & Accounting
Pages 4 (1004 words)
Outsourcing Customer Service Operations Introduction Outsourcing involves contracting out the business processes or operations carried out internally within the business to the local or foreign organizations, and it is popularly known as BPO or Business Process Outsourcing.
The cash flow from the operations proposed to be outsourced is analyzed to work out the net present value for evaluating the outsourcing decision of the company under various scenarios. Hypothesis Cost savings is an important determinant in the risk reward analysis of an outsourcing decision taken by a company. However, there are also other considerations involved such as tax implications, stringent statutory regulations and the conditions in the labor market. Labor productivity Since the decision proposed to be taken is mainly on the basis outsourcing labor involved in the operations, productivity of the labor need to be analyzed for comparison. Though currently the labor productivity in India is less compared to US, the company is hopeful of increase in productivity over a period of time due to training and experience as reflected in Scenario 2. Labor productivity Number of service calls per day : 600 Total number of calls during the year : 600 x 365 = 219000 Number of customers served in US/Hour : 10 Number of customers served in India/Hour : 6 Number of hours in US required/year : 219000 / 10 = 21900 Number of hours in India required/year : 219000 / 6 = 36500 Labor Cost The company aims at reducing the cost of providing service to the customers for maximizing its profits. ...
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