Business Process
“Chemito Free” is the manufacturing company that produces the cleaning products free of toxic chemicals and insights. The mission of the company is to protect the environment from the toxic substances and facilitate the society with environmentally-friendly products. The products include household cleaners, vehicle cleaners, hand washes, sanitizers, baby cleaners, fresheners, bathroom cleaners and controllers. The company is going to offer its products in the local as well as in the international market. Being a manufacturing business, it is very required and important for the company to maintain its business processes to make its products outreach to the customers successfully. The major business processes of the company include the following:
Manufacturing
Accounting
Marketing
Research and development
Distribution and logistics
In-house and outsourced processes
As the company is aimed to offer chemical free, non toxic cleaning product, therefore, the research and development will also be maintained in-house.
The other three major business processes, the company decided not to control within the company. For Marketing, Accounting and Distribution & Logistics, the company is going to outsource the services and activities. Marketing is one of the major functions for any business to make the products and services outreach to the target customers. All these three business processes require efficient dealers and also the high cost to maintain within the company.
For instance, to maintain logistics in-house, the company will be required to have own transports and vehicles that will increase the business cost. Similarly, for marketing activities such as advertising and promotions, the company will be required to have hardware and software systems as well as efficient professionals to control the systems and design effective ads and promotional campaigns.
In accounting process, the company will mainly outsource the account payables and receivable services, that will help in maintain and improving the transactions of the company as it is very important for the business on such a large scale to know that from where the money comes and goes (Mullich, 2013). Outsourcing all these three services will help the company to improve business process and control the cost that will directly increase the efficiency of the organization (McGovern & Quelch, 2005).
Level of Services from the vendors
The company on deciding the vendors will develop the level of service agreement to maintain the quality of service as per required and proposed. It is very important to decide the performance target to explain and define the objectives and aims of the services to the vendors.
For accounting business process, the company requires the services for account payables and account receivables. The aim of the company is to maintain the cash of the company that include the bills and payments from the buyers, customer database, invoices, reporting, reconciliation and collections. The vendors must report the company for where the cash goes and from where the cash comes.
For distribution and logistics, the company requires that the vendors must ensure the on time delivery of the products to the required location. The major service level includes collecting the required quantity of the product, reporting about where the goods are and reducing the cost at maximum levels. In the logistics, the company requires continues improvements in terms of delivery time, quantity to collect and savings of cost.
For marketing activities, the company decides the level of service that includes the business awareness, customer engagement, customer loyalty and increase in the sales of the company. The major services in marketing processes include advertising and online promotions. Therefore, the vendors must ensure that the awareness of the company and its products is increasing, the customers are purchasing the products, the loyalty of the customers is increasing and the company is successfully generating the sales.
Type of Contract
The contracts for outsourcing the services for business process can be developed based on different types of contracts. These types include fixed cost contract, cost plus contract, reimbursable contracts etc. The company will develop different contract agreements with different vendors of three services.
First, the contract with accounting services will be developed based on fixed cost contract. The reason for developing fixed price contract is that either the cost will increase or not; the contractors will be agreed on the prices, decided in the contract. No matter, how much time, the contractors will spend on completing the work and what resources, they will use, the prices and amount for the service will remain same. The reason for fixed price contract is essential for accounting as the services will be received on continuous basis that might make the company to face the increase in the prices, labor cost, salaries etc. Therefore, developing fixed price contract, the company will reduce the risks of increases in the budget for the services.
For the distribution and logistics, the company will develop the cost-plus contract to control the cost as much as possible. The third party logistics providers make all efforts to develop flexibility in the resources used therefore, the fixed price contract can make the company to lose the opportunity. Therefore, for distribution and logistics, the cost-plus contract will be developed for flexible prices and cost. Further, as the logistics and distribution is the major and the continuous service, it requires the quality work that can be more efficiently developed in the cost-plus contracts.
The marketing activities will be outsourced based on the fixed price contract. The fixed price contract will help in maintaining the stability in the business process. The marketing activities such as advertising, online promotions etc, the services will be paid based on the fixed price contract, so that the company will not face any additional cost in case of high expenses and resources used to complete the service.
Evaluation Criteria
There are various vendors and third party service providers are available in the market. Therefore, for the selection of the vendors, the company is setup some criteria to evaluate the best vendors for the business processes of the company.
The selection criteria will be different for the vendors for three business processes. The reasons for different criteria are that each unit requires different level of service and also, the contract process is also different. Further, the nature of the services in the three units is also different. Hence, the selection criteria are different.
Selection criteria for accounting services include the following:
The years of the business in the market: it is very important to analyze the time period, for when the accounting service provider company is existed in the market because for the accounting services, the trust, accountability and reliability are very important.
Prices: as the contract will be developed based on fixed price, the vendors will be selected based on the low prices for the services as once the service will be contracted, the company has to pay the proposed prices, either the prices in the market will be low.
Selection criteria for distribution and logistics services are as follows:
Ability of the vendors to supply the service constantly: the company’s operations will mainly based on the efficient distribution and logistics services to maintain the supply and demand in the market. Therefore, the major criteria for selecting the vendors will be their ability to facilitate the company with constant and continuous services.
Flexibility in orders: On the increasing demand of the products of the company, the company might be required to distribute the large quantity in the market; therefore, the vendors must be able to show flexibility in the orders for the services.
Selection criteria for marketing services are as follows:
Professionalism of the workers: The marketing service providers must facilitate the company will efficient and professional employees so that the company will be ensured of effective promotion and advertising to attract the target market to buy the products of the company.
Prices: again, the contract will be based on fixed prices; therefore, the negotiable, discounted and low prices will be preferable while selecting the marketing service vendors.
The individual vendors will be selected for the services of each business processes. The number of vendors will be different for each business unit based on the nature of the service.
For accounting services, the company will select only one vendor for both payables and receivable services. As, it is already mentioned above that reliability and trust are very important for the accounting process, therefore, selecting one most trusty and reliable vendor for all accounting services will be more suitable.
For logistics and distribution, the company will select two vendors i.e. one for the distribution within the country and second for the distribution in the international market. Selecting more distributors and logistics service providers, the company can efficiently increase its ability to make more products available in the market. The larger the distribution, the more the products will be outreached.
For marketing activities also, the company will hire two vendors. These two vendors will include the online promotions service providers and advertising service providers. The traditional media advertising is completely different from online marketing and promotion. Therefore, different vendors will be selected based on their expertise.
Timeline
The table below shows the timeline for the major activities required for each contract process:
For all three contract processes, the company will use the same timeframe for the bidding activities. For instance, the company will find the vendors for all services include accounting, marketing and distribution within 2 months and then one month will be required to select the best vendors in all three categories. The complete process can be understood from the diagram below:
References
McGovern, G. & Quelch, J. (2005). Outsourcing Marketing. Retrieved April 1, 2016, from https://hbr.org/2005/03/outsourcing-marketing
Mullich, J. (2013). The Benefits Of Outsourcing Finance And Accounting. Retrieved April 1, 2016, from http://www.forbes.com/sites/xerox/2013/07/12/the-benefits-of-outsourcing-finance-and-accounting/#1af55f153897
