Commentary & Analysis
Organizations Sharpen Their Competitive Edge Through Consolidated Output Infrastructures
By Kemal Carr,
By WhatTheyThink Staff
Published: April 7, 2005
By Kemal Carr, Madison Advisors Organizations now realize that they can cut significant cost by consolidating their output organizations. April 7, 2005 -- Numerous organizations have adopted consolidation as an approach to achieve business goals spanning regulatory compliance, increased productivity, and reduced operating costs to growing business through improved customer communications. While consolidation is a complex and challenging undertaking, several organizations have begun reaping the benefits of their efforts in these areas. As a result of acquisitions, mergers, and outdated output philosophies, some of the nation’s largest banks, financial institutions, credit card, and insurance providers have disparate and geographically distributed output operations. Their multiple, dispersed output operations inhibit the streamlined, highly efficient, and forward-looking production environments that are paramount to high-quality, competitive customer communications. Such output production environments constitute many challenges including: Lack of Coordination: With numerous production facilities geographically distributed across the country, production staff doesn’t act as a single, unified provider to the parent organization. Missed Opportunities: Lines of Business outsource portions of their mission-critical work because they don’t believe their internal production operations are a high-end services provider capable of meeting their needs. Over-scoped Resources: Facilities have redundant capabilities and underutilized capacity. Excessive Cost: The overall output function is far more costly than it needs to be. In many organizations, each production facility believes that its operations and the applications it supports are mission-critical and should not be changed in any way. Faced with challenges like these, organizations now realize that they can cut significant cost by consolidating their output organizations. In addition they can use the consolidation initiative to re-assess the organization’s overall needs, and ensure that the new output organization is a world-class provider. With a high-end unified output organization, the parent company has rich opportunities for growing revenue through better customer communications. They are also positioned to bring work in house, eliminating outsourcing fees and investing the money back into the organization. Developing an enterprise output consolidation strategy is a tremendous undertaking. Banks and insurance companies seeking to develop enterprise output strategies and consolidate output operations must take several critical steps to achieve success: A clear objective behind the output strategy. For example, many banks are consolidating their output organizations to meet for Check 21 legislation and the elimination of physical check return. Other organizations recognize the potential savings behind consolidation, while others feel they can deliver a better product to their customers with streamlined operations. The overall approach and outcome will be different depending on the objectives. In short, there is no one-size-fits-all solution to consolidation. A thorough understanding of operations and application requirements (current and future). Organizations need to conduct an enterprise-wide assessment of their existing technologies (hardware and software) to determine overall capabilities and capacity levels. They also need to know the breadth of their current and future application requirements across all lines of business. Without this knowledge, it’s impossible to develop an effective consolidation strategy or understand how it will impact the organization as a whole. An unbiased perspective of areas of best practices, inefficiency, and redundancy. In many organizations, each production facility believes that its operations and the applications it supports are mission-critical and should not be changed in any way. It takes shrewd and objective analysis to determine exactly what is needed to support the entire organization (and what is not). Recognize which go-forward strategies and practices will have the greatest impact on the organization as a whole . Of course this varies from one organization to another. Consolidation for one organization may mean transitioning from 20 to 5 production facilities, each with specialized capabilities. Another organization may see the greatest benefit by moving from 10 to 2 facilities, each with identical capabilities. Assess the business impact of consolidated output operations. It’s not a good idea to roll out a consolidation strategy without first assessing the business impact. It’s critical to compare the cost of the consolidation to the short- and long-term projected savings, and alert upper management of the timeframes in which they will begin to recognize the benefits. The business impact also includes the impact on the organization’s ability to meet service level agreements and customer service standards. Finally, the impact on the organizational culture is critical, i.e. the objectives of the consolidated organization should be in line with those of the overall organization or it will never gain the support it needs to fulfill its vision. The objectives of the consolidated organization should be in line with those of the overall organization or it will never gain the support it needs to fulfill its vision. Well Fargo bank is and example of one institution that has worked through these challenges. “We have begun to build an internal production operation that functions more like a business than a cost center to stay ahead of the competitions and better service our customers,” relates John Taylor, a vice president with Wells Fargo. “Madison Advisors helped us identify the type of production organization that would best enable us to meet our enterprise goals for customer communications.” Building a consolidated organization is a complex process, and it may take upwards of a full year before the benefits become visible. But the pay off is tremendous. Consolidation efforts position companies to be highly competitive with their customer communications. In the banking, financial services, credit card and insurance industries, this is a key area of differentiation. Organizations capitalizing on it will create competitive separation in the next few years.