Meijer Sends 81 Jobs to India/50 to Boston
By George Anderson
Meijer has decided to outsource 131 jobs, with 81 information technology positions going to a firm in India and 50 call center jobs going to a contractor in Boston.
The company said the decision to outsource the jobs was necessary to keep it competitive.
According to a report in The Grand Rapids Press, the 81 IT jobs eliminated included 55 contract workers and 26 employees. The 26 Meijer employees will be offered jobs in the company and will receive a severance package if they choose to seek other opportunities.
Meijer spokesperson Judith Clark said the company is outsourcing the IT work to Infosys Technologies Ltd. out of Bangalore, India. The company counts Food Lion and Hannaford Bros. among its U.S. clients.
“This work will be offshore, but Infosys will develop and support the technology needs for the stores and the company,” she said.
The retailer’s call center jobs are going to National Telecommuting Institute Inc. (NTI), which employs people with disabilities to work part-time at home. The company includes the Home Shopping Network, Staples and The GAP as clients.
“A lot of companies are doing similar things, and this is a little bit of a cultural shift for the Meijer family,” said Ms Clark. “But this will be good for our company and bring solid cost savings to Meijer and keeps us competitive in our pricing.”
Moderator’s Comment: Is there a set of Best Practices that retailers considering outsourcing should follow to make sure the transition and eventual shift
go as seamlessly as possible? Are there other functions outside of IT and call centers that retailers should consider outsourcing if they are looking to reduce costs or, in other
ways, improve performance? –
George Anderson – Moderator
I hear America singing
Varied cost carols do I hear
Outsourcing is ever ringing
To allay competitive fear.
We, three hundred million people,
Can’t figure out on our shores
How to build efficient steeples
That will keep vital jobs indoors.
And now outbound-plagued Michigan,
Which once ruled the worldly roost,
Despite its chauvinistic elan,
Looks to India for a boost.
In general, the questions to ask are “is this capability mission critical to our corporate strategy?” and “is this capability linked to our competitive differentiation in the marketplace?” If either answer is yes, in the long run, the organization should own the capability rather than rent it. Understand, in reviewing similar situations for your organization, that if you can outsource this cost and performance effectively, so can someone else. Which means it becomes a common element to doing business. No cost advantage will result, no performance advantage will result, and no differentiation will be created.
On the surface of it, I think these are probably very good decisions by Meijer. Infosys is extremely familiar with the new merchandising system integrated at Meijer (and may, I think, have been a large part of the contract labor that went into the actual integration). Retailers in general do a bad job of managing and supporting their own IT infrastructure, and generally end up with either insufficient resources to support the business or a bloated cost sink which supports its own agenda. Call centers in general are cost effective ways of supplying a segment of the capability lumped into “customer service.” The key aspects to customer service which could provide Meijer an advantage are probably not contained within the call center.
Even if the capability is deemed mission critical, in the short run, it is often better to outsource as part of a long term journey plan. Developing the infrastructure, processes and people to be extraordinary at a capability takes time and resources. If in the meantime you can “rent” a high degree of competency through outsourcing, go for it!
Personally, I do not like dealing with call centers in India. The workers mainly are reading off of cue cards which makes communication difficult.
All of these proposed changes might cut costs but I think it will contribute to the dummying down of Meijer. Recently, I visited several Meijer stores. They are not the same Meijer stores of yesteryears. Skilled employees have been replaced with elderly or immigrant part-timers. There is limited meat cutting in the stores. The quality of cashiers has gotten so bad that Meijer has been forced to install self-checkout systems so customers will not have to interact with an employee.
Store conditions have continued to deteriorate as many Meijer stores are now 20 to 40 years old. Labor has been reduced along with customer service. Naturally, employee morale had fallen along with Meijer’s former image of quality and service. Meijer seems to becoming more and more like Wal-Mart, except their prices are about 10% higher.
Yes, there are definitely best practices in call center outsourcing, as well as adhering to your core competencies as a retailer. Don, Bill, and others have pointed many of these out, as well as the common dislike of many folks who do not like speaking with a customer service person who may not speak or understand English with an American accent. These are certainly considerations which are taken into account, as are the cost savings. For most call centers, their work involves early morning and late night hours, as well as level 1 and level 2 calls, with the upper level calls coming back to the US. Meijer recognizes that they are competing against large retailers with efficiencies and deep pockets to match. To best compete, they need to examine every portion of their organization and choose the best mix of cost and services which fulfill their customer’s needs. Common best practices including System Development Life Cycle and other transitionary approaches give Meijer ways to examine their best practices and how they are being delivered to the customer (and for what price). Meijer, like all corporations must continually be examining their costs and this is but one facet which can benefit from outsourcing. Outsourcing needs to be considered anytime you can take advantage of another organizations core competencies which deliver superior services for a lower price.
I’ve operated systems departments in the U.S.A. and I’ve outsourced systems work to U.S.A. as well as foreign suppliers. Any work location and method (in-house, outsourced domestically, outsourced to other countries, as well as a combination of 2 or 3) can be excellent or a big mistake. Many are attracted by the alleged savings, but they can also experience much faster responsiveness and skill. Even if you save nothing, the speed/skill payoff can be wonderful. No country has the monopoly on brains. Furthermore, there are terrible call center operators in the U.S.A., not just in India. No one would expect a retailer to only source merchandise made in the U.S.A. Why would anyone expect a retailer to source its staff only in the U.S.A.? Successful companies can use outsourcing, not just unsuccessful ones. It’s not a sign of failure, it’s a sign of agility.
In general, I am not a big fan of outsourcing. When it is done in order to keep costs down, it can be a fallacy because the resulting service is of poor quality and fulfills the old “you pays your money and takes your chances” ideology. Outsourcers rarely have any great incentive to do the job properly; money doesn’t really do it for them especially as the people on the ground get so very little of it. I am particularly agin outsourcing to Asia or most of the other countries used; call centre staff have great difficulty dealing with off-script idiomatic language and have absolutely no leeway in how they can respond. I am currently fighting with my telephone company which has outsourced staff in India who insisted on telling me the problem would “definitely maybe” be fixed soon and ended each futile conversation with the line, “is there anything else I can do for you today?” In exchange for my verbal abuse, shouting, frustration etc. etc. they are almost certainly being paid a pittance but sadly I do not think they deserve any more. The fault is absolutely with their employer who has trained them insufficiently, ineptly and insensitively.
Outsourcing is not always bad. Some companies have realized they simply do not have the ability to perform select functions. Others have limited resources and should focus them on their core competency. Every outsourcing failure (more than half) that I have observed could have been prevented, had the relationship and expectation been better defined. The key is having a reasonable set of key performance indicators.
This move by Meijer — following in the footsteps of Hannaford and Food Lion — is just the modest tip of a much larger iceberg that is floating just below the surface of our overall economy.
It’s about work shifting freely to lower costs and frequently superior performing resources.
>Infosys has made its mark by investing in capabilities that make outsourcing of IT development easy for U.S. companies. The best practice here would be to select one of the leading providers of this capability who has already smoothed out the wrinkles of handling this type of global exchange of work. It’s good news for some and probably not good news for others, but these folks are ready to do this work; we’re probably the ones who need to change our mindsets.
>The shifting of call center work to the Boston company using employees with disabilities, some of whom may be working from their homes or informal offices, is an example of the same shift of work, this time taking place by good fortune within the U.S. Jet Blue pioneered this concept by outsourcing their reservation work to home-based employees located throughout the Salt Lake City area, and the results have been a win/win.
The best practice coming from the experts like Thomas Friedman in the book, “The World is Flat,” focuses on each individual now needing to define where and how they uniquely add value versus the old form of competition where it was primarily between companies and/or countries. We all need to ponder this one.
The whole IT outsourcing rage really has me befuddled. There is no other department in a retail organization where the actions of one individual can have a greater impact on the success of a retailer. In a high volume business like retail, an application design that enables better decision making or reduces labor requirements can impact thousands of employees. This huge “leverage” of the IT employee works in two ways to counter the economics of outsourcing. First, the “units of labor vs. cost of labor factor” means that the unit cost of making an application change across thousands of employees is relatively small. Secondly, it is more difficult to design and write a “user friendly” application. Just “addressing the problem” does not provide the best answer for an organization. It may take more effort on the part of IT, but a truly “great” solution only comes from a total understanding of the organization. So if it really doesn’t make sense economically, why are people doing it? I blame the “reward system.” Maybe a way to change this is not to outsource IT, but to bring it back in-house and tie the department’s compensation to things like inventory turns, sales per labor hour, and utility usage.
Having said all this, once the decision has been made to go outside the biggest concern is going to be communication. Requirements definitions, service level agreements, and performance evaluation criteria have to be determined up front. The impact of a “bad release to the stores” must be anticipated and the necessary controls put in place to recover. The final quality assurance testing should must be well designed and executed. There are legal considerations for contract negotiations and privacy of customer data if it is transferred out of the country. But when it is all said in done, a company who has not “gotten everything they expect” from their in-house IT department should not expect to do any better with their outsourcer. If they don’t have adequate controls on in-house IT they certainly will not have them on an independent contractor.
Not sure what Scanner is alluding to, but Meijer has seasoned retail executives. The key to any retailer’s success is creative minds. Meijer is more than just a grocery chain so they more than just grocery experience. They generate billions of revenue from GM and apparel.
Also, why is Wal-Mart opening 1500 stores impressive? That is what they do- they open stores. That doesn’t mean others need to follow that model? Most of those new stores are in areas that I wouldn’t bring my kids or leave my car unattended. Again — the Wal-Mart model. OK for them, not others.
My take is that outsourcing results from poor upper level management.
Low or no expectations as to what the IT Department is supposed to be contributing is one area. First, management is usually nearly illiterate when it comes to IT functions. Second, they are unfamiliar with the terms, or why something can’t be completed before lunch.
Outsourcing can be the result of spending a ton on technology then not leveraging it to make more top sales and more bottom line profits. You only need to look at the Loyalty Card programs, thousands spent with little or no increase in loyalty.
You have to wonder if the management had decided that loyalty begins in the store with the people on the ground…maybe the money would have been better spent on re-models or employee training or morale-building; instead of on tons of data on customer transactions and patterns, that sits gathering dust and static electricity somewhere in the ether.
This appears to be only a small view into the problems for Meijer. I think the comments by Ms. Clark are very revealing – “this will be a bit of a cultural shift for the Meijer family.” From my view, this tells an entire story about the position that the company finds itself in today. The lack of leadership, the quick change of CEO, the naming of a non-retail background new CEO, and changes from its winning strategy, are just to name a few issues.
Meijer has real problems floating below the surface – the biggest is lack of leadership, focus, and direction. Don’t misunderstand though — Meijer remains a strong company and has unmatched per store sales. They do, however, show signs of floundering which, in this environment, things could change for them in the blink of an eye. Simple proof is the announcement this week by Wal-Mart to add 1,500 more stores in just a few years. That will be to Meijer’s dozen or so. They can’t be Wal-Mart, nor beat them. They created and had a winning operation that differentiated themselves from anyone. Lack of focus has allowed them to slip into a mode of a follower rather than an innovator focused on their own customer – one with distinct characteristics and expectations from that of a Wal-Mart customer. Of late, they have shown weakness in the appearance that they believe they are one in the same. Possibly they should study Target a bit to regain their focus.
Meijer, for the most part, has made good strategic business decisions as they fight for market share versus Wal-Mart and other national and regional grocers.
Over the past 2 years they have become more creative from an advertising standpoint with fresh and targeted print ads and from a direct marketing standpoint they have more effectively utilized multiple channels of communication from direct mail, email and most recently new technologies like voice mail. Their next step should be how to take advantage of mobile, wireless and GPS and this will help stave off low-tech Wal-Mart customers.
Say what you want about Meier, they have held their own through good and bad and always survive at the end of the day.
Outsourcing seems to always be negative or positive, with no gray area between. I seem to fall in the middle, easily swayed depending on how I look at the situation. From a business analysis point of view, it only makes sense to outsource to a reputable company full of knowledgeable IT specialists. However, as a consumer that gets frustrated with automated phone systems with voice prompts and the likes, I find it frustrating to reach someone that is reading from a cue card and does not speak clear English. Perhaps we as American consumers are trying to have our cake and eat it too. We want low prices when it comes to our money, low operating costs when it comes to our companies, and high salaries. Well, some of us are getting our high salaries, but only at the cost of outsourcing many positions to other countries. To keep with the American trend of low prices for quality items, we have to outsource what were previously American jobs to other countries.
Just a quick follow up – 1,500 stores is very impressive, no matter what you think of the retailer doing the opening and regardless of the location. What that means is the competitive nature of the marketplace will continue to become even more intense. That also means doing what others have done, those that are even less successful, may not be the model to follow.
In visiting some of Meijer’s most recent openings, the shopper will quickly take notice of a very Wal-Mart Supercenter-like environment. Doing the same thing as others, especially Wal-Mart, isn’t the answer either. Meijer has also made substantial changes in their model, leaving the consumer with less service. This change also was to make them ‘more competitive’. In the end, it took away what made them competitive and attractive to the consumer.
Don’t get me wrong, Meijer is a strong and surviving company, however, their changes of late indicate a shift from what got them to their current position. Evolution and innovation are one thing; emulation is another.
And, yes, Meijer is far more than a grocer, however, so are Wal-Mart and many of the other emerging leaders. A serious and objective look would show real concern about their current direction or lack of one.