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.

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.

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.

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… Read more »

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.

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.

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… Read more »

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… Read more »

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.

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… Read more »

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.

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… Read more »

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.

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… Read more »

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… Read more »