Analyzing consolidated vs. decentralized customer service

Will the centralization of call centers really cut costs? Read Donna Fluss's advice here.

I am currently a regional manager for a group of call centers in different countries in Asia Pacific. Recently, I was told by my vice president that the top management is looking at centralizing all these call centers into one in Singapore, because they think it will be more cost effective and customer-centric. I don't really understand the rationale behind this. Will the centralization of all our call centers really cut costs? Wouldn't the toll-free, long-distance calls from other countries be more costly? How would this move benefit the organization in the long run?
I just finished a consulting engagement that addressed a similar issue for a domestic client with many regional field offices. They were looking for an analytic framework to quantify and evaluate the tradeoffs and benefits of consolidated vs. decentralized servicing. My client's call center experts correctly believed that it would be cost effective to consolidate their servicing activities into a single location. (The assumption was accurate, due to the relatively large number of agents and because salary rates in the new location were either the same or less than at the decentralized sites.)

The reason I was involved was because there were also sales people on the analysis team who believed that they...

would lose relationships and possibly business if the contact center operations were centralized into one location. It turns out that they were also right. After measuring the hard dollars of projected cost savings against the loss of local service, the company decided to proceed with the consolidation initiative; the cost savings were substantial, while the customer impact was projected to be limited. The answer could differ for your organization, depending on your cost factors and customer base. The only way to know is to run the numbers.

To analyze the situation and determine the savings, you must first identify all costs associated with servicing. Then, for each call center, identify the volume of transactions (calls, emails, chat session, faxes and any other communications handled by any of the centers) as well as the average talk time, average work/wrap time, average handle time, abandonment rates and service levels, broken down for each transaction type; this will enable you to estimate resource requirements for each transaction type. It's also important to study all call categories to ensure that you know what skill sets will be necessary for new hires at the consolidated center. This analysis will give you the information to accurately determine optimal staffing levels and organizational structure for the new site. Comparing the costs developed in the new site analysis described above to the status quo will show you whether or not consolidating is cost effective.

The cost analysis is relatively easy, albeit time consuming. The numbers may be hard to locate, but they do exist. Estimating the impact of the move on regional customers is challenging, but essential. By comparing the numbers for your current setup with the proposed single-site plan, you will be able to measure and assess the impact of centralization on your customer base and your bottom line.

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