Picture the job of a call center director who must provide staff to handle inbound sales calls in response to sales and marketing initiatives. Picture the job of an insurance claims operations director who also must provide staff to cleanse and adjudicate claims. If they don’t have a good estimate of inbound transaction volumes, how are they to handle the calls and transactions in a timely, efficient manner? A solid operations direction knows that transaction forecasts are the key to meeting SLAs.

Your vendors are no different. In fact, this is the number one complaint I’ve heard in the years of outsourcing vendor management. The dirty truth is that it’s probably the number one issue plaguing your operations today, and the vendors aren’t going to put their financial necks on the line if you can’t forecast well. It’s also the key to successfully managed operations, which is what we all want from our outsourcing vendors. So, it pays off to do this one function exceptionally well.

Each month, on a particular day, vendor managers should provide a rolling 6-12 month forecast in excruciating low-level detail. If you’re managing a call center, 30 minute increments for every hour of every day of every week of every month is the bare minimum. If you’re managing back office function that works in a batch-processing environment, daily forecasts are sufficient. Anything less isn’t good enough.

Typically the 2nd month of your forecast is what vendors like to call a “locked forecast”, meaning that variation from the forecast in either direction by more than a specifically defined amount in the contract either provides the vendor a minimum monthly billing amount (because the vendor has fixed costs in a variable/price per transaction model) or they will not have adequate time to provide sufficient quantities of trained staff in time for volume peaks. It therefore pays to be accurate, and the best vendor managers use quantitative methodologies based on historical volumes, sales forecasts, and internal systems/communications forecasts to be right on the money.

Forecasting requires absolute discipline, and you should measure the success of your vendor managers in this area as follows: on-time delivery of monthly forecasts and accuracy of monthly forecasts’ locked volumes (as compared to actual transaction volumes). Producing great results in these areas will allow the vendors to achieve their SLAs while meeting your customers’ needs. This area is so important, that vendor managers’ annual reviews should be in part based on their ability to achieve or exceed these metrics and it should serve as a guide for executives as to their ability to successfully manage outsourcing relationships.

Do you use specific forecasting processes you’d like to share? Do you have questions for the community on effective forecasting? Post a comment and start a conversation!