Managing Service Quality in Multiple Outsourcing

Service operations, such as call centers and various business processes, are often outsourced by e-commerce companies and others to offshore locations for many operational reasons, including cost savings. The trade-off these companies face is lack of control over the service quality, which has affected customer satisfaction in many cases. When a customer's call is routed to a third-party call center rather than handled by the firm itself, the perception of quality loss could be a source of customer dissatisfaction. The problem intensifies when multiple call centers are involved. In our analytical model, the firm uses a contract for the allocation of quantity to motivate the two suppliers to improve their quality. Our results show that such a contract can induce an improvement in service quality in the market. In this way, the outsourcing firm's customers who use the call centers are assured of a higher level of consistent quality even if their calls are routed to one of the third-party call centers. We pr...