Executive Summary
Student Name
August 14, 2010

PURPOSE/OBJECTIVE: The purpose of this executive summary is to outline the outsourcing / contracting process for Travel Magazine. This process will ultimately be used to determine which business processes at Travel Magazine will be outsourced and which will remain in-house. In addition, this summary will include various vendor selection considerations, such as evaluation criteria and performance measurements, for those processes that will be outsourced.

GENERAL OUTSOURCING INFORMATION: The following is some general information regarding the outsourcing of business processes: * Outsourcing promises valuable opportunities, but may also pose substantial challenges and risks * One of the top reasons for outsourcing failures is due to the mismanagement of agreements * The outsourcing market is still overall relatively immature (Krell, 2007)

OUTSOURCING DECISION MAKING PROCESS: Before deciding whether or not to outsource any of our business processes, we decided to use three evaluations, other than cost, to ensure that a sound outsourcing decision will be made. We want to ensure that our decision ultimately aligns with our overall strategy, objectives, capabilities, and plans. The three evaluations include: * Identify Strategic Drivers – Identifying the company-specific strategic drivers for the outsourcing decision of each business process is essential to keep everyone on the same page throughout the process. * Evaluate the Full Range of Options – A thorough evaluation of the full range of options includes considerations of shared service arrangements, as well as all sourcing possibilities. * Assess Internal Capabilities – Assessing the internal capabilities of each sourcing option must include an honest evaluation of systems and controls, as well as the skills necessary to transfer and effectively manage the outsourced process (Krell, 2007).

GENERAL BENEFITS OF OUTSOURCING: There are several overall benefits that we hope to achieve by outsourcing some of our non-core business processes. Some of these benefits include: * Reduced costs * Access to better talent * Solve potential staffing issues due to qualified labor shortages * Access to better technology * Improved processes and productivity * Reduced risks associated with ineffective in-house processes (Krell, 2007)

RELEVANT FACT #1: The following chart shows the basic outsourcing decision model for our business processes. Each process will be stepped through this model in the table below this decision model chart to help determine feasibility for outsourcing.

(Krell, 2007) BUSINESS PROCESS | Linked to Strategic Planning and/or Competitive Advantage? | Does Process Create Significant Business Risk? | Can Controls Be Implemented to Mitigate Risk? | Can Controls be Preserved by Vendor? | Is Impact of Process on Customers Critical to the Business? | Accounting | No | Yes | Yes | Yes | No | Editorial | Yes | N/A | N/A | N/A | N/A | Photography | No | Yes | Yes | Yes | No | Publishing | No | Yes | Yes | Yes | No | Distribution | No | Yes | Yes | Yes | No | Printing | No | No | N/A | N/A | N/A | Layout | No | No | N/A | N/A | N/A | Advertising | Yes | N/A | N/A | N/A | N/A | Editing | No | No | N/A | N/A | N/A | Articles | Yes | N/A | N/A | N/A | N/A |
Key: Green highlight = Potential Candidate for Outsourcing
Light blue highlight = Not a Candidate for Outsourcing Based on Potential Risk to Strategic Planning and/or Competitive Advantage

OPTIONS AND ANALYSIS: Based on the analysis of the business process decisions model above and the corresponding table, there are only three business processes that we feel would be in our best interest strategically to keep in-house as opposed to outsourcing. These three processes, highlighted in red, are editorial, advertising, and articles. We believe that we should keep our core business processes of writing articles and editorials internal. Both of these processes are important for us as a company as each provide a level creativity with which we want to keep. In addition, we believe that it would be to our competitive advantage to continue with our strategic marketing and advertising plan as opposed to outsourcing this process.

RELEVANT FACT #2: The remaining seven business processes are candidates for outsourcing based on the above strategic deductive reasoning technique. Based on this information, please see the table below for further analysis of these processes and the feasibility of each regarding outsourcing.

BUSINESS PROCESS | OUTSOURCING PROS | OUTSOURCING CONS | Accounting (accounts payable, accounts receivable, payroll, general accounting, etc) | 1) Reduced personnel costs2) Access to better and more specialized talent3) Allows for better growth potential, particularly concerning shared services | 1) Takes away some level of control of accounting and bookkeeping processes2) Allows vendor access to potentially sensitive financial information | Photography | 1) Eliminates the need for internal photography staffing.2) Access to more expert photographers3) Reduces the costs associated with photography equipment | 1) Takes away some of the internal photographic creativity2) Prevents our staff from having as much of a choice with regards to photos (must rely more on photos from others) | Publishing | 1) Reduced overall costs associated with publishing2) Allows staff to concentrate more on creative writing and editorials | 1) As a magazine company, publishing the magazine is part of the core business, which we would lose if outsourced | Distribution | 1) Should dramatically reduce transportation costs2) If printing is outsourced, perhaps distribution to subscribers can occur directly from printing company as thus provide further savings3) Vendors who specialize in distribution to newsstands will already have connections and thus provide quicker access of our magazine to the public | 1) It may be harder to track customer deliveries with regards to subscribers and their subsequent delivery satisfaction2) We may lose some control over where our magazine is sold, as vendors may have their own network of preferred newsstands | Printing | 1) Reduced costs associated with print shop equipment2) Reduced cost in personnel needed to operate printing services3) Takes advantage of established printing company and their specialized expertise4) Printing company may also be able to assist with distribution, especially to subscribers | 1) If magazine goes from printer directly to either the distributor or the customer, we miss the chance for catching any last minute mistakes | Layout | 1) Reduced personnel costs2) Using companies who specialize in layout should help expedite the process and thus avoid delays3) Takes advantage of vendors who have expertise in magazine layout as there are technical specs in which magazines must be submitted in order to print | 1) Takes away some of the creativity associated with design and layout of a magazine2) May result is losing some control of overall look of the magazine | Editing | 1) Reduced personnel costs2) Takes advantage of expert third part magazine editing specialists, which helps ensure unbiased editing of content3) If layout vendor also provides expertise in editing, this could result in time and money savings overall | 1) Loss of control of editing the final product may affect the creative nature of our magazine |

OPTIONS AND ANALYSIS: Based on the analysis above regarding the pros and cons of each of the seven remaining processes that we feel are potential candidates for outsourcing, we have decided to move forward with the outsourcing of five of these business processes as soon as possible in order to get Travel Magazine up and running within 9 months from today, August 14, 2010. These other two processes will remain in house. Please refer to the table below as an illustration of our decision. BUSINESS PROCESS | OUTSOURCE VS IN-HOUSE | REASON(S) | Accounting (accounts payable, accounts receivable, payroll, general accounting, etc) | OUTSOURCE | Expertise of accounting vendors, cost savings, and ability of specialized vendors to easily handle growth clearly outweighs any of the cons mentioned in the above table. | Photography | IN-HOUSE | While there may be some substantial benefits to outsourcing photography, we believe that it is in our best creative interest to maintain photography in-house. However, we will save money by supplementing with stock photos of travel destinations when feasible. | Publishing | IN-HOUSE | As we are a magazine publishing company, it makes the most sense for us strategically and creatively to keep the publishing business process in-house. | Distribution | OUTSOURCE | The benefits of outsourcing the distribution business process clearly outweigh the disadvantages of such. Vendors who specialize in magazine distribution often have contacts with newsstands, which provide for excellent opportunities to get our magazine to as many stores as possible. In addition, distribution to subscribers may be combined with printing services. | Printing | OUTSOURCE | It will definitely be more feasible to outsource the printing services for our magazine as printing equipment is extremely expensive. In addition, printing companies who specialize in publication printing services typically have state of the art equipment, as well as distribution and mailing methods in house to support the destination requirements. | Layout | OUTSOURCE | The main benefit to outsourcing the layout business is that there are technical specs in which magazines must be submitted in order to print. In addition, only a few layout programs are acceptable. As a result, we feel it would be in our best interest to allow a vendor with this expertise and technology handle this process. | Editing | OUTSOURCE | Although outsourcing the editing business process may feel as though we are relinquishing some aspects of control over the final product, the overall benefits of outsourcing this process outweigh the feelings of losing control. Vendors who specialize in publication editing have the expertise necessary to handle this process in an efficient and cost-effective manner. |
Key: Green highlight = Will Move Forward with Outsourcing
Light blue highlight = Will Remain In-House

VENDOR CONSIDERATIONS: There are several aspects regarding potential vendors and their selection that must be considered. Some of these considerations include evaluation criteria, the number of vendors we will most likely use, the type(s) of contracts that will likely be used, and performance targets for each. The following section will demonstrate in detail these vendor considerations.
EVALUATION CRITERIA: The table below illustrates the evaluation criteria for each business process. Please note that, due to the fact that the number one goal of our outsourcing decision is to reduce costs, overall cost will be weighted higher than all other evaluation criteria. Overall cost will, in fact, be weighted at 50% and all the remaining evaluation criteria will be equally weighted with the remaining 50%. BUSINESS PROCESS | EVALUATION CRITERIA | Accounting | * Overall cost * Capability to handle multiple processes, such as accounts receivable, accounts payable, and payroll * Reputation * Capacity to accommodate growth and combine services into an enterprise system if feasible * Management approach | Distribution | * Overall cost * Ability to accommodate growth * Ability to provide both distribution and printing services * Reputation * Management approach | Printing | * Overall cost * Ability to accommodate growth * Ability to provide both printing and distribution services * Reputation * Technical capability * Management approach | Layout | * Overall cost * Ability to accommodate growth * Ability to provide both layout and editing services * Reputation * Technical capability * Management approach | Editing | * Overall cost * Ability to accommodate growth * Ability to provide both editing and layout services * Reputation * Technical capability * Management approach |

DESIRED NUMBER OF VENDORS: Based on the previous levels of analysis above, we believe that our vendor selection will include a total of three vendors to accommodate the outsourcing of the five selected business processes. This following shows how the five business processes will be outsourced via three vendors: * Accounting Services – One vendor for all accounting services (general accounting, accounts payable, accounts receivable, and payroll) * One vendor for all accounting services will help ensure consistency and repeatability * This will also help with any future growth and enterprise system development * Takes advantage of expertise of trained personnel who specialize in accounting shared services * Printing/Distribution – One vendor for both printing and distribution services * Publication printers typically have state-of-the-art equipment and technology * Publication printers usually have in-house mailing and distribution methods, which allows for distribution to occur directly from the printing company * A publication printer will have standard magazine sizes, page counts, and paper stock that can help simplify the print process and reduce our costs * Layout/Editing – One vendor for both layout and editing services * Companies who specialize in layout have a thorough understanding of the technical specs in which magazines must be submitted in order to print * Many layout vendors also provide expert editing services, which will inherently save on total cost * Layout/editing vendors will have access to the very specialized layout programs that are required

CONTRACT TYPE(S): The table below shows the contract types that will be used for each vendor. BUSINESS PROCESS | CONTRACT TYPE | Accounting | Fixed Price Contract – Because this is a service/labor based business process, there should be little additional costs for any materials. As such, we feel that negotiating a fixed price contract with the accounting vendor would be the most desirable. | Printing/Distribution | Cost-Plus-Incentive-Fee Contract – For the joint printing/distribution services, we feel that an incentive-based contract will work best. Because getting our magazine printed in a timely manner and distributed to subscribers and newsstands as quickly as possible is part of what we hope is a competitive advantage, we believe a contract with incentives for exceeding quality requirements and time deadlines as well as penalties for not meeting either requirement is most desirable. | Layout/Editing | Cost-Plus-Incentive-Fee Contract – Aesthetically appealing layout and mistake-free editing in a timely manner are also part of what we hope will eventually give us a competitive advantage. As such, we feel that an incentive-based contract would be bests for out layout/editing services. In this case, there will likely also be incentives for exceeding quality requirements and time deadlines as well as penalties for not meeting either requirement are most desirable. |

PERMORMANCE TARGETS: The table below illustrates the performance targets that will likely be used in evaluation vendor performance. BUSINESS PROCESS | PERFORMANCE TARGETS | Accounting | * Minimal number of errors in accounting services (quality) * Customer satisfaction surveys from vendors, customers, and employees will help us gauge the overall satisfaction of the services | Printing/Distribution | * Ability to meet printing and distribution deadlines * Minimal number of printing related errors * Customer satisfaction surveys to determine the level of on-time delivery | Layout/Editing | * Minimal number of layout and/or editing errors * Ability to translate layout and editing directions/requests from our company to a desirable finished product to be determined prior to printing * Customer satisfaction surveys to determine the quality level of perceived aesthetically pleasing layouts |

TIME LINE: Based on all the analyses shown above, we have constructed the following time line with milestone dates that encompasses each step of the contracting process. In addition, we have included a contract administration milestone date and ultimately the latest possible date we will open for business.

TIME LINE MILESTONE SUMMARY: The following time line milestone summary shows, in greater detail, the expectations of each milestone. * Plan Purchases and Acquisitions (8/20/2010) – By August 20, 2010, the expectation is to have decided which business process will be outsourced. As we have already completed this step, we are slightly ahead of schedule * Plan Contracting (10/4/2010) – By no later than October 20, 2010, we will have a procurement management plan created and in place in order to prepare the necessary documents for soliciting bidders. A contract statement will be created, request for proposals (RFPs) are written, and final vendor evaluation criteria will be decided upon. * Request Vendor Responses (11/15/2010) – By no later than November 15, 2010, the procurement documents, including the RFPs, will be advertised and/or sent to potential vendors. We will then work to develop a “short list” of potential vendors who will be the finalists in the bidding process. * Select Vendors (1/14/2011) – After receiving all procurement document packages from qualified vendors and, we will select the three vendors for our outsourcing needs and award contract to each. We will also negotiate and finalize all contracts prior to our milestone date of January 14, 2011. * Contract Administration (3/1/2011) – By no later than March 1, 2011, we will ensure that any potential change orders have been agreed upon and implemented. * OPEN FOR BUSINESS (5/2/2011) – With this plan, we will be open for business prior to the nine month deadline of May 14, 2011. In fact, we feel that we have left enough buffer room between critical milestones to potentially be ready for the commencement of business operation much sooner.

References
Krell, E. (2007). Management accounting guidelines – Outsourcing the finance and accounting functions. Retrieved from http://www.cma-alberta.com/index.cfm/ci_id/13357/la_id/1/document/1/re_id/0
New magazine startup guide. (n.d.). Retrieved August 14, 2010 from http://www.magazinepublisher.com/startup.html