Strategically Speaking: 12 Costs to Consider in Outsourcing Distribution
5. Interface Costs: Business systems do not connect automatically, and there will inevitably be resources required to link the publisher's ERP system with the third-party distributor. Beyond estab- lishing the initial connection, ongoing reporting requirements may require specialized technology resources be temporarily brought on board to build the interfaces needed for ongoing business management.
6. Transition Team Expenses: Outsourcing distribution operations is one of the most significant business decisions a publisher can make. Flawless execution is essential. The publisher should create a dedicated team to plan and manage the transition. The team should have representatives from all appropriate functional areas including HR, legal, finance and operations, and be staffed by the organization's best people. The transition team is not a place to stash the organization's personnel problems—the stakes are simply too high.
Temporary resources may be needed to backfill for the employees assigned to the transition team. In addition, the transition team will need adequate—and no doubt incremental—funds for travel, lodging and meals. It needs to establish a presence at the third-party provider—publisher visibility during the transition is essential to success.
7. Contingency Provision: No matter how careful the plan, some project expenses will almost certainly be higher than budgeted, or unanticipated costs will surface. The calculation of one-time costs should include a contingency provision of 10 percent of the total one-time costs identified above. The contingency provision is not a license to allow the identified one-time costs to go unmanaged, but recognition of the fact that this is a complex undertaking and the unexpected is to be expected.
As in any well-run project, measurement of actual transition costs versus the project budget should be ongoing, and the total transition cost reforecast biweekly—at minimum—or more frequently should special circumstances arise. These steps will ensure potential problems are identified and increase the chances that problems can be corrected to bring the project back on schedule and budget.