Reducing Localization Costs with Economies of Flow

Reducing Localization Costs with Economies of Flow

It's no surprise that most localization outsourcers pursue economies of scale to drive cash savings. One way is to give vendors more work and look for discounts, but long term, this can backfire when it has a negative impact on the quality of service they get. The amounts of work, handling and checking are not getting smaller, so vendors might skimp on things like quality checks to help them retain their profit margin.

Such traditional outsourcing is an example of shifting the burden in organizations that want to solve a problem. Here’s an analogy: if you have a headache, the quick solution is to take pain killers. Symptoms go away quickly and the next time you have a headache, you’re more likely to take the medicine again. But you’re not solving the problem—what’s actually causing the headache? What’s more, the fact that taking pills is easy and removes the symptom of the actual issue makes it less likely for you to change your lifestyle or actively focus on improving your health (which is the real problem).

Similarly, if cost is the problem you are trying to solve, the ‘symptom solution’ would be to squeeze on price and move the burden to the outsourcing partner. In the long run, this atrophies the ability to further reduce costs in all parts of the process and has a negative impact on quality as mentioned above.

The better way to reduce localization costs and address the underlying problem is to adopt economies of flow. This represents a challenge to current managerial beliefs, but the impact on cost goes far beyond economies of scale. Economies of flow take the entire workflow or situation into consideration and look to find efficiencies in one or more specific areas, while at the same time ensuring that these efficiencies do not cause detrimental consequences on other components. It’s taking a broader, stepped-back approach to the problem to come up with the best solution overall, rather than treat ‘symptoms’ in just one area or another.

Here are a few ways in which you can apply economies of flow to your localization program for more precise and meaningful ways to lower costs.

Sort out your demand

Start paying attention to your demand and how it flows through the whole localization ecosystem. Get data about the types and frequencies of the work you outsource. Make sure you and your partners know where processes stop, break or divert, and why. Failure demand (a result of something not done or not done right for the customer) represents a major unknown contributor to cost to both the outsourcer and the service provider. Removing it consistently has an enormous impact on the economics.

When you have data about demand, use it to find ways to make demand more predictable and standardized so it flows uninterrupted—and waste is removed. Together with your strategic service providers, start to evaluate end-to-end time (flow), because it is a key influence on cost.

Maximize the ability to handle variety

In localization, tools and technologies (once in place) determine the way work is done. They can also pose difficulties when needing to adapt to changing customer demands. To enable adaptability in a single flow, make a clear distinction: technology itself is not good at handling variety; people are.

Employ the ingenuity of the team to manage variety and improve the system, and let technology support the service, not hinder it. The ability to handle diversity within one flow is the hallmark of good service design and has a significant impact on cost.

End the practice of awarding business based on price alone

Commoditizing localization is a way to get suboptimal quality from service providers who compete on the unit price as opposed to on value. The way out of this is to have a clear idea of how much you are willing to pay for the service, what specifically the value is, and what really is included in the service. You can read more about the word-rate clash with value demand, as well as viable alternatives, here.

Use the right measurements

These are predictive measurements that are the same for both you and your suppliers and that uncover the level of improvements in the ecosystem. Typically, they include demand rhythm, the amount of failure demand, turnaround (or end-to-end) time and predictive quality measures.

Support your vendors on improving these measurements and make them accountable for cost improvements. Having clarity on how much unwanted variation is removed will protect you from the thinking trap that ‘sticking to the budget’ is the purpose. These measurements are a means to constantly decrease costs.

You will need to work with trusted partners to deliver on global needs and holistic strategies. Nurture these long-term collaborative relationships. True partnerships create a powerful alliance to drive innovation and a better and faster overall process—a number one cost driver for all parties involved.

Here are a few tips on how to take your partnership with your language services provider to the next level:

  • Get truly aligned with your suppliers on the program’s purpose and what matters. As you work together, you will better understand each other’s businesses and what’s important to deliver optimized quality.
  • Together, engage in ongoing initiatives that create better and faster production using economies of flow. This approach has the potential for double-digit savings compared to the previous state.
  • Standardize demand. Work together to make demand more predictable to streamline services, reduce overhead, eliminate waste and improve quality.
  • Outsource areas that are not your core business. Globalization professionals can add value by reducing variation (e.g.: content design services, localization strategy creation or technology integrations).

Lastly, accurate measurements can yield evidence that the changes you implemented are affecting your performance data and ultimately, client satisfaction.

 

Economies of flow are still largely unfamiliar and counter-intuitive to localization practitioners, and their huge impact on cost is still waiting to be fully uncovered. The big opportunity today is to start to learn and execute economies of flow in full.