Managing the Outsourcing of Two-Level Service Processes: Literature Review and Integration

The outsourcing of service processes presents several complex management challenges. Services typically have variability in both the pattern of customer arrivals and service times, which make capacity planning challenging. Workers also have discretion over the workflow, and therefore each worker can affect the workload passed to other parts of the system. When a service process is outsourced, this discretion may be in the hands of a vendor who then makes choices that influence the customer experience. A firm must decide upon the design of the process, which parts of the process to outsource, and how to contract with the vendor to overcome issues related to information asymmetry. This paper addresses these questions within the context of a two-level service process where the first level serves as a gatekeeper for experts in the second level. We integrate the results from several papers in the literature to give a comprehensive perspective on how to approach service outsourcing.