Call center outsourcing: Coordinating staffing level and service quality

In this paper, we study the contracting issues in an outsourcing supply chain consisting of a user company and a call center that does outsourcing work for the user company. We model the call center as a G/G/s queue with customer abandonment. Each call has a revenue potential, and we model the call center's service quality by the percentage of calls resolved (revenue realized). The call center makes two strategic decisions: how many agents to have and how much effort to exert to achieve service quality. We are interested in the contracts the user company can use to induce the call center to both staff and exert effort at levels that are optimal for the outsourcing supply chain (i.e., chain coordination). Two commonly used contracts are analyzed first: piecemeal and pay-per-call-resolved contracts. We show that although they can coordinate the staffing level, the resulting service quality is below system optimum. Then, depending on the observability and contractibility of the call center's effort, we propose two contracts that can coordinate both staffing and effort. These contracts suggest that managers pay close attention to service quality and its contractibility in seeking call center outsourcing.