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The Answer is "Yes"

Updated: Apr 20

We hope you had a chance to attempt solving the ZedCar case on your own. Below you will find our suggested approach, but rest assured that this is not the only one possible.

Q1: What factors should ZedCar consider when making the decision?


ZedCar is looking to reduce costs, hence these will be in the core of our analysis, however candidates shouldn't forget the qualitative factors or risks related to the relocation of its customer service centre.


Operating Costs

  • Rent

  • Utilities, supplies, etc.

  • Staff salaries


Relocation Costs

  • Location build-out costs (walls, wiring, etc.)

  • Furnishing costs (desks, cubicles, etc.)

  • Staff moving expenses (related to existing staff - relocation cost, severance cost)

  • Staff hiring costs (related to new staff - recruiting, training)

  • Lease break cost


Risks in Transition

  • Capabilities: availability of staff to hire, strategic advantages, quality of talent, impact on staff morale

  • Customers: potential disruption to operations, impact on customer satisfaction


Q2: ZedCar's COO is particularly interested in evaluating Newcastle, UK as the new location. Based on the exhibits below, how long will it take ZedCar to breakeven on the costs of the move?


Here is a suggested calculation of the breakeven point. Don't forget the "so what" of the quantitative analysis:



Suggested "so what": Based on the calculation, ZedCar should move their call centre to NewCastle, as they will breakeven on the relocation costs within a bit more than a year, owing to significantly lower operational costs. We should keep in mind however, the potential business implications of the move, such as service disruptions and staff morale.


Q3: In addition to relocation, ZedCar COO is looking for ideas to further reduce the cost of the call centre. What would you suggest her?


The key to brainstorming questions is to develop a "grouping" strategy for your idea. Since we are talking about costs, typical Quantity x Price structure is suitable. 3-4 idea groups are sufficient with 2-3 ideas for each (a total of 6-8 ideas is the aim).


Reduce number of customer care calls

- Less accidents by more safety features

- More self-service options

- More online guides


Reduce cost of a customer care call

- Provide team with detailed response guides

- Good knowledge management and retention

- Implement call routing systems

- Automate certain tasks, e.g., customer identification


Reduce non-staff costs

- Negotiate consumables / communications cost with suppliers

- Allow reps to work from home to reduce required space


Recommendation: As your team is discussing the case over lunch, the CEO walks in looking for an update. The team looks at you, what will you say?


I would recommend ZedCar to move their call centre to Newcastle (unless the company can’t afford the £2.6m short-term cash outflow). The move to Newcastle, will cost £2.62m in relocation costs (one-time expense), however will save £2.32m in annual operating costs.


As a next step, I would suggest negotiating to reduce the lease break cost, and analysing closer locations with lower rent and cost of doing business that may reduce staff turnover and limit recruitment, retraining, and severance costs.


ZedCar should also look to mitigate the transition risks:

  • Consider gradual move to reduce risk of service degradation, and potentially costs

  • Consider augmenting staff initially via outsourcing services to ramp up quickly

How similar was your response to the example answer? Feel free to post your questions or feedback in the comments section. Don't forget to review the preparation plan for tips on approaching this and other cases. Book a coaching session to get expert feedback on your performance and ways to improve.

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ABOUT US

Consulting Case PRO was started by Ben Gutkovich.

Ben is a former Engagement Manager with McKinsey & Company and an MBA graduate from London Business School. At LBS, Ben secured offers from McKinsey, BCG and Bain. At McKinsey, he led the firm’s recruiting efforts at top UK universities.

 

Ben helped 100+ candidates secure an offer from top tier consulting firms since leaving McKinsey, and started Consulting Case PRO to give more candidates access to his exclusive interview preparation techniques. 

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