Procurement Transformation Blog

Procurement Transformation Blog

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

So you want a Shared Service Center…

In today’s business environment, the mandate to reduce costs and improve performance often leads to a shared services opportunity.  While this model works for many corporate services, it can truly pay big dividends for procurement.  The challenge is NOT necessarily evaluating the concept, but rather starting on the right path. Throughout my career, I have been fortunate to work with leading Fortune 100 companies and several major Business Process Outsourcing (BPO) service providers.  In doing so, I have observed both the glass half full and the glass half empty personality types struggle with startup challenges.  In this blog posting I cover upfront topics to consider as you start up a shared services center.  In my next posting we’ll go into how to leap frog your organization into a next generation share services center success story.   

Starting a shared services center requires picking the path you believe offers the best chance of successful for your organization.  Many glass half empty personalities will seek out “how can I/we make this not fail” shying away from risks and often missing opportunities to maximize value.  While a glass half full personality might search for insight on pushing the boundaries to pursue greater success (more on that in my next posting).   In the end, success can be measured across a wide ranging spectrum, in which both success and failure can be spectacular AND public.  For example, the West Australian Government’s decision to decommission its IT Shared Services, while not procurement specific, was a pubic shared services failure and represented a significant cost, projected at $95 million in 2013, and ~$370 million overall to deconstruct.   Regardless of how you view your glass, let’s discuss some key areas to consider for a good start. 

Understanding the vision and developing guidelines

Being crystal clear on the vision of where the organization wants to go is critical, because lack of business clarity is like navigating with a broken compass, which often leads to going in circles.  Being able to articulate the vision succinctly will also help stay the course when others may start to loose direction.  
Gaining alignment up front in a few key areas can help smooth the path forward.  Early thought should be given to the following topics:

●   Which functions / activities fit in scope (not all activities are a good fit)
●   What Shared Service Center (SSC )structure fits the organization
  • Centralized: to maximize efficiency
  • Center of Excellence: to take advantage of expertise
  • Regional: to handle local requirements
●   Is the long term goal to in-source or out-source (most companies figure this out in the first couple of years and a growing option is the hybrid model with a local component)?
 
Tackling these types of questions upfront will hopefully help you avoid executing a second pass at the SSC design and then dealing with the cost and business disruption of unwinding / un-implementing an unsuccessful direction.

Early alignment

Company executives often ask how to speed up a project which sometimes translates into an accelerated design timeline, but a few simple questions can help drive visibility and alignment before anyone hits the accelerator. 

1. Do you have the right support?
This isn’t just a sponsor who is ready, able and willing, but do you have top down executive buy-in to communicate a clear set of expectations? Are the executive sponsor and key business stakeholders aligned on the program details and are they ready to mobilize their support?
 
2. Do you understand current state?
Have you completed an assessment to understand the people, process and technology landscape and have the key concerns been addressed?  One of the numerous ways a company can handicap themselves is to start with a blind spot and then not fully appreciate the impact when it comes to light. 
 
3. Do you have change management support?
Is the organization ready to acknowledge the level of effort this type of cultural change will require, and do you have the right capabilities to deliver a full change program?
 
4. Are you committed to the right tools?
Have you understood the limitations of the current tool set and committed to providing the right technology to deliver forecasted benefits?
 
5. Have you locked in your governance approach?
Do you know HOW you are going to govern the design process to detail the future state and maintain control through implementation?

Approach trade-offs

Near term considerations which may change the outcome:

1. Select the migration approach
  • When migrating a broken process to the shared service, will you fix-then-migrate or migrate-then-fix
  • It’s not a question of the cheapest  or fastest, but how to get the highest level of adoption with the most effective process 
2. Play to your strengths
  • Understanding your organization’s strengths and when and where to engage a third party service provider
3. Validate the assumptions
  • Locking in the business case is a great idea, but don’t forget the bottoms up validation
  • Being fact based up front will help the validation process and potentially identify those areas that truly don’t fit and need to be de-scoped

Long term considerations for success:

1. Commit to all the phases
  • Moving to a shared service is a multi-phased endeavor, and the vision and objectives should be designed as such up front with realistic targets. 
  • Milestones should each deliver incremental value, and make it known that progress is cumulative and not expected to be complete at the end of the first step.
2. Press the boundaries
  • Measure success across the end-to-end process and include internal customers
  • Draw the lines of responsibility to include everyone involved, making the end-to-end process success part of everyone’s responsibility    
3. Focus on the people
  • Culture change is often the hardest part; process and tools are table stakes for success
  • The internal customer’s willingness to support the change and roll up their sleeves in rough times to fix issues is what will carry the initiative over the finish line.  

About the author

Bryan Garcia
Bryan Garcia
Bryan Garcia is a manager in the Consumer Products and Retail group with 10+ years of global supply chain experience. Focused on procurement transformation, he has guided clients through strategic changes and driven optimized solutions. His work experience includes operating model and organizational design, source-to-contract and procure-to-pay transformation, shared services setup, and contract management. Bryan has been fortunate to drive many projects from start-to-end including establishing shared service / outsourced capabilities, leading strategic sourcing initiatives from identification through negotiation and implementation, and establishing new procurement channels. Recent projects have expanded into accounts payable and inventory management within broad range of industries, including consumer products, wholesale distribution, and telecommunications.
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