point of view on demand organisation development
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Demand organisation | The way we see it
How to design your Demand organisation?
March 2010
2Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
A significant proportion of an organisation’s value is created by outsourced processes and should get the right management attention
Directly after the outsourcing deal is settled, the expectations are met,
…however after 3 years the benefits of outsourcing decrease and value leakage is increasing:- Dissatisfied internal clients on delivered services- Perceived loss of quality- Unsustainable contract terms- Lack of control or coordination- Battle for talent and retaining knowledge
Measures to make changes in control and governance often fall short
Value leakage during operations
Increase in outsourcing initiatives - more organisations focus on their core
Shift from outsourcing standard operational activities towards outsourcing complex (complete) processes
Agility and time-to-market are more important drivers in today’s volatile and rapidly transforming global market
Role of the supplier is increasing
… delivering sustainable value of an outsourcing decision can only be achieved by effective alignment of business needs with the capabilities of the service providers
The way companies monitor, control and manage their sourced process(es) should adapt/match the developments in demand and supply
Network of internal and external demand-supply relations
Conventional 1-on-1 customer-supplier relation
Introduction
3Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
The demand organisation enables an effective alignment of demand and supply and ensures the potential value of the sourced process is delivered
A good structured Demand Organisation guarantees the right level of service, quality and costs in accordance with business requirements by maximising the benefits and minimising the risks.
Demand organisation is the intermediary between the core business processes and the supporting processes
Demand organisation is typically established when supporting processes are delegated to a separate business unit (e.g. shared service centre) or third party (outsourcing).
In the demand organisation activities are executed to manage the supply side (internal/external suppliers) as well as the demand side (business).
Demand organisation
Procurement process
Business unit
Business unit
IT process
Finance process
... process
Business unit
Business unit
Supply management(external SLA’s)
Demand management(internal SLA’s)
Business Shared support organisation or external suppliers
Intermediary
Definition
4Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
Market trends stress the importance of the demand organisation as the engine of managing sourced processes
Co
st s
avin
gs
Degree of maturity
Internal provision ofservice
Shared service Centre
Business process outsourcing
1
2
3
Outsourcing & SSC• The Dutch outsourcing market has grown by 17% since 2005. 51% of
subcontractors expect to grow in the future [Source: Morgan chambers, 2007]• More companies consider SSC and BPO for their support activities
[Source: Capgemini, 2009]• The combination of different sourcing options (Hybrid; SSC and BPO) will
increase in the coming years• Most important reason for companies to outsource is to reduce cost,
penetration of new markets, reduce cycle times, increase customer service, access to innovation and reduce logistics cost
• Research has proven that directly after the outsourcing deal is settled, the expectations are met. However, after 3 years the benefits of outsourcing decrease [Source: Capgemini, 2007]
Demand Organisation• Management and the structure of decision making from the customer side
are not captured by 50%+ of Dutch companies that outsource [Source: research community Digital Boardroom, 2005]
• About 60% of all customer organisations is in a insufficient extent satisfied on their suppliers
• Directing or professionalising their demand organisation is mentioned by 80% of companies to be most important element for improvement. For 53% of the organisations it has real priority
• The mean score that organisations give their demand organisation is a 6 on a scale from 0 to10 [Source: Morgan Chambers, 2008]
• Organisations interpret the demand organisation differently, leading to large differences in the design [Source: Capgemini, 2009]
Trends in Outsourcing, SSC and Demand organisation
Trends and issues
Identified trends in the market
5Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
Companies encounter the following issues when the demand organisation is operational
• Once a sourcing deal is signed, many organisations falsely believe that their work is done
• A major cause of sourcing dissatisfaction and failure is the assumption that a few people acting just as ‘liaison officers’ can manage complex sourcing relations
• Organisations experience a lack of control and insufficient coordination of suppliers
• Insufficient control on SLA, resulting in bilateral disappointments on contracts/ dissatisfied customers.
• Expectations keep on changing, the contract does not
• Continuous discussions about the quality and timeliness of the service
• The success in sourcing is determined by the people and the organisation, not the technology
• The gap between internal client satisfaction and the service levels in the SLA needs to be managed carefully
• Very often a lack of a professional portfolio management leads to a ‘cheap’ contract and very expensive add-on work
• Direct management of outsourced processes is not possible anymore
• Most companies have to professionalise their own organisation for governing the relationship to achieve the best from their outsourcers
The demand organisation has to balance demand and supply
Trends and issues
Issues regarding the demand organisation
demand for specialised services
supply of highly standardised
services
6Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
When designing and implementing a valuable demand organisation you have to consider the following success factors
Performancemanagement
SLAs
People &Organisation
Processrequirements
Sourcing strategy
Technology /IT strategy
Governance
Demand organisation
design
Governance
A certain level of maturity (formality/structure)
Clear line of authority and responsibility
Consistent, understandable policies and standards that are embedded in operating processes
Exchange of information from suppliers as well as business units.
Proactive decision making on how to manage the demand organisation and service providers
People and organisation
Alignment organisation with the operating processes
Flexibility and ability to absorb environmental changes
Clear defined operating model (processes, roles, communication)
Choice centralisation/decentralisation, number of SLA’s/ customers reflect size and place organisation
Steering on competences within demand organisation
Processes
Standardised processes which are compliant with policies and regulations
Transparency in processes on demand and supply management.
Manage expectations of the user-organisation in a structural way
Clear split and handing over between the in-house processes and the outsourced processes
Performance
Steer on quality delivery, targets and realised service levels
Alignment of KPIs and objectives with corporate targets
Clear and common understanding of specifications,
Periodical evaluation of contracts, SLA’s, and performance
Quality of internal underpinning contracts (services, volumes, price)
Technology / IT
Systems need to be aligned with the external party (or vice versa)
Advanced web-enabled requisitioning and management tools
Integrated portals supporting reports on performance and communication
Strategy
Sourcing strategy needs to be aligned with corporate strategy and purchasing strategies.
Demand organisation and strategy has to be established, before (out)sourcing takes place
Bilateral strategy: customer focus as well as maximising synergies
Success factors
7Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
An effective demand organisation consists of the following 7 building blocks
Demand management
Organisation & Governance
Performance management
Supply management
Human resourcemanagement
Technology / ITFinancialmanagement
Vision / strategy
Process, activities and roles (RACI)
Infrastructure/enablers
Business
Demand organisation
External / internal suppliersbuilding blocks
Building blocks
8Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
Implementing the 7 building blocks enables your company to realise more value out of your sourced processes
Demand management
Organisation & Governance
Performance management
Supply management
Human resourcemanagement
Technology / ITFinancialmanagement
Demand organisation
building blocks
Building blocks
9Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
A sustainable demand organisation is interwoven with your sourcing strategy and should continuously go through a closed loop process
Delivery or Operations
Analysis and Definition
Transition or Migration
Selection and Preparation
Scenario Planning and
Business Case
Design of the demand organisation for multiple scenarios– High level of organisation and
governance– Processes
Set up the business case on the demand organisation design
Sourcing strategy1 creates a vision on the right mix on– Ownership: In house or Outsourced– Location: Onshore or Offshore– Management required: Light or Tight
Sourcing strategy sets the scope of the demand organisation
List requirements and set up SLAs - demand and supply side
Detail way of working (organisation and processes)
In house: input for business process redesign (e.g. set up SSC)
Outsourcing: input for selection process and process improvement
Plan transition or migration
Finalise way of working (organisation and processes)
Finalise SLAs and KPIs Transfer critical knowledge Train employees and/or recruit new
employees
Evaluate regularly on multiple organisation levels:– Performance service providers– Client satisfaction (business)
Alignment of the demand organisation to changing environment
Approach
10Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
After the implementation you need to regularly evaluate the demand organisation whether the current design is still successful
Delivery or Operations
Analysis and Definition
Transition or Migration
Selection and Preparation
Scenario Planning and
Business Case
Approach
11Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
Why Capgemini?
Why Capgemini?
Capgemini has the people, culture and experience to deliver high quality results and solutions that work
Business Transformation Capabilities – Based on our unique multidimensional Business Transformation ® framework Capgemini supports leading companies on their journey towards measurable and sustainable competitive advantages. We are focused and committed on delivering transformation
Rightshore™ BPO – Our Rightshore model will provide flexibility and scalability based on the right process at the right location within the Capgemini global delivery network. We leverage European and US onshore expertise for planning, consulting and strategy roles while leveraging offshore expertise for execution and administrative roles
The Results We Achieve – Capgemini works in a strictly results-oriented way, focusing on sustainable improvements and less on academic concepts. Capgemini supports transformations until the expected results are delivered
Capgemini way of working - Collaborative Business Experience. A key strength in our working style is that we do work WITH our clients. Capgemini believes this joint working to be essential in effecting sustainable change in an organisation
Thought leadership – Capgemini has a clear vision about the evolvement of service management. We provided and implemented this vision in the aftermarket of several clients helping them to become market leader- Capgemini’s Global Sourcing of Services (GSS) cube ©
- “Point of view on Sourcing Strategy”
- “Outsourcing strategy survey 2009-2010”
12Copyright © 2010 Capgemini. All rights reserved.
Demand organisation | The way we see it
Supply Chain Management • Proprietary and Confidential
Capgemini has broad experience in all aspects of Demand organisation
Business challenge3 cases
Chosen solutionby company
Approach and results
Need to professionalise the organisation and to reduce costs
Centralise accounting processes
Implement SAP Shared Services Centres and achieve cost savings
Shared Services Centres
Imperative for improvement in business support processes – both cost and service
BPO
• Phase 1: The feasibility study - Business Case; Survey of the processes and ICT in place, and the ICT incl. it's bottlenecks; Vision on the future processes and ICT; Headlines of an implementation plan; Project charters for the planning in details; Migration script; Plan for change management.
• Phase 2: Describing the future processes and operating procedures incl. pilot - design of ICT, Processes, Personnel and Organization; and, Migration preparation
• Phase 3: Migration - the financial administrations pass to the support centre
• Consolidate IT processes into global SAP Shared Service Centres• Used extensive global experience in establishing shared service establishment,
process re-engineering and SAP implementation to effect an ideal solution for the client
• Consolidated parallel IT systems that were costly to operate and maintain• Incorporated SAP methodology and leveraged experience from prior SAP
implementations to design, develop and implement global SAP solution.
• Provide information technology, call centre, billing, human resources, supply chain, accounts payable, and finance and accounting services
• Develop and implement new business processes and rationalize existing services in order to enhance operational efficiencies and leverage new technologies
• Minimise business disruption and achieve significant reduction in cost of provision of these services
Why Capgemini?
www.capgemini.com/consulting
Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group Copyright © 2009 Capgemini. All rights reserved.
R. (Robin) AdriaansSenior Consultant
Capgemini Nederland B.V.Papendorpseweg 100, P.O. Box 2575, 3500 GN Utrecht - The Netherlands
T. +31 30 689 4062F. +31 30 689 55 60
Mob. +31 615 030 344 [email protected]
www.nl.capgemini.com
M. (Marjolein) DijkshoornConsultant
Capgemini Nederland B.V.Papendorpseweg 100, P.O. Box 2575, 3500 GN Utrecht - The Netherlands
T. +31 30 689 5594F. +31 30 689 55 60
Mob. +31 615 031 022 [email protected]
www.nl.capgemini.com