Point of View on Demand Organisation Development

Demand organisation | The way we see it

How to design your Demand organisation?

March 2010

2Copyright © 2010 Capgemini. All rights reserved.


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




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




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




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




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




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




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




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




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




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”




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