Many Efficiencies Possible, New Report from The Hackett Group Says

Many large companies have transitioned at least some of their business processes to a global business services (GBS) model. Using the GBS model means developing shared services across different business units and geographies, and is sometimes combined with a "center of excellence" approach.

Supply Chain Digest Says...   Hackett adds that digital technologies can further enhance the scale advantages and enable GBS to add more value. What do you say? Click here to send us your comments   Click here to see reader feedback

While the GBS has generally been used to deliver back-office processes such asfinance and human resources, research from consulting firm The Hackett Group shows processes in supply chain have emerged as worthy GBS candidates, as companies look for opportunities to improve supply chain operational efficiency and effectiveness.

In a recent research report, Hackett says GBS adoption for supply chain management and order management/customer service is still limited, but is starting to grow. A recent survey of GBS organizations by the firm found 24% of them support supply chain and 31% support order management functions. Moreover, another 10%-15% of GBS organizations expected to expand into these areas in the next few years.

Hackett says the following are the types of supply chain activities that are moving into GBS structures:

• Supply Chain Logistics and Transportation Activities: These include inbound and outbound transportation, reverse logistics and logistics strategy. Hackett cites as an example Dow, which has moved operations for truck, rail and marine, third-party logistics management for bulk and warehouse, and international trade operations into a GBS organization. Similarly, Cargill has shifted transportation and logistics into GBS. The two companies "have not only driven operational efficiencies, but also provided both companies with competitive differentiation," Hackett says.

• Direct Procurement Activities: These include transactional activities such as requisition, receipt and purchase order processing, as well as sourcing, contracting and negotiations for direct spend categories.

• Manufacturing Activities: While production execution remains within the BUs and plants, companies are placing activities such as manufacturing strategy and maintenance management in GBS.

• Supply Chain Planning Activities: Hackett says companies are also leveraging planning processes and capabilities, such as integrated business planning (IBP) or sales and operations planning (S& OP) and inventory management, across business segments and geographies by placing them in GBS.

Of course, such moves may be able to uncover cost saving opportunities and synergies across business units and geographies.

(See More Below)

"The biggest benefits of GBS include cost optimization, productivity improvements, improved quality and improved compliance," the Hackett report say. "Digital technologies can further enhance the scale advantages and enable GBS to add more value."

For companies deploying supply chain processes into a GBS framework, Hackett says it is important to consider a number of issues, including the following:

• Use of customer segmentation to differentiate service levels across customers

• Scope of global, end-to-end processes and ownership to drive standardization and streamline the organization

• Key performance indicators, metrics and analytics needed to measure performance and drive continuous improvement across process, policy and organization

• Governance that expedites decision-making and issue resolution to drive continuous improvement

• Determination of physical location of the GBS center and what to retain in-house versus offshore/outsource

• Impact of efficiencies realized due to centralization, process improvement, technology, etc., on structure and sizing of the future-state GBS organization

• Technology enablers required to support the GBS vision and strategic objectives

Hackett is very bullish on the use of the GBS approach for many supply chain processes, noting that "Expected benefits from moving supply chain and customer service processes to GBS make a compelling case for centralization and standardization - just like any other function that has previously migrated to GBS."

It adds that digital technologies can further enhance the scale advantages and enable GBS to add more value.

What do you think of th idea of moving supply chain processes into global business service organizations? Pros and cons? Let us know your thoughts at the Feedback section below.