A Long Journey to Rapid Outsourcing

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Molson Coors share their Outsourcing Journey

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A Long Journey to Rapid Outsourcing

  1. 1. A long journey to rapidoutsourcing March 2011
  2. 2. A summary of what I’ll cover today• Molson Coors overview• The project in context• Outsourcing specifics• The benefits we realized• The lessons we learned 2
  3. 3. Overview of Molson Coors• Leading global brewer with 14,500 employees*, 18 breweries*, and operations in more than 30 countries• 2009 annual sales of $8 billion including our share of MillerCoors.• Embodies more than 350 years of pioneering spirit & family brewing heritage with Molson and Coors families retaining significant ownership in the business• Diverse portfolio of more than 65 strategic and partner brands, including signature brands Coors, Coors Light, Molson Canadian and Carling• Strong presence and brand momentum in three of the world’s largest markets − Growth profile in the U.S. through MillerCoors (JV with SABMiller) − A leading brewer in Canada via Molson − Top tier brewer in U.K. & Ireland through Molson Coors (UK) * Includes employees at all partially3and wholly owned subsidiaries.
  4. 4. There are two great things in the beer business The beer! MillerCoors Molson Coors Canada Molson Coors UK
  5. 5. 5
  6. 6. In total, our journey took longer than a year 2005 2006 2007 2008 Feb 2005 Merger of Molson and Coors Benchmarking Study Project Wins Project Wins Project Wins Re-shaped In-house Shared Service Re-shaped Internal & Outsourcing Internal &Identification Approach Services Outsourcing of synergyopportunity to reduce G&A RFI and RFP for Expense F&A, HR and IT to reduce G&A Expense and improve certainty of benefit delivery Feb 1, 2008 Commencement Date July 1, 2008 First go live 6
  7. 7. We set out to get $180m in synergies• Part was to come from streamlining the back office, where several areas drove the opportunities for Molson Coors − Process standardization − Technology and process efficiency − Centralization that will drive and continue to improve process standardization and efficiency − Labor arbitrageShared services was our path to achieving this
  8. 8. We considered what was important to us1. Organizational Scope Enterprise Wide 50% of Enterprise Small Number of Legal Entities F&A + AO HR2. Process Scope End-to-End Single Process Transformation Transaction Services3. Geographic Scope Global Country Areas4. Languages English Local Languages5. Desired Process Maturity New World Existing Legacy Process Class New Competitive6. Delivery Style Self-Service Concierge Supported Self Reliance7. Delivery Channels On-Line Telephone On-Line & Telephone8. Service Delivery Locations Offshore Client Site Mixed9. Delivery Consistency Totally Vary by Geography Consistent Pragmatically Consistent10. Affected Employees Optimize Cost Minimize Social Costs Savings 8
  9. 9. We also thought about our strategy• Future direction − Where is the company going? − What are the goals?• Status quo and capabilities − What does the current environment look like? − How easily can we change? − What skills do we have?
  10. 10. We targeted the following processes• HR − HRIS Data Management − Compensation Administration − Benefits Administration − Vendor Management − Payroll − Recruiting• Finance − Accounts Payable, T&E, Accounts Receivable, Credit and Collections − General Accounting and General Ledger Management − Product Costing and Profitability Analysis − Cash Management/Tax Administration• IT − Application Configuration, Maintenance & Support − Project Management Office − Architecture & Security − Vendor Management
  11. 11. Two ways to build Shared Services• Internal − This would require MCBC to build and maintain the internal model − The location, to contain costs, would need to be close to one of the Divisions• External − The outsourcer is an expert at centralization and already has leveraged centers − We believed that they could offer a lower cost, lower risk solution In fact, we ended up with some of each
  12. 12. MCBC comparative insource vs. outsourceIn-source Outsource Reliant on current organization to achieve Acts as a catalyst for change – ‘there is and sustain change Change no choice’ but to progress Requires a long-term mindset within the Capability Contractual protection for the change function/organization agenda Benefits limited by scale and assets of Use of existing Provider assets to MCBC Scale achieve gains faster Function/organization to create and own and Assets Leverages the Providers’ book of assets business Timing and level of costs and savings can Certainty of cost - implementation be targeted Cost overruns borne by Provider All Capital Expenditure borne by MCBC and Risk Provider meets certain capex Multiple service providers and delegated Enhanced control and single point of authorities Control and accountability Fixed costs limit flexibility Flexibility Adjustment speed to altered volumes MCBC responsible for transformation Cross-functional governance focused and delivery on change and operations Reliance on in-house resources (which Focus Need to establish outsourcing may not be scalable) management organization 12
  13. 13. Fix it first or outsource?There are no absolute right answer to this dilemmaWe took a hard, honest look at the improvements we could realistically achievewith respect to cost, time, and probability (certainty of benefit) With the leverage of technology and labor arbitrage, it is no longernecessary to reengineer all business processes before outsourcing Cost & Time: Examine the track record for making changes • Certainty of benefits • Getting to benefit run rate Culture: Consider which scenario is the best fit for your company’s culture • Will senior management invest in reengineering a back-office process? • Is there a burning platform for outsourcing? • Is there companywide support? Feasibility: Will it work if we lift and shift (in our case, not for HR) 13
  14. 14. Full-value BPO –value proposition Five “Pillars” of Full-Value BPOTotal Cost • Subject- matter • Reengineering expertise to standard/ • On-Near-Off • Compliance best practice Shore Model • Proprietary/ and • Continuous • Operating commercial • Global secure controls improvement metrics, offering network Significant • Innovation SLAs & • Effective • Capacity Cost governance architecture management Savings • Partners • Reusable • Depth of solutions benchCurrent Domain Process Labor Savings/ Technology Scale/ FutureCost Expertise Optimization Productivity Leverage CostStructure StructureScope of Multi-Tower MCBC deal is positioned to deliver the full spectrum of value 14
  15. 15. HP sites providing service to Molson Coors Kirkland, Canada Wroclaw, Poland HR, Finance HRToronto, CanadaITSan Jose, Costa RicaHR, IT Puerto Rico Chennai, India Finance Finance, IT • Far shore, near shore & specialized • Single, common delivery process & delivery centers toolset across centers • Optimized proximity, language & • 24 X 7 and follow the sun flexibility cultural fit • Blended model: right work at the right location 15
  16. 16. Timeline re: F&A outsourcing 2008 2009 Feb 2008 Contract Date Knowledge Ramp US Transfer Up “Go-Live” Stabilization Knowledge Ramp Canada Transfer Up “Go-Live” Stabilization Knowledge Ramp UK Transfer Up “Go-Live” Stabilization 16
  17. 17. So, what benefits were realized?• Financial − We saved millions of dollars with a strong IRR − This included places where we had to spend more• Capability − We gained new systems and tools − We developed a platform we can add upon − We learned how to run COEs• Discipline − We cleaned up messy processes
  18. 18. Outsourcing lessons learned Ensure the support of senior executives Involve key business stakeholders at beginning of project in assessing the scope and business impact of the transition to outsourcing (especially BU CXOs) Understand your current state: people, costs, technologies, processes Select your multi-functional team (the best, not who’s available) − Leader, SME’s / process Owners, IT, Finance, Procurement & Legal Conduct some benchmarking versus your peers Hire some external help experienced with outsourcing (contract & legal) Define your best internal case (Get real!) 18
  19. 19. Outsourcing lessons learned Have retained group in place before you outsource. Define your future state Strategy work and mission critical delivery requiring tight control is best kept inside Management of change – be honest with the people who are leaving Insist on continuity of supplier personnel Full documentation of standard operating procedures Extensive testing of connectivity and integration with ERP systems to ensure proper system access Involve auditors and managers of Internal Controls in the early stages of the outsourcing project 19
  20. 20. Outsourcing lessons learned A clearly defined escalation process and communication plan implemented before go-live dates Clearly defined roles for interaction and communication with BPO representatives A comprehensive process scorecard, with accurate metrics such as backlogs, available for all newly outsourced process Set clear expectations on timing of transition and on the learning curve of both client and outsource provider YOU must lead and manage the journey to excellence – you cannot delegate 20
  21. 21. Outsourcing lessons learned Outsourcing providers and contracts must be managed on an ongoing basis – it is hard work to make outsourcing arrangements work over the long haul Don’t under estimate the internal resources required to manage BPO once transition is complete – a formal team is required Understand the Indian culture up front, they want to please and will not challenge deliverables in order to please – in the end, due dates are missed BPO will not fix broken processes – it only highlights the issues! Turnover in Chennai is a key issue – not only at the processor level, but also the management level 21
  22. 22. Next Steps on our JourneyTo drive efficiency with HP going forward we must address three areas of opportunity:1. Standardization We must eliminate what feels like 3 co-located shared services centers in Chennai, eventually moving to one Global MCBC Center.2. Best Practices (“Innovation”) Currently great Shared Service Centers have adopted many processes/automation (enabling Technology) we do not have.3. Next Generation Outsourcing We must revisit our blended service delivery model to re-examine what work should take place, where, and by whom. 22
  23. 23. Questions? 23

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