P&G outsourcing

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P&G outsourcing to HP, IBM & JLL

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P&G outsourcing

  1. 1. Diwakar Yadav SIBM-B Batch 12-14 Protect & Gamble (P&G) Global outsourcing Introduction: The Procter & Gamble Company (P&G) markets a wide range of branded consumer goods products, including beauty care and household products. It’s a American multinational company head quartered in Cincinnati, USA. The company’s products are sold in more than 180 Countries, with net sales exceeding USD 84 billion in 2013. P&G owns 145 manufacturing facility & Company today markets more than 400 products and has touched life of 5 billion people across the globe. Key Customers P&G customers include mass merchandisers, grocery stores, membership club stores, drug stores, high-frequency stores, distributors and e-commerce retailers. Sales to Wal-Mart Stores, Inc. and its affiliates represent approximately 14% of P&G total revenue in 2013 and 2012, and 15% in 2011. No other customer represents more than 10% of company net sales. P&G top ten customers account for approximately 30%, 31% and 32% of our total unit volume in 2013, 2012 and 2011, respectively. The nature of business results in no material backlog orders or contracts with the government. They believe their practices related to working capital items for customers and suppliers are consistent with the industry segments in which they compete. USA is major market which contributes 36% of total net sales. Sources and Availability of Materials Almost all of the raw and packaging materials used by the Company are purchased from others, some of which are single-source suppliers. P&G produces certain raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities consumed in our manufacturing process and in the distribution of input materials and finished product to customers. P&G grouped its Global Business Units into four industry-based sectors 1. Global Beauty Contributed to $ 20 Bn Net sales (Data from 2013 Annual report) Global Business Units Categories Leadership Brands Beauty Care Antiperspirant and Deodorant, Cosmetics, Personal Cleansing, Skin Care Cover Girl, Max Factor, Olay, Old Spice, Safeguard, Secret Hair care & colour Hair Care, Hair Colour Head & Shoulders, Herbal Essences, Nice ’n Easy, Pantene, Rejoice Prestige Fragrances, Prestige Skin Care Gucci, Hugo Boss, SK-II Salon Professional Salon Professional Wella 2. Global baby, feminine and family care contributed to $22 bn Net sales
  2. 2. Global Business Units Categories Leadership Brands Baby care Baby Wipes, Diapers, Pants Luvs, Pampers Family Care Paper Towels, Tissues, Toilet Paper Bounty, Charmin, Puffs Feminine Care Feminine Care, Incontinence Always, Naturella, Tampax 3. Global fabric and home care contributed to $26 bn Net sales Global Business Units Categories Leadership Brands Laundry care Bleach and Laundry Additives, Fabric Enhancers, Laundry Detergents Ace, Ariel, Bold, Bounce, Dash, Downy, Gain, Tide Home Care Air Care, Dish Care, Surface Care Cascade, Dawn, Febreze, Mr. Clean, Swiffer Personal Power Battery Duracell 4. Global health & grooming contributed to $ 17 bn Net sales Global Business Units Categories Leadership Brands Braun and Appliances Beauty Electronics Braun Oral care Toothbrush, Toothpaste, Other Oral Care Crest, Fixodent, Oral-B Personal Healthcare Gastrointestinal, Other Personal Health Care, Rapid Diagnostics, Respiratory, Vitamins / Minerals / Supplements Prilosec, Vicks Pet Care Pet care Eukanuba, Iams Shave Care Blades and Razors, Preand Post-Shave Products Fusion, Gillette, Mach3, Prestobarba, Venus Operations With operations spread across 180 countries, meeting the business service needs of the organization was challenging. P&G’s Global Business Services (GBS) organization has met this challenge successfully; they have implemented best-in-class processes to provide business capabilities that create value for the business units, while reducing the costs and efforts necessary to support these operations. GBS is one of four organization pillars that support the organization’s business and provides more than 170 services to the company. The services delivered through GBS include everything from employee services (e.g. people management, facilities, communication, meeting services, and travel services) to business services (e.g. financial services and solutions, product innovation, supply network solutions).
  3. 3. Many of those services are provided today through a set of alliance partnerships (outsourcing). The scope of the alliance management effort at GBS encompasses the entire outsourcing lifecycle of these outsourcing engagements; the goal is to create value for the business by improving the efficiency and effectiveness of these partner relationships, while reducing the risk associated with the use of third party organizations to deliver services. Managing the end-to-end relationship successfully creates a win-win situation for the organization and its partner, and benefits all stakeholders vested in the alliance partnerships. Evolution of Outsourcing & Partnership in P&G P&G has taken a systematic approach to the development of the organizational structure of the support unit that provides the business services for the entire organization. The examination of the evolution of the business services organization at P&G identifies three stages: establishment of Shared Service Centers, engaging in outsourcing arrangements, and strategic alliance management. With the global expansion in the ‘90s and the ensuing need to manage the services necessary for the internal corporate clients, P&G set up a Shared Services organization and began to change the way certain type of services were delivered to its business units. Service centres were set up in Costa Rica, Manila, and Newcastle, and work was spread across these centres. Shared Service Canters offer Organizations the opportunity to eliminate redundant activities and realize efficiencies in service delivery. Most of the savings with the Shared Services model come from standardizing processes, making it easier to provide support for multiple business units, while improving the speed and quality of service. The three Shared Service centres marked the first stage of a journey for P&G in the development of a best-in-class service management organization. In the 2002-2003, P&G’s GBS (Global Business services) started an initiative to examine the possibility of transferring some of the work that was being done by the organization to third party. While the organization was achieving advantages from scale on its own, it could derive additional value in a well-managed third party relationship with a service provider who had made the particular service its core competency. P&G initially mulled over outsourcing to a single provider all its noncore functions, including HR, IT, finance and accounting, and facilities management. But, after significant due diligence that included prolonged discussions with two service providers interested in servicing the 3 broad segments, P&G opted instead to divide and conquer. P&G decided to enter into three initial partnerships in 2003. 1. Jones Lang LaSalle for facilities management 2. IBM for Employee service & 3. HP for IT infrastructure, applications, and transactional accounts payable. With these relationships, these service provider organizations took on some of P&G’s employees and portions of the Shared Service centres. P&G often called their out-sourcers as partners. Reasons for Outsourcing
  4. 4. To compete more effectively in the dynamically changing consumer goods market, P&G embarked on a major business transformation a few years back, a key element of which was outsourcing important but non-core business processes. Outsourcing would offer a way to improve flexibility and sharpen the company’s focus on critical core competencies, not to mention reduce overall costs imbedded in the various back office and administrative functions. 1. Partnership: Jones Lang LaSalle for facility management Jones Lang LaSalle is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.2 billion square feet worldwide. LaSalle Investment Management, the company's investment management business, is one of the world's largest and most diverse real estate with approximately $50 billion of assets under management. In June 2003 Jones Lang LaSalle received contract from P&G to oversee 14 million square feet of real estate at 165 sites in 60 countries. Fifty of those sites are in North America. Sites include the company’s corporate headquarters in Cincinnati, plus sales offices and research facilities around the world. Limited services are supplied to manufacturing facilities. The agreement between the two companies covers three distinct areas: facility management, project management and strategic occupancy services. Facility management services include such things as building operation, security, mail delivery, car fleet operations & dining. The new three-year agreement encompasses portfolio management, transaction management, real estate brokerage, lease administration and strategic portfolio planning services for a portfolio in excess of 150 million square feet of real estate, including plants, warehouses, offices, technical centers and other properties in more than 80 countries throughout North America; South America; Asia-Pacific; and Europe, the Middle East and Africa. In addition, Jones Lang LaSalle continues to provide facility management and project management services to P&G's office and technical center buildings worldwide, a portfolio which entails approximately 16 million square feet. Benefits for P&G Managing a wider range of real estate strategies through one alliance partner enables us to increase efficiency and consistency, leverage scale and enhance service levels. P&G and JLL established a business agreement where both parties have a Vested interest in each other success. They are most successful when they are both successful. Their secret sauce per se involved constructing a business agreement that rigorously adheres to five key rules. o Focus on Outcomes, Not Transactions o Focus on the WHAT, not the HOW o Clearly Defined and Measurable Desired Outcomes o Pricing Model with Incentives o Insight versus Oversight Governance Structure
  5. 5. 2. Partnership: IBM for Employee service P&G announced another contract of employee service to IBM consulting group in August 2003. This contract will be for 10-year, with deal of $400 million global agreement with IBM Business Consulting Services for Human Resources Business Transformation Outsourcing (BTO) services. The pact calls for IBM to support nearly 98,000 P&G employees in about 80 countries, providing services such as payroll processing, benefits administration, compensation planning, expatriate and relocation services, and human resources data management. As per contract IBM also provided application development and management of P&G's HR systems with P&G's existed SAP software. IBM called the contract an example of "business transformation outsourcing," or BTO. Benefits for P&G The agreement enabled P&G to improve services and reduce HR costs through process transformation, technology integration, and best practices; further improved decision making by providing executives real-time access to employee reporting information that is consistent, accurate, and standardized; and deliver employee services in a more real-time, flexible, on demand manner. IBM served strong business process knowledge, deep technical expertise and a flexible, responsive business model to employee services at P&G. "IBM's vision for combining P&G capability with their own to lead the BTO marketplace is a win for P&G and IBM, with this many employees benefited from strong future career potential. 3. Partnership: HP for IT Infrastructure P&G was growing exponentially with increase in volume of transaction. To improve transaction volumes, customer satisfaction and cost efficiency, P&G developed one of the industry’s largest shared services projects. This bold initiative consolidated accounting and finance operations that were once spread across the enterprise, into a single, global organization. P&G announced its 3rd partnership with HP. In 2003 P&G signed a $3 billion, 10-year outsourcing contract that called for HP. HP Services managed P&G's IT infrastructure, data centre operations, desktop and end- user support, network management and applications development and maintenance for P&G's global operations in 160 countries. Approximately 2,000 P&G employees from 48 countries planned to transit to HP Services, mostly from P&G's Global Business Services unit. Current Scenario P&G’s infrastructure and applications environments, as well as many business processes, have been supported by HP for more than nine years now. Under the terms of the new agreement, HP will be accountable for most of the critical business applications used throughout P&G’s financial and supply chain systems, including research and development, inventory management, SAP enterprise resource planning, and business intelligence.
  6. 6. HP will integrate P&G systems - including those provided by other vendors - by supporting applications, databases, servers and networks to create a more standard, reliable and transparent technology environment. Benefits for P&G P&G’s quality and efficiency of its product supply chain, as well as its ability to be innovative enhanced in addition to reducing overall operating costs. HP’s transactional accounts payable (TAP) migration helped P&G improve service levels, reduce operating expenses, ensure business continuity and mitigate risks. Below mentioned are the few business benefits which P&G gain with this outsourcing.  Improved service levels, functionality, flexibility and capabilities  Boosted employee and supplier satisfaction  Improved turnaround time in Asia Pacific and Europe, Middle East and Africa (EMEA) regions to nearly 99%  Retained 75% of in-scope TAP personnel  Reduced operational costs while increasing performance and productivity IT Benefits & Improvement P&G benefited from some of HP's industry-leading technology solutions, including the adaptive infrastructure capabilities provided by the HP Utility Data Center (UDC) and Adaptive Network Architecture. With UDC, P&G was capable to rapidly deploy and manage servers in its IT environment, providing greater flexibility to quickly respond to changes in its business and IT environments. The HP Adaptive Network Architecture services provided a policy-based architecture to allow P&G to easily and rapidly add and reconfigure networks from its corporate backbone. Reference  P&G Annual report 2013  Partner’s websites  Economics Times article 2003  P&G Case Study by Dr. Beena George, Ph.D, Associate Professor

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