Shared Services Center (SSC) - PwC What is a SSC? Why implement a SSC? SSC benefits Feasible areas for a SSC model Organizational change Main differences between shared services

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Text of Shared Services Center (SSC) - PwC What is a SSC? Why implement a SSC? SSC benefits Feasible areas...

  • Shared Services Center (SSC)Integration and standardization of operations, increasing efficiency and reducing costs.

  • Preface

    What is a SSC?

    Why implement a SSC?

    SSC benefits

    Feasible areas for a SSC model

    Organizational change

    Main differences between shared services and centralization

    SSC in operation, maturity assessment

    How can PwC help you?

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    02

    03

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    09

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    Contents

  • Over the past 30 years, in order to reduce costs, business groups worldwide have transformed the structure of their service areas. The accounting, finance, payroll, human resources, purchasing, logistics and systems departments have changed their structure and organization, delivering the same services under different and creative schemes, increasing the quality, efficiency and transparency of their administrative duties and back-office.

    Among centralized organization models, SSCs are the schemes that best respond to the stockholders' changing needs, providing the expected cost cut, facing globalization and market expansion, and showing a particular flexibility with respect to the new rules of governments and securities market, way above typical centralized organizations.

    Migrating transactional operations to the SSC structure is a decision, whose main trigger is cost reduction; however, experience shows us that success of this conversion must include a set of indicators directly linked to each group of shareholders global strategy and vision to not fail in the effort.

    01

    Preface

  • 02

    It is the concentration of the organization's administrative and support activities that are traditionally distributed and duplicated in the business units and group companies.

    This is how the Shared Services Center provides these activities with the support required, obtaining lower costs, increasing internal controls, quality services in its operations, simplifying and standardizing processes

    A SSC is not: A simple centralization. Bureaucracy. A standard solution for all companies. Only a cost reduction initiative.

    What is a SSC?

    Business partner

    Capability to adapt. Control of master data and reports.

    Strategic support. Making of profitable decisions. Risk and compliance management

    Approach to processes. Sole control environment. Standardization and simplification.

    Centers of excellence

    Shared services

    Business unit

    A

    Business unit

    B

    Common process

    Common process

    Common process

    Shared Services Center

    Business unit

    C

    Shared Services Center

    Culture of service

    Flat structure

    Lead practicesIndependent

    entity

    Focus on the clientBusiness

    intelligence

    Economies of scale

    Standardized processes

    Strategic

    Specialized

    Transactional

    Business analysis and decision support

    Assessment of investmentsCost Management

    Tax and financial planning

    Management reportsBudgets and planningTreasury management

    Consolidation and reportFinancial analysis

    Transaction support(mergers, transactions and

    carve-outs)

    Fixed assetsCustomer and suppliers

    Income cycle IT

    AccountingAffiliate reconciliations

    TreasuryExpenditures cycleHuman Resources

  • 03

    The best startup strategy should be designed based on each company's individual characteristics, situation, needs and configuration. Companies reach better results when we first clean up the processes and later transfer and implement them in the SSC; in so doing, the center can use its expertise in improving them.

    The decision factors for situating the SSC must include, aside from possible savings in low-cost cities (real estate and payroll factors), constant supply of labor for successful continuity of the SSC.

    This requires strong involvement in the change management strategy by the board of directors and executive management focused on active sponsorship. It must be planned with a vigorous and early communication campaign to avoid resistance to change, mainly from middle management and key local teams.

    Mostly, the companies considered no tax scope in implementing their SSC. Transfer pricing and tax savings implications should be evaluated in the business case of the package for assessment of savings in operating costs.

    Making the decision to create a SSC has ceased to be a decision of the finance group, must be the decision of the organization's leaders in conjunction with the shareholders, to learn the specific needs of each of the business areas and how to tackle them. The best approximation to this approach is through a business case analysis and transformation to a SSC. Your organization's leaders must be completely involved in the planning, implementation, improvement and supervision process.

    The results of the 2012 SSC Survey conducted by PwC Germany showed that the factors that the directors consider to be the most important in migrating processes to a SSC model are:

    1 Cost reduction

    2 Improvement of quality

    3 Improvement of transparency

    4 More efficient services

    Implementing a shared services organization leads to centralization of common and duplicated processes that are provided to different business units under a sole leadership, working as an independent department with a focus on service and business.

    Success factors prior to implementation

    Why implement a SSC?

  • 04

    Higher service

    quality

    Simplification and

    standardization of

    processes

    Support future growth

    for shareholders

    Business units focus

    on strategic activities

    Cost reduction

    The most commonly outlined objectives in implementing a SSC were cost reduction and increased quality, however, from a current perspective, the most important factor is quality, while process transparency and service speed gain importance, as well as retaining key human capital.

    Improving users experience. Improved efficiency in the administration of labor demand. Combining services among business units.

    Internal controls, compliance and corporate governance. Better executive information. Documented end to end processes

    Increase skills and tools for business mergers and acquisitions. Increase flexibility and trust. Ongoing improvement.

    Simpler and more effective organizations. Leadership in your branch of industry.

    Through economies of scale. Through process efficiency. Maximize investment (real savings). Better determination of profiles.

    SSC benefits

    Common Systems

    E. EnabledSystems

    Multiple systems

    Ben

    efits

    and

    Sav

    ings

    Time to Implement

    Current

    5 -10%

    10-20%

    20-40%

    40 +%

    ERP Implementation

    Economies of Scale

    Labor Cost Arbitrage

    Process Re-Engineering

    Future

    Semi-standardProcesses

    Single/ Few Locations

    Common Systems

    StandardProcesses

    Standard,SimpleProcesses

    Non-standard Processes

    Multiple Locations

    Common Systems

    Semi-standardProcesses

    Offshore Location

    Self Services

    Multiple Locations

    Common Systems

    Semi-standardProcesses

    Offshore Location

  • 05

    Curently, organizations that have implemented a SSC in the world receive migrated services in the following proportion:

    Shared services initially focused on generic processes, with strong transactional bases and common to multiple business units.

    Need for standardization. Advantage of concentration and specialization. Separation thereof is possible between the business units and the SSC. It is feasible to provide remote services. Acceptable relationship between cost and benefit.

    Feasible areas for a SSC model

    Source: HfS Research and PwC EUA 2012

    85%

    60%55%

    60%

    50%

    Fina

    nce

    and

    Acc

    ount

    ing

    Info

    rmat

    ion

    Tech

    nolo

    gy

    Cus

    tom

    er

    Serv

    ice

    Hum

    an

    Res

    ourc

    es

    Purc

    hasi

    ngService delivered by the SSC Internal reports

    Accounts payable

    Accounts receivable

    General accounting

    Intercompanies

    Fixed assets

    Statutory reports

    Travel expenses

    External reports

    Taxes

    Master catalogue

    Payrolls

    Treasury

    Supply chain

    Customer service

    Human resources

    Processes migrated to SSCs vary in complexity and in number, the standard ideal a SSC should manage is not defined and an analysis should be conducted in each case, taking into account transactional processes (i.e.: accounts payable, fixed asset accounting or calculation of travel expenses), as well as more complex processes (internal and tax reports, budgets, general accounting, intercompany operations). The total number of services offered by each SSC seems to increase over time.

  • 06

    Location of the SSC This decision depends on two main factors: 1)

    availability of qualified personnel, and 2) local labor

    costs. However, in regard to future decisions, companies

    give priority to qualified personnel, as the market

    situation, in terms of recruiting better qualified

    employees will become highly competitive. In the

    American Continent, Latin America is the best location

    for an SSC, as they have, on the average, the highest

    level of maturity combined with the highest savings in

    operating costs and good contribution to the

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