Does simultaneous outsourcing of all your purchase-to-pay processes and achieving process improvement in just 12 months sound possible to you?

Does simultaneous outsourcing of all your P2P processes and achieving process improvement in just 12 months sound possible to you?

Jan Fonfara

Sony Europe

Agenda a. Sony & Sony Europe b. Baseline c. Target d. Solution e. Challenges f. Journey g. Achievement h. What If i. Still to Do j. Summary k. Q & A

Sony & Sony Europe

Sony

• app 65 Bill. EUR sales worldwide

• app. 165k employees

• Founded in 1946 by Masaru Ibuka & Akio Morita

Sony Europe:

• Distribution of Consumer and Professional Electronics across Europe (7.5 Bill EUR external sales)

• Covering every European country

• app 5k employees

Sony Europe Electronics=

26 different legal entities

Legal Entity Restructuring

• Main Co in UK• Countries as branches of the Main Co• S/CIS, S/TUR not in scope

TODAY TOMORROW

S/CIS

STURK

SFR

SDL

SUK

SNORD

SESP

SITA

SOASCH

SHEL

SPOR

SPOL

SCZE

SHUN

SLVK

SBNL

SOCE

S/TURK

S/UA

1

1

1

1

SFRSFR

SDLSDL

SUKSUK

SNORDSNORD

SESPSESP

SITASITA

SOASOASCHSCH

S/CISS/CIS

STURKSHEL

SPORSPOR

SPOLSPOL

SCZESCZE

SHUNSHUN

SLVKSLVK

SBNLSBNL

SOEMSOEM

1

1

11

1

1

1

11

2

1

1

1

1S/TURK

1

S/UAS/UA

1

1

24

As Sony Europe was

• 26 legal entities across Europe • Independent local finance functions with

regional headquarter coordinating • 10%+ Finance employees (estimated..) • No outsourcing • Overlapping functions (local, regional,

sub-regional) • Limited process standardisation • Lack of transparency, difficult to

compare entities • Unsustainable cost structure accelerated

by unfavourable market environment

Baseline

2010

42 SAP company codes

The Impacts

• “Controllers controlling the controllers”

• Long budgeting process (bottom-up – top-down etc.) lasting 3 months

• Discussion about intra-SEU transfer prices

• High effort for governance (e.g. SOX)

• Lack of actual control

• Relying on the middle (e.g. FD of local organisation)

• (partially) meaningless KPI’s

• Inwards focus

Baseline

Sony Europe Vision

Simplification

Standardisation

Customer focus / Our Purpose

Competitive cost structure

Finance to deliver value

Flexible Organisation

Target

Thro

ugh

The Solution

Sony Europe Electronics=

26 different legal entities

Legal Entity Restructuring

• Main Co in UK• Countries as branches of the Main Co• S/CIS, S/TUR not in scope

TODAY TOMORROW

S/CIS

STURK

SFR

SDL

SUK

SNORD

SESP

SITA

SOASCH

SHEL

SPOR

SPOL

SCZE

SHUN

SLVK

SBNL

SOCE

S/TURK

S/UA

1

1

1

1

SFRSFR

SDLSDL

SUKSUK

SNORDSNORD

SESPSESP

SITASITA

SOASOASCHSCH

S/CISS/CIS

STURKSHEL

SPORSPOR

SPOLSPOL

SCZESCZE

SHUNSHUN

SLVKSLVK

SBNLSBNL

SOEMSOEM

1

1

11

1

1

1

11

2

1

1

1

1S/TURK

1

S/UAS/UA

1

1

24

2011

Solution

1 legal entity

1 standardised branch per country

1 SAP Company Code for Europe

1 Standard Process used (unless TLS)

Centralised process ownership

Outsource processing (PTP, OTC, RTR)

Transformation of process, systems and ways of working in short period of time

Simultaneous standardisation and outsourcing of processes

Moving from local to central decision making and responsibility

Cost savings already required in first year (2011) and fully to be realised in 2012

Massive challenges and very short timelines required a new and systematic approach

Challenges

Key steps (P2P)

Journey

1. Define standard processes fast, communicate and control them 2. Outsourcing of all activities 3. Implement delivery responsible 4. Ensure communication 5. Define targets (KPI’s) and start monitoring

Step 1

Journey

• Define standard processes fast, communicate and control them • Process experts, SAP solution architect and future Process

Owner in workshops to define processes (supported by Nimbus). Declare them as mandatory! Define ownership.

• One single truth regarding process documentation (Sony me@work) to prevent outdated and multiple process descriptions (Visio, PowerPoint)

• Decide which parts are to be outsourced • Implement a change control process

2011 Sony Corporation

Process / Risk / Control “Commitment to the Basics”

Ownership

• Single Global Process Owner for every process

Simplicity

Transparency

• Standardised process across Sony Electronics

• All processes documented in a single tool (Nimbus)

Control

• Any change or local variation must go through a strictly governed change control process

• Using the standard process is mandatory

RequesterEuropean

Process OwnerCAFÉ Approval Implementation

Step 2

Journey

• Outsourcing of all activities • No Po No Pay policy, exception list with coding instructions

for unsuitable categories (communication and enforcement) • No retained activities • Purchasing systems (e.g. SRM) and invoice approval flows to

implemented • Train outsourcer in new standard processes and systems • Knowledge transfer from local Finance teams to outsourcer • Review differences and ensure outsourcer follows new

processes

Step 3

Journey

• Implement delivery responsible • Considered as not required by many consultants as

outsourcers are supposed to work independently • For organisations which change processes simultaneously to

outsourcing this function is very beneficial • Guide outsourcer on a day to day basis • Must ensure delivery regardless which part of the

process breaks down • Contact point of last resort • Ensures it gets done

• Close communication between Process Owner and Delivery Lead

• Communicate shift of responsibility (from local Finance Director to Delivery Lead)

Step 4

Journey

• Ensure Communication • Communication has to be managed between the outsourcer

(two locations), delivery lead, process owner, vendors, stakeholders and Sony users in 26 offices / branches

• Clear escalation route in case standard contact to outsourcer did not deliver the required results

• Keep stakeholders updated regarding delivery results and reasons for missing targets

Step 5

Journey

• Define targets (KPI’s), start monitoring and improving • Developing the KPI structure and ensure they reflect clear

process responsibilities (e.g. Outsourcer – Sony) • Daily reports for driving process execution • Monthly report for KPI and SLA reporting in order to drive

further efficiency

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Untouched To be deleted

SONY APW Items WNS APW items

Return to vendor APW items Manual approval required by Sony

Manually approved, to be posted by WNS SONY AP2 Items (old SAP Workflow)

Closing Balance

So far....

Achievement

• Processes are truly standardised and fully outsourced

• A new operating model is established

• Business has not been disrupted • Central process and delivery

ownership • Local finance teams being

transformed and changed their focus

• Significant cost savings through labour arbitrage

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2010 2011

Outsourcer

Sony

PTP

..we would not have done it?

What if..

• Market environment has changed significantly, decline in most European CE markets / “LCD hangover”

• Margins and profitability are under even higher pressure • Significant disruptions due to natural disasters (Fukushima,

Thailand flooding) • Significant decline in European CE markets • Sony Consumer Products (global) -19% (LC) Dec YTD

We are just getting started..

Still to do

• Using the KPI’s for our improvement projects • Acknowledged best practice across Sony – Utilising this advantage • Automation to improve process efficiency

So: Is it possible to simultaneously outsource all P2P processes and achieve

process improvement?

Summary

YES, if: • A experienced change programme is in place (incl. IS, HR) • Full buy in from senior management, no back-off when problems

start – the principles are not changing • A strong central team who takes full ownership and control • The outsourcer operates as an extended arm of the organisation

• Direct operational communication • No hiding behind SLA and contractual obligations

Q & A