Outsourcing as a Competitive Strategy - CIMA · Outsourcing as a Competitive Strategy Mr Chen Theng Aik Senior Vice President & Head AP Finance Operations, ... Shipments: - more than

Chartered Institute of Management Accountants

Outsourcing as a Competitive Strategy

Mr Chen Theng Aik

Senior Vice President & Head AP Finance Operations,

DHL Asia Pacific, Malaysia

CIMA World Conference 2009

13-14 July 2009

Off Shoring/ In-House SSC – A Case Study

An Intro….

Page 4

DP DHL – Facts and Figures

DHL is part of DP DHL Group (HQ Bonn, Germany)

2008 Revenue: approx. Euros 60+ billion

500,000 employees worldwide

Presence in more than 220 countries and territories

Shipments: - more than 1 billion per year

Operates under 4 Business Divisions

Page 5

Freight Forwarding Supply Chain & WLEXPRESSMAIL

Global Business Services

Corporate HeadquartersGovernance and Selected Head Office Functions

Supply of World-Class Services Across all Business Units Worldwide

All BU specific core

functions such as M&S,

Ops, etc.)

The Structure of DP DHL

DP DHL – Bonn, Germany

Page 6

ObjectivesBenefits for Business Partners and DPWN

Leverage economies of scale

� Deliver lower cost and better service and greater value

Enhance flexibility of business

Professionalize service quality

� Help the company grow in a dynamic business environment

� Enable employees/ business units to focus even more on core work

GBS covers currently 9 different Service Lines under one roof:

Why? How?

IT ServicesReal

Estate

Fleet Mgmt. & Specific

Services Germany

Legal

Services

Inhouse

Consulting & TIM

HR Operations

Finance

Operations

Corporate Procure-

ment

Insurance

& RiskMgmt.

The goal of GBS is to enhance the flexibility of the business and professionalize service quality.

Global Business Services (GBS) and its benefits

Why set up the FSSC in Asia Pacific?

Page 8

Why set up the AP FSSC?

Our cost of finance as a % of total revenue was close to 2% in 2004

Benchmark studies have shown that best in class for such a high

volume industry is 0.5 to 1% (Hackett)

Project Team identified a combinations of ways to get towards best in

class benchmark as follows:-

• Setting up a SSC in a low cost environment

• Standardization and Harmonization

• Process Simplifications

Page 9

The Asia Pacific Finance Shared Services Centre (AP FSSC) was set up to serve as a platform for the Region to achieve significant productivity

improvements and reduce overall operating costs in Asia Pacific.

Objectives of AP FSSC

Specifically, the AP FSSC will provide opportunities to:

� Centralize accounting services and other value added activities for DPWN

divisions in a common location in Asia Pacific

� Provide significant cost savings by leveraging the wage arbitrage

� Achieve economies of scale and synergies

� Faster implementation and execution of Best Practices

� Center of Excellence

� Standardization & Harmonization

Page 10

Why Malaysia?

� Malaysia was chosen as the location for the AP FSSC for reasons which include:

- Significant wage arbitrage compared to our key locations

- Close proximity to one of our global IT SSCs (Cyberjaya)

- Availability of skilled resource with diverse language capabilities (English, Mandarin, Cantonese, Japanese, others)

- Stable political & economic environment, infrastructure, technology and communications network

- MSC Incentives

� Recently, HR and Express Asia Customer Service have also selected Malaysia for their SSC and they are now co-

located with AP FSSC

AP FSSC Team - 2008

Page 11

Other SSCs located in Malaysia

Companies with Centralized Services in Malaysia

Malaysia is ranked # 3 as a global SSC location by A.T. Kearney

Page 12

• With a pilot of less than 40 FTEs end of 2004, we have grown steadily and now provide services to all DPWN

divisions operating in Asia Pacific.

• We gradually increased our scope to become a regional center of excellence for Revenue Leakage program and to

also start to provide services to cover customer facing activities such as query, collections and billings.

Our Journey & Growth

AP FSSC at ~120 FTEs

Incre

asin

g O

pp

ort

un

ity t

o

Red

uce F

inan

ce

Co

sts

2006 2007

AP FSSC at ~195 FTEs

AP FSSC YTD at ~270 FTEs

2008 2009

AP FSSC projected at ~400 FTEs

• Large pool of accounting graduate available in Malaysia job market

• Real estate / office space at reasonably low rental rates are readily available with sufficient notice

Pilot :-

late 2004

with less

than 40

FTEs

Page 13

Lessons Learnt & Success Factors

Early Senior Management Buy In

Start with a Pilot & prove the concept (do the simpler tasks first)

Get relevant benchmark KPIs so you know your end game (e.g. CoF)

Do base lining of relevant KPIs & publish your KPIs

This is a “JOINT” effort

Have an agreed “transition period”

There will always be “teething” problems so be realistic and do not over promise

Have SLAs agreed & Signed before G0-LIVE

Have good documentation, process maps and detailed work instructions ready and

signed off

Have business case prepared and agreed up front!

Be prepared for “noise”!

Create and build a “service culture” in your SSC and put in place continuous motivational

initiatives.

Good Luck!

Thank You!

Chartered Institute of Management Accountants