Implementing Multi-Tower Outsourcing for a Global Health and Hygiene Products Manufacturer

Executive Summary

A Fortune 100 global health and hygiene products manufacturer, seeking assistance with a major, multi-tower outsourcing initiative, engaged Everest Group to provide expertise and assistance in strategy development, solution development, service provider selection, and contract negotiations. Everest Group and the client worked collaboratively for more than two years to take the company from concept to a steady state environment. This successful engagement has positioned the client to realize US$150 million in anticipated net savings over a five-year period.

The Client’s Challenge

The client had begun a cost reduction and efficiency enhancement program across its business support services. It was considering six towers for outsourcing: engineering, IT infrastructure, application development and maintenance (ADM), finance and accounting, human resources, and procurement.

The company wanted to lower its spend across various indirect sourcing categories, and reduce procure-to-pay transaction processing costs. It also sought to further automate various aspects of the procure-to-pay processes, drive standardization across sectors and geographies, and strengthen vendor relationships via improved processes and technology. In addition, it wanted to continue strengthening client internal sector relationships, and consistently achieve regulatory compliance. Finally, the client wanted to achieve better visibility into category spend on a global basis to enhance decision making with proactive support for its contract manufacturing strategy.

While the client’s sourcing functions were relatively mature and low-cost, particularly in North America, the company was limited in its ability to recruit and retain talent in indirect procurement categories. There was also significant skepticism within internal procurement and middle management regarding whether procurement outsourcing providers possessed the maturity and experience to deliver more value than internal teams. Further, although the client believed the cost savings would be significant, the actual savings could not be fully determined until the sourcing activities commenced. This required a leap of faith with the procurement outsourcing providers.

Insight to Action

Over the course of 14-months, Everest Group guided the manufacturer through development of the functional strategy, solution, provider selection, and final negotiations. Over the subsequent 12 months, the Everest Group team also aided in implementation of the agreed transition plan, and remained with the client until steady state was reached.

After gathering the initial fact base, developing the business case, presenting a clear view of the market and service provider capabilities, and developing a standardized set of service levels, Everest Group and the client invited three providers to a series of collaborative solution development workshops. These led to a down select of two providers, both of which were brought into contract negotiations, with an ultimate selection of one provider.

Everest Group also organized visits to the providers’ delivery facilities in India and Eastern Europe during the due diligence phase, and continued to facilitate dialogue and relationship building throughout implementation of the transition plan.

Impact

The Fortune 100 client projected US$150 million in net savings over five years as a result of the ongoing outsourcing engagement. As part of the initiative, the company established a European buying center, providing opportunities for improved tactical sourcing and better compliance levels.

The new retained organization and governance structure that Everest Group helped to create has enabled the client to monitor the relationship and manage provider performance. The process also resulted in a harmonized set of service descriptions and service levels across the client’s main geographies, North America and Europe.

Finally, the key client stakeholders became convinced of the benefit of the outsourcing initiative, buying into the outsourcing model and the strategic value that it could provide. The process thus helped create a strong and open relationship in which both client and provider gained common understanding and expectations.