Optimizing a Retail Giant’s Support Functions to Save US$20 Million per Year

Executive Summary

A retailer with more than 3,000 stores was facing declining revenues and difficult market conditions. It engaged Everest Group to ascertain opportunities to optimize its support functions and create value from outsourcing. The scope of the work Everest Group supported included finance and accounting, customer service, IT, distribution, transportation, and store maintenance. Everest Group led transformation initiatives directly and indirectly by tapping carefully vetted third-party service providers to identify value creation opportunities. The engagement resulted in savings of more than US$20 million per year for the client.

The Client’s Challenge

Against the backdrop of a severe credit crunch, crippling recession, and new management, the retailer needed to review its company-wide support functions to look for opportunities for performance improvement and free up scarce capital to invest in new competitive revitalization initiatives.

Insight to Action

Everest Group began by assessing all key support functions within the organization for quick wins. The support functions it reviewed included:

• Finance and Accounting
• Human Resources
• Distribution and Transportation
• Information Technology
• Customer Service
• Store Maintenance
• Procurement
• Stock Administration

Based on a variety of factors including ease of achieving rapid savings, Everest Group recommended the client defer human resources, procurement and stock administration to a second wave of transformation opportunities.

Everest Group conducted internal assessments, built detailed business cases, engaged multiple suppliers, ran competitive RFP processes, and supported negotiations for each in-scope function.

Impact

Everest Group worked collaboratively with the client’s business teams to identify solutions that appropriately balanced risk, savings, and service. Outcomes included:

• Restructured a variety of IT infrastructure support functions, rationalized all contractors, and consolidated  offshore suppliers for continued maintenance and onsite development support
• Optimized return transportation to lower costs while improving product turns, and consolidated shipment carriers both to reduce costs and create a more flexible transportation network that improved stock to shelf performance of goods
• Restructured finance and accounting outsourcing to generate savings based through leverage of offshore service providers
• Consolidated customer service and collections services, and engaged an offshore call center service provider
• Optimized store maintenance operations, and selected a new service provider to provide continued support
• Designed a distribution consolidation model that moved substantial goods distribution to an upstream supplier to eliminate transportation costs, labor, material and improve cycle time performance

As a result, the client is realizing savings of more than US$20 million per year.