The New Era of Shared Service Centres: Translating Efficiency into Effectiveness
by Treasury and Trade Solutions, Citi
Shared service centres (SSCs) have reached an inflection point in their development. Expanding in scope – particularly as ongoing economic challenges encourage the pursuit of cost and process efficiencies – the role of SSCs can now look beyond ‘efficiency’ to long-term “effectiveness”, and play a pivotal role in delivering sustainable, strategic business outcomes. To support this evolution, Citi recently hosted a Shared Service Centre Forum170, bringing together market experts from a cross-section of industries to discuss the opportunities and challenges at hand.
SSCs – organisations’ internal hubs that centralise the in-common functions of otherwise separate business divisions – have been a growing feature of the corporate landscape since the 1980s, offering numerous benefits with regard to cost and process efficiencies. And, as continuing economic uncertainty and the impact of new regulations heighten the need for such efficiencies, SSCs have become more popular than ever. Indeed – according to a 2012 report by KPMG – growth in the use of SSCs now outstrips that of traditional outsourcing models, with new innovations in technology revolutionising the ability of such centres to support increasingly global businesses.
Against a backdrop of continuing economic uncertainty and new regulations, SSCs have become more popular than ever, outstripping traditional outsourcing models as new innovations in technology revolutionise SSCs’ ability to support global business. In fact, the role of the SSC has reached a major turning point in its development, expanding beyond more immediate centralisation and standardisation benefits to play a critical role in delivering sustainable business outcomes to the wider organisation, in partnership with a growing variety of business and functional stakeholders. By expanding in scope – both functionally and geographically – SSC activities can become more closely aligned with organisations’ strategic aims, and better translate ‘quick-hit’ efficiencies into long-term effectiveness.
Sustainable and strategic business solutions
In recognition of this shift, Citi recently brought together a number of market-leading corporate partners – treasurers, consultants and procurement managers at the frontline of SSC-supported initiatives – to encourage greater dialogue about the strategic opportunities provided by SSCs’ expanding scope and the hurdles that must be overcome to realise the greater potential. Through centralisation, standardisation and rationalisation, SSCs can increase forecasting accuracy by improving accessibility to – and visibility over – a wide variety of both financial and non-financial metrics.
Bearing in mind the continued economic pressures in the wake of the 2008 global financial crisis, it is no surprise that the forum opened with a focus on working capital. Citing the need for continued improvements in working capital management and cash-conversion efficiency rates, Daniel Windaus – managing director of financial consultancy firm REL – identified “the agility gap that has developed over the course of the financial crisis – a gap between decreasing revenue and rising costs that must be eliminated by making SSCs more global and multifunctional”.
Accurate forecasting depends on access to the right information at the right time
In a theme that resonated with all participants, Windaus highlighted the need to look beyond short-term ‘quick-win’ solutions – such as writing down obsolete stock or extending days payable outstanding (DPO) – and to focus instead on long-term, sustainable and more effective solutions. Chief among these goals – and in line with the desire to strengthen risk management – is enhanced cash forecasting capabilities. “The challenge is to translate working capital into better cash-flow forecasting,” said Windaus. “In an REL survey of the top 1,000 corporates in Europe, the USA and Japan, more accurate forecasting was cited as a top-three priority in all three regions.”
Through centralisation, standardisation and rationalisation, SSCs can increase forecasting accuracy by improving accessibility to – and visibility over – a wide variety of both financial and non-financial metrics. “Accurate forecasting depends on access to the right information at the right time – and top performers in this respect have much greater coordination between functions,” said Windaus, underscoring the strategic value of SSCs’ expanding remit and of greater coordination between regional SSCs under the umbrella of global business services.