FMCG Client – Consumer Packaged Goods

  • Annemarie Stupples
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Our FMCG client chose a major Indian outsourcer as their preferred managed service partner in late 2020.

The scale of the transformation programme is significant. It has led to the creation of over 100 different Statements of Work (SoWs) and Change Requests (CRs), ranging from complex managed service agreements to systems development and integration projects, and resources contracts.

Our client needed support to put in place improved controls, develop the cross functional (ITIL-based) services and overall account management, and additional contract negotiation and drafting expertise.

The result has been improved controls with clearer oversight of the managed service, reduced risk, and enhanced relationships between service owners and service delivery leads.

The improved controls have led to the opportunity to drive further cost reductions of around 5% as well as significantly improving efficiencies in the day-to-day administration of contracts and commercials. 

The client faced four distinct challenges: 

  1. Limited capacity within their existing Procurement function to provide the level of governance and contract development support needed as a result of the transformation change programmes.
  2. Limited experience and capability within the Operations teams to be able to define clear requirements of their managed service provider in a way that could be translated into a contract.
  3. Balancing the prioritisation and delivery of a complex transformational change agenda, with its inherent interdependencies and occasionally competing objectives. This challenge was exacerbated as the major programmes were supported by different systems integrators.
  4. All whilst implementing a new target operating model, which resulted in many personnel changes.

To achieve our client’s objectives, we provided senior procurement and commercial transformation advisory and assurance services, supplementing the in-house Procurement team with experienced staff members familiar with supporting complex transformational change programmes.

At the outset of the engagement, a short discovery exercise allowed us to: 

  • Understand who the key stakeholders were who were involved in the delivery of the Services from the outsourcer, or the management of the Services, at the client setting.
  • Gather information about what Services were already being provided by the outsourcer, to whom and at what cost.
  • Evaluate the current controls to determine what was working well, and what needed to be improved.
  • Support the stakeholders in prioritising the change agenda to determine what the transformation roadmap – and importantly the project and managed service roadmap – looked like for the next year.

Once a clear baseline emerged, we could move on to: 

  • Create a centralised record of all the historical and in-force contracts, gathering signed contracts that had been put in place without the support of Procurement, and uploading them to the central contract management database.
  • Conduct an outsourcing risk assessment, working with the Service Owners to understand their concerns, and plan mitigate activities with the support of the outsourcer.
  • Make recommendations on contract consolidation opportunities.
  • Put in place the governance commitments made in the MSA.
  • Improve the monthly and quarterly reports.
  • Develop a continuous improvement plan for each of the managed services.
  • Develop a simple, repeatable approach to gathering detailed contract requirements for both managed services and resource contracts.
  • Start to draft fit-for-purpose contracts that protected the client.
  • Improved Controls: Prior to the discovery work, Procurement had a record of 22 Services that were being delivered by the managed service provider. The analysis led to understanding that almost 50 contracts had been put in place without the engagement of Procurement or their approval. Gathering a more accurate picture of the Services allowed the client to understand the totality of the Services provided, this in turn led to an accurate calculation of the Service Credits and Earned Value discount due to the Client, plus further cost reduction opportunities. 
  • Reduced Risk: Assessing the Operational Risks as a result of the outsourcing deal, and actively planning interventions to mitigate these risks, has allowed the client to reduce their overall Operational Risk profile. What gets measured, gets done. Articulating clearly defined Service requirements in professionally prepared SoWs and CRs, aligned to the MSA obligations, provided a better level of protection for the client in the event of an escalation or dispute.  
  • Better Relationships between the Service Owners and the Service Delivery Leads: Improvement in the monthly and quarterly reports, and a new focus on continuous improvement has seen the operational relationships blossom.  With more than half of the Service Owners now describing their Services as ‘good’ or ‘very good’. 
  • Increased Efficiencies: Consolidation of around 18 short-term, resource only contracts, not only reduced the overall costs for the same resources, but significantly reduced the administrative effort of raising so many individual contracts, purchase requests, invoices, goods receipted notifications, and payments remittances which were previously required every 3 months 

Barkers: FMCG Client – Consumer Packaged Goods Case Study

Author: Annemarie Stupples