India Centre Offers Nearshore and Offshore Wins for Robert Bosch

Robert Bosch set up a Global Business Services model in 2004, originally just for Finance & Accounting services, but subsequently extending it to Procurement and Purchasing and HR services, as well. The India centre plays the biggest role, but a number of regional "spoke" models provide the necessary additional "customer intimacy." The scope of delivery currently covers North America, Europe, India, Asia Pacific and Japan, with Latin America running itself for the time being. India’s role is very important, as Kiran Sundararaman explains, offering both nearshore and offshore options. The decision as to how to support a customer based on a mix of onsite, nearshore, and offshore services centres is a crucial plank in Bosch’s services delivery strategy – and it’s one that is paying off. In this interview with SSON’s Barbara Hodge, Kiran explains how this delivery strategy is driven by two parameters: total cost of ownership and total cost of experience. Kiran, can you start by explaining who heads Bosch's GBS? And what are the reporting lines of that individual? The GBS is headed by Ms Sujatha Doreswamy. She’s based in India but is globally responsible for the process ownership across these three functions: finance & accounting, procurement, and HR. The HR area is still in the process of being established. Currently, she reports to a business unit leader here in India, with functional reporting to corporate headquarters in Germany. So, although we are the shared services provider, from a reporting standpoint, and we have complete responsibility for the functional areas, we do not have a global reporting structure yet. In terms of Bosch’s global business services strategy, how are you leveraging your global delivery centres? Apart from India we have a few nearshore centres, for example we have one in Mexico, and a second in Vietnam. Additionally, Bosch has a third centre in Romania. Effectively, we are deploying a hub and spoke model, by leveraging on-site, offshore and nearshore strategies. These three elements contribute to the location strategy for delivering services globally. When we say on-site, this relates to activities done at the customer premises, but the responsibility for the process, and the KPIs and SLAs, rests with the global business services. When it comes to nearshore, we have basically split the regions into specific blocs. North America and South America remain in one region, for example, and our nearshore centre in Mexico caters to them, based on the proximity needs of the regional units. For Europe, the nearshore centre is in Romania. The nearshore centre in Vietnam takes care of the ASEAN region and China and Japan as well. India is also a near shore centre for India specifically, because the country has been identified as a specific region. Because of its potential? Yes, because of its potential and because of the volume of work that is being done in India. We see that it is important for us to have a special focus on India and hence we are delivering the shared services as a nearshore solution for India itself. The offshore centres are predominantly India and Vietnam. So the reason I bring up Vietnam again is that Vietnam tends to have a duel advantage. One, because it is in the ASEAN region, so from that sense it can be termed an offshore centre; but when we talk about nearshore, it is more because of the cultural and local proximity to the ASEAN as well as China sub-region; hence, Vietnam plays a duel role: both nearshore and offshore. Similarly, India is the offshore destination for shared services on the procurement front for all the global regions. So the idea of splitting the work between onsite, nearshore and offshore is driven entirely by the strategy of the customer site. We determine this at the site of a project, to decide what percentage of the work needs to be done onsite, what percentage would be nearshore and what percentage would be offshore. Currently, our onsite activity is about 3- 4% of the overall volume of business and nearshore is about 15-17%. The rest is offshore. [eventpdf] What are the main customer-oriented drivers for this strategy? Essentially, what we have defined as location strategy is driven by two parameters: total cost of ownership and total cost of experience. For total cost of ownership, our focus is on reducing the cost of ownership to the customer. In that situation, cost plays a very critical factor. The cost of ownership has to be low to the customer and hence our delivery model will be focused mainly on offshore, with a minimum nearshore presence. When we talk about total cost of experience, the cost is not the focus but proximity to the customer is. At Bosch, the customer decides on the right balance for their specific project needs. Based on the two parameters mentioned above, I’ll choose an offshore model or a nearshore model or a combination. For example, in China, where customer proximity and the need for us to be closer to the supplier base are very high, we have deployed the on-site model. But the cost of ownership is very high there because there’s no significant cost arbitrage for operating on-site in China. What are some metrics that prove the success of your GBS model for purchase and procurement? Purchasing and procurement shared services has two aspects. One is direct materials procurement and purchasing and the other is indirect materials. Our shared services is focused on both these aspects. So, if I look at direct materials, the cost of sourcing is one of the parameters that we have been given as a KPI. We have year on year targets for reducing these costs from a sourcing standpoint. So that KPI has worked in our favour. The second metric is in terms of benefits realisation, specifically focusing on delivery management of suppliers. So here the cost of delivery needs to reduce continuously, and it’s related to the supplier delivery performance on the direct material side. So once the supplier has committed for delivery, we have to ensure that the committed schedules are met and the overall cost of delivering the components is minimal, bearing in mind there are opportunities for suppliers to delay their shipments, which leads to higher freight costs for example, so the overall cost of delivery goes up for our customer. We monitor this supplier delivery performance as a parameter, and we have to show improvement in this KPI for our preferred suppliers. We also help the customer organisations in closely tracking and monitoring the performance levels of the suppliers and monitoring their shipment details. We provide early warnings to our own internal customers to be ready with a mitigation plan in case there are delays in deliveries, and so on. So this is part of a solution or a service that we offer on the supplier’s delivery management side. On the indirect material side we have something called an ordering centre. This is primarily focused on making sure that the purchase requisitions are converted to orders and orders are sent out to the suppliers. It helps us ensure that the deliveries of these indirect materials happen on time. So, in the ordering centres we have KPIs based on turnaround times for converting the purchase requisitions to purchase orders, as well as time to acknowledgement and time to delivery. These are the two other parameters that we monitor in the ordering centre, and in which we have achieved some marked improvements. What is your biggest goal in the next year? What will your focus be for 2014? The main objective right now is to come up with a clear material grouping strategy, and a bundling strategy for our various commodities. Now that we have set up an international, global bundling team, we want to ensure that we can realise the benefits of bundling and negotiating with suppliers to increase our potential savings. So that is a focus area, and analytics obviously plays a huge part in it. It’s why I chose "analytics" for the theme of my presentation at the Shared Services & Outsourcing conference in India next month. My team is having a real impact by providing meaningful insights into the decision making process: Where is the potential for us to save? How do we optimise the supplier base? What is the potential for us to negotiate with the supplier? These analytics have been initiated from my side and we have some examples that I’ll be talking about in the session – for example, the work we’re doing for one of our North American entities. I’ll be explaining how we went about this analytics project in detail at the conference, but essentially, we looked at the data for the past three years for a specific material group and came up with the analysis part of it first, and then delivered insights to the strategy development at the purchasing organisation. As a result, that group, right now, is evaluating changes to their purchasing strategies, some of which may be far reaching. Can you share some more details on how this will impact purchasing policy, and the benefits? This entity operates in three sub-regions, with multiple manufacturing locations in these regions, and supports three corporate units. These multiple manufacturing locations are the most critical part of the whole analytics aspect that we are focusing on, and we’ve chosen a specific material group, which is machine components and spares. These are consumables that are required in day-to-day production, and which have to be replenished from time to time. Our spend to date in this material group is very significant and we are now analysing it through various visualisation methods. The data points have been driven down to detail, to give meaningful insights. So now we are coming up with clear insights that will help the region to make specific changes to its strategy for sourcing and negotiating with suppliers. Overall, how would you describe the perception, within Bosch, of the shared services group? Is it welcomed as a strategic enabler? Is it recognised for its value? Do you face resistance? A very important question. I would like to answer this a little more qualitatively. So, when we started back in 2003/2004, the concept of shared services itself in our organization was more of a centralised approach, more of a top/down approach. Now, in the initial years there was a clear mandate, but there were challenges in high cost countries, because it meant that people may get redundant, or reassigned. So in the initial wave there were some barriers. The second aspect was the language in which the service was to be delivered. This was a major challenge for us initially. We started by focusing on English speaking countries and then we brought in the complexity of language as an enabler. We started with languages we could deliver out of our offshore centres, and over a period of time built a nearshore capability to help complement the language aspect. This part of the journey took three years, I would say. After three years we really started to see the benefits of the shared services organisation, meaning our customers started to see the benefits of standardised processes and increased transparency. In some phases we had to enable the process with stronger IT systems so these systems also kicked in with benefit realisations. I would say that in the course of this journey of nine years, the first three years were more of a struggle, but in the past six years the organisation has really seen the benefit. So now it’s become a key element of our corporate strategy. It sounds like you are changing the world for your customers? It’s not easy to change the world, but I think if we are at it on a continuous basis, once the change begins, it’s within us. It’s more about the mindset, I would say, so that’s what the shared services is trying to focus on. Join Shared Services & Outsourcing Week India, 2013, to learn more about: • Converting big data into smart data by implementing predictive, correlative and operational analytical tools • Characterising data and enhancing big data value by tagging and analysing • Moving towards easily accessing real-time information, thereby reducing time to insight Click on the banner below to get more details.

India Centre Offers Nearshore and Offshore Wins for Robert Bosch

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