The shared service center, the pinnacle for performance improvement in retailing

Markets and shops have a very ancient history, dating back to antiquity. Retailing involves the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit.

Over the last centuries change has always been a dominant driver in the retail landscape, but today the frequency and the scope of the changes are huge. Retailers who won’t be agile enough to change rapidly enough will lose the game. The challenging discounters are not going to disappear and are now evolving from no-frills stores towards a genuine alternative for the established dinosaurs, offering higher quality, a broader assortment and a better shopping experience.

In this highly competitive arena, the role and performance of the shared service centers or “headquarters” as old-fashioned organizations still call it will be a crucial parameter. In most performance improvement projects, we conduct, the question to centralize or decentralize remains a dilemma.

To help our clients to make better choices EffCo has developed an easy, straight forward 3 questions-approach to facilitate the process without political carnages.

1.      Is there a choice?

Some functions like legal, accounting, compliance etc.… just can’t be decentralized, let’s not waste time on discussing.

2.      Does centralization mean substantial efficiency gains?

We have developed an easy to execute methodology to analyze the potential cost savings. If there is no 10-20% value added, drop it.

3.      What are the risks?

The customer comes first! All activities that have little impact on the commercial agility of the BU’s should be considered.

 

In most retail organizations, huge inefficiencies can be found, so tackling the operating costs is a condition sine qua non for survival. Not only vendor negations, outsourcing of non-core activities and a best in class real estate management will not do the trick. Applying advanced efficiency improvement techniques, far beyond “lean” will very often reduce operational costs with up to 30%.

Improving service levels and reducing costs of shared service centers is a critical challenge for most retailers.

To make a Shared Services Center remodeling work, 5 rules of thumb apply:

·        First adapt and improve the organizational structures and processes before starting the implementation.

·        The remodeling should start with a top-down approach. These implementations are often highly political and without a strong top-down approach, BU-managers won’t be spontaneously embrace the change.

·        Cost-cutting should not be the sole objective, but this kind of transformation should always start from a customer-centric point of view.

·        Communication is key! Buy-in of all stakeholders involved is crucial.

·        Simplicity is a MUST as giving in to complexity for political or other reasons will substantially fade out the efficiency gains.



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