MGI SHARED SERVICE PROJECT DESIGN

Presentation to the Board

January 12, 2015

Presentation Flow
I. Project Overview
II. Procurement
I. Project Overview
• Motivation behind Shared Service (SS)
Implementation
• Decision to Migrate to Shared Service
• Functions Identified for Shared Service
• Roadshow on Process Splits (SBU-
based vs. Centralized)
• Pilot Processes
What can companies going into a shared service a
business model expect?
• Resources are leveraged across an entire organization
• Long-term lower costs with agreed upon customer-service levels.
• A separate business unit created within a company or agency
• Accountability for delivering a suite of services to both the operating
business units and the corporate functions
• Employees work in an environment that pushes for “better, faster, cheaper”
• A backdrop that the work can move elsewhere at any time
• Challenge of creating a Shared (Business) Services environment that offers
opportunity, flexibility, and positive energy for employees.
For MGI, the motivation behind creating a shared
service for support functions were:

• Growth from 3 SBUs to 14 SBUs

• Common functions occurring in almost all SBUs
• Duplication of processes and supervision for the same functions
• Differing SLAs and costs for the same goods/services across SBUs
• Pressure to gain cost efficiencies from the merger
Functions Identified for SS
• Design and Engineering (D&E)
• Information Technology (IT)
• Technical Services Department (TSD)
• Finance
• Human Resources (HR)
• Supply Chain (SC)
When the decision to migrate to shared services was made,
a mandate was given to generate cost efficiencies from the
merger by operating common support functions in a shared
environment.

• Support functions were identified as potential areas for shared service operations
(Design and Engineering (D&E), Information Technology (IT), Technical Services
Department (TSD), Finance, Human Resources (HR) and Supply Chain (SC)
• Directors of these functions were engaged as shared service champions
• SS Champions evaluated their functions and created process splits to identify
opportunities for shared service
• Roadshows with SBU Heads and Operations were conducted over a one-month
period to generate support for shared service
Pilot Processes

• RECRUITMENT These were prioritized as pilot

processes for shared service design
• PROCUREMENT and implementation

• The objectives of of these pilot design and implementation were:

o To establish 2 quick wins for implementation by January 2015
o Create a replicable processes for rolling out currently decentralized
processes into the shared service operations
o Build the credibility of support functions operating in a shared service
environment
The Project Team Members

1. Functional Heads
o Supply Chain – Cora Jacinto
o HR – Rhodora De Leon

2. Process Leads:
o Recruitment and Selection Head (new joiner)
o Procurement Head (no involvement)

3. SBU subject matter experts

4. HR Project Coordinator – Donna Dizon
5. OD & Learning Resource – Joy Noree Maramba

NOTE: The planned counterpart MGI Project Lead to mirror the mirror the design framework for
other processes and provide knowledge transfer benefits for MGI did not materialize.
Timeline

Implementation
Other • January 9, 2015
milestones
Core Process
Design
• November 17-
Project 18
Documentation
and Analysis
• November 14 &
17, 2014
Project
Organization
• November 12,
2014*
*Planned Start Date was
November 5, 2014
Current Status
Activity
Define end-to-end process
Design/document sub process
Design Organization
Identify People
Define system requirements
Quantify costs
Define new capability
Build/buy capability
Identify pilot areas
Define SLAs
Secure Approval to Implement
Communicate Change
Implement Change
Recruitment Procurement
✔ ✔
✔ ✔
✔ ✔
✔
✔ ✔
✔* ✔*
✔ ✔
✔ ✔
✔ ✔
✔ ✔
✔ ✔
* Ballpark figures
Shared Service Benefits

Organizations that implement Shares Services enjoy a multitude of benefits: 

• Measure actual performance management

• Reduce cycle times
• Improve customer service
• Promote cross-functional efficiencies
• Achieve economies of scale

Many institutions choose to take advantage of a Shared Services model to

transform into a lean and agile organization.
 The Future group Shared Service Center is a “supermarket” of services
where companies procure services. Limited customization is provided
but greater variances may not be supplied and must be in-sourced.

Company 1 Company 2 Company 3

Company 4 Others…

Company 5 Company 6
Shared
Service
Center
• Working together as a team
• Leveraging the value of being part of a bigger group
• Still respecting your different markets
From: Optimizing HR Service Delivery to Enhance HR Value Creation by Emily Verde April 28, 2006
Future Vision – The Group Shared Service Center

• Individual Company Practice:

– Each company is represented by a house
– To be part of the community, the houses must meet some minimum
standards
– A blueprint will be laid out for the core house design for each company
– Each company can choose to vary core components if required – but
major variations won’t be supported by the community

• Group Shared Service Center:

– Centralized services, technologies and support

From: Optimizing HR Service Delivery to Enhance HR Value Creation by Emily Verde April 28, 2006
 How will the Shared Services Center conceptually work?
NOW: THE FUTURE:
COMPANY A: Front-end processes:
Front-end processes COMPANY A

COMPANY B:
Back-end processes

COMPANY B: COMPANY C:
Front-end processes

Back-end processes

COMPANY C:
Front-end processes Cos. A, B &
C

SHARED SERVICE CENTER

Back-end processes Back-end processing

From: Optimizing HR Service Delivery to Enhance HR Value Creation by Emily Verde April 28, 2006
II. Procurement
• Scope
• Changes
• Organization
• Process
• Headcount
• Skills
• Impact
• Cost
• Benefit
• Process
• Current Status
• Next Steps
• Additional Areas of Synergy
Scope - Procurement
Delivery of Goods
Purchase Request Purchase Order
to Requesitioner

Category Local Source

Importe
Non
d Local
Food
Buy

All
Importe
Food Categories
All SBUs d
Changes - Organization

From To

Multiple Procurement Teams Centralized Procurement Team

SBU/Client-based buyers Shared buyers in central location

Shared buyers assigned to

Buyers dedicated to SBU categories
Brand Champions assigned to SBUs
Changes – Procurement Process
As-Is Transition End-State
Common processes across Common Processes across
Unique process per SBU
SBUs SBUs

Buyers purchase multiple Buyers purchase per Buyers purchase per

categories for the SBU category for different SBUs category for different SBUs

Common forms across

SBU-specific forms SBU-specific forms
SBUs

SBU-specific procurement SBU-specific Procurement Unified Procurement

systems Systems System

Disparate categories, SKUs Common Categories, SKUs Common Categories, SKUs

and vendors and Vendors and Vendors

Leveraged, contracted Leveraged, contracted

Transaction-based buying
purchase purchase
Advance management of Advance management of
procurement for food & procurement for food &
Expediting as a way of life
non-food mat’l non-food mat’l
requirements requirements
 Changes - Headcount

Current Transition End-State

2 Leads and 28 Buyers 2 Leads and 26 Buyers for all More FTE savings with
across SBUs/client locations categories Automation

Incremental Headcount for Maintained Headcount for

New Market Research (2) New Market Research (2)
and Technical Officer (1) and Technical Officer (1)
 Procurement Organization - Interim
Supply Chain
1:36

Technical Govt Liaison Officer

Assistant 3PL

PROCUREMENT Category & Brand MARKET Project Management – LOGISTICS

PROCUREMENT – Non Traded
Management RESEARCH Transition Management MANAGEMENT
1:10
1:16 0:2 1:0 1:3

D & E Dept.
Marketing Dept.
Poultry Max’s Support and
Support
Operations Wares

IT/HR/Finance,/ Commissary
Pork & Beef PH
TSD/Other Depts. Support

Seafoods & Sauces Dencio’s/Kabizera

Grains, Oils, Fats, Beverage,

Dairy Vegetables & Fruits

Packaging Traded Products

 Changes - Skills
From To
Process-based skills to deliver transactional buying Strategic perspective on demand and supply to
driven by PRs achieve best approach on contracted purchases

Mechanical application by requisitioners of Stronger demand planning and forecasting skills to

historical trend to arrive at PR allow more effective price and volume leveraging

Stronger negotiation skills for leveraged buys

Partnering/Relationship management skills to

Outplace to Operations or address vendor behavior risk during price volatility
other areas may happen
Technical knowledge of categories, items and
supply side processes required for partnering and
client advisory services
Impact – Process, Compliance, Quality and Cost

• Minimal impact on process at the onset. Current forms will be used

but processes will be standardized
• Compliance on demand planning required for SLAs to kick in
• Detailed specification on approved PR will be the basis for purchase
quality
• SLAs defined per category based on normal process (vs.
rush/expedited process)
• Cost of operations and investment will be shared across SBUs
• Longer term FTE savings when the procurement process shifts from
manual to fully technology enabled
Impact – Process, Compliance, Quality and Cost

• Eventually, penalties for non compliance will be imposed on both procurement

and internal client
o Charges for expedited or rush purchase
o Penalties for late delivery
o Change in specs will be counted as new PR. Superseded PR will be considered
closed.

• Lower cost of goods sold due to purchase contracts negotiated on demand

forecast
• Tiered pricing for quantities below minimum order instead of open market
purchase
• Unforecasted demand to be served up to the level of internal buffer stocks
and vendor-managed inventory
 Impact – Cost and Benefit
P ???? P ???
• Trainings, exhibits and conferences Competitive
• Supplier qualification, sourcing and Strategic
Salaries
negotiation trips (local and Sourcing
international Activities P ???
• Monthly CAPA visits & commissary Procurement P ???
visits System Training cost
• Hiring for new capabilities
• Competitive salaries

P ??
• Procurement system purchase

•
Leveraged buys
5% to 10% savings on volume buys

•
through bids and preferred vendors
Tiered pricing minimize open market P ???
buys of operations staff P ???? FTE And Space
• Longer-term increase in buyer Reduction in COGS Rationalization
efficiencies
 THE NEW PROCUREMENT APPROACH WILL GENERATE A NET SAVINGS OF
PhP 138,303,357

SHARED SERVICE OPERATIONS MEANS BUYERS A REDUCTION IN COST OF GOODS SOLD OF

WITH GREATER TECHNICAL CAPABILITY AND PHP150M WILL BE DRIVEN BY AN INCREASE
HIRING OF CAPABILITY NOT AVAILABLE IN THE IN SUPPLIER MANAGEMENT AND
CURRENT TEAM. STRATEGIC SOURCING ACTIVITIES

Annual Cost Annual Cost

Staff Cost Component (Savings) Item (Savings)
Training Cost 2,465,000

Market Adjustment 2,288,398 Savings from

Leverage/Strategic Buys (150,000,000)
Incremental Technical Capability
Cost (Technical Officer, Market
2,672,245 Supplier Management Cost 1,850,000
Research Officer, Field
Researcher) Strategic Sourcing Cost 2,420,500
   
TOTAL 7,425,643
TOTAL (145,729,500)
 Next Steps
Cascade to
SBU
Heads and Comms to
COOs Buyers Roll out
• Jan 26 • Jan 31 • Feb _

Cascade to Training
SBU • Feb 1
Clients onwards
• Jan 27
Additional Areas of
Synergy
Technology
Space
Operations Management
Process Training
Expansion to other areas
Challenges and Learnings

• Availability of data
• Timing of initiative
o Availability of Project Team Members
o Availability of third party contacts
o Peak season

• Concurrent role of Project Team members

• Absence of Project Management and Functional Leadership
Counterparts
Longer Term –Initiatives

• Consolidation of IT Investments
o Infrastructure
o Applications
- Procurement Management System
- Linked Demand Planning and Materials Management
Systems
- Manpower planning process
- Demand planning and forecasting processes
 Typical risks and barriers to change
Risks
• Change is not managed effectively
• Other competing priorities take priority
• Communication is not managed effectively (both within the function and to the
rest of the organisation)

Barriers
• System access
• Existing communication channels within the team
• Resistance to change
• Gaining consensus and agreement within the team re future direction

From: Optimizing HR Service Delivery to Enhance HR Value Creation by Emily Verde April 28, 2006
 The critical success factors for achieving these type of
project goals are:

1. Deployment of a single user-friendly employee-centric portal

2. Deployment of a single source of truth for data
3. Self-service functionality for information update and
maintenance
4. A focus on process optimisation, centralisation and
streamlining
5. The implementation of a clearly defined formal change
management strategy

From: Optimizing HR Service Delivery to Enhance HR Value Creation by Emily Verde April 28, 2006
 One final key to success…

Think
BIG Start small
• Start with one business
unit or function
• Define the strategy for • Quick wins/”low
where we want to be 1, hanging fruit”
3, 5 years from now
• Understand how
people, process and
technology should
integrate over time
Scale UP
• Keep referring back to
• Plan our new eHR
our objectives, and add
infrastructure around items or coverage that
our growth plans will provide biggest
dividends and pay back

From: Ayala Group HR Mall Presentation

THANK YOU

QUESTIONS?