GBS, short for Global Business Services, is a relatively new term and service model that stemmed off from the Shared Services Model which has been around much longer. In the past few years, we have seen increasing integration between Supply Chain Processes and GBS Global Business Services for large companies due to the many benefits of centralization. Before you jump on this hype train, we want to provide you with a basic understanding of GBS services and SSO, how they relate to supply chain, and what your business supply chain process can expect to benefit from using such a service model.
What is Global Business Service and Shared Service?
The term Shared Service may be familiar to you as it is traditionally a shared service made to support back office functions such as accounts payable, IT, or any high-volume transactional processes that are easy to automate. Large companies have these types of shared region or global account shared service centers to support their back-office processes. The core ideas of Shared Service are to centralize, automate and standardize processes.
Centralization – capitalize on economies of scale
Automation – Deliver savings and increase scale using new technologies
Standardization – Improve process through standardization to achieve the ultimate goal of cost saving
Global Business Service
GBS is basically a more integrated and advanced version of the shared services model that evolved from new demands. It is truly global, unlike shared services which can be regional, country based or multi-national. Unlike shared services, GBS global business service serves beyond basic transaction functions, has expertise to deliver and incorporate multiple high value functions into the process, such as data analytics and consulting.
The higher value functions offered by a global business services model also means that it embraced new tools and technologies in order to deliver these higher value functions. Rather than a service provider, a GBS services company acts more of a business partner of equal standing to the company it serves. It runs like a business and has the power and control of the process.
What are the Similarities and Differences Between Global Business Service and Shared Service?
In a nutshell, both Shared Service and Global Business Service have the objectives to improve processes, reduce costs, and improve service quality.
However, there are key differences between the two that makes GBS Global Business Service a more suitable model for supply chain operations than the former one.
Global Business Services most likely has a hybrid model that takes advantage of not only its own technologies but third parties tools. Integrating GBS into your business operation doesn’t mean completing revamping your current process, but a combination of existing technologies and new tools, which makes the adaptation easier and more efficient
According to EXLservice survey of Global Business Service and Shared Service Provider, 70% of GBS incorporate multiple functions, compared with 48% of SSOs
Global Business Services are more customer focused than Shared Services
Global Business Services have to provide beyond transactional functions
Global Business Services emphasize culture and leadership, looking to improve inward by recruiting new talents, establishing training programs to educate staff for desired behaviors. It has a central leadership that controls and oversee all the process to ensure coherence in business strategy and consistent communication between GBS and the business
How Does GBS relate to Supply Chain Processes?
A study by The Hackett Group has observed an increased adoption of GBS global business solutions for supply chain operations. As GBS services move to embrace higher value and knowledge-based functions, Supply Chain seems to be the next area that can take advantage of the model for value creation and cost reduction. A recent survey by the firm found 24% of them support supply chain and 31% support order management functions. An additional 10 to 15% of GBS organizations are looking to expand into the supply chain in the next few years.
Supply chain related operations that are already supported by many GBS organizations include direct procurement and order management. Supply chain management is seeing a raise in adoption as well in 2020. Below is a chart taken from the Hackett Group showing the activities within the Supply chain management process and how they are broken down under GBS. The newer activities that are being incorporated into the GBS structures include logistics and transportation, direct procurement, manufacturing, and supply chain planning.
Strategic Supply Chain Management
Sales and Operations Planning
Production and Resource Scheduling
Moving into GBS >
Not a Fit for GBS
Production and resource scheduling
Strategic supply chain management
Sales and operations planning
Common Practices of the New Supply Chain GBS Delivery Model
According to Hackett Group, there are some common practices emerging from the new supply chain GBS delivery model, particularly with service design, service partnering, organization design, and governance.
Development of Centers of excellence (COEs) for knowledge centric processes such as supply chain strategy that are cross-regional in nature
Single global technology platform for standardization of supply chain tools such as analytics, planning, warehouse and transportation management etc.
Migration of selected activities to specialized third-party providers
Common outsourced processes include inbound and outbound transportation, reverse logistics, and manufacturing operations
Organization Design and Governance
The migration to GBS encourages companies to rethink supply chain organizational design and create roles that are enterprise wide rather than siloed roles that report into business. This allows greater efficiency in global collaboration and allowing the entire supply chain operation to be more integrated rather than sparse.
Benefits of GBS Global Business Services
The biggest benefits of GBS, according to the Hackett Group, include cost optimization, productivity improvements, improved quality, and improved compliance.
Companies can achieve economies of scale by leveraging resources across multiple regions and business units, which allow for cost savings.
GBS compliance Services provide way to standardize process of auditing and compliance in one central location
Centralization of supply chain processes across business units reduces complexities and allows better quality, productivity, and agility
Standardization and use of performance metrics give a better customer service experience. Continuous feedback loops also allow room for internal and external improvement
GBS global business solutions have an internal focus on empowering staff and employees to achieve excellence with opportunities for training and promotion, which ultimately lead to a better retention rate and higher employee satisfaction. Continuous nurturing of staff for professional growth and further career achievement also helps the business itself grow healthy as the operations scale.
A standardized and simplified supply chain means easier and more effective risk management
Leveraging resources means freeing up spaces for reinvestment opportunities elsewhere in the company such as product and service innovation and emerging market exploration etc. Leaders can also focus on more value-based activities since transactional activities are all taken care of by GBS.
Steps to Get There
So, what does it take for you to adapt the Global Business Services Model for your supply chain processes? The Hackett Group recommends a standard 10-step approach regardless of which functional area your business is looking to centralized. Though the 10-step approach is a good guide to get started with GBS implementation, feel free to adjust and alter based on the actual process the business is going through.
Vision and Strategy – Articulate the supply chain GBS goals and strategy, and determine operating guidelines.
Scope of Services – Evaluate current state supply chain processes and determine which can be moved into a centralized environment.
Business Case – Calculate and understand your case for change.
Implementation Road Map – Develop a plan for standing up the new GBS operation.
Detailed Process Design, Service Catalog, and SLAs – Document in-scope processes and design to-be processes. Develop service catalog and SLAs for customers.
Organization and Governance Design – Design the organizational and governance structures needed to support the to-be processes and service catalog.
Hiring and Training Plan – Define GBS resource requirements. Create hiring and training plans.
GBS Facility Stand Up – Coordinate stand-up of GBS operation, including set-up of facility, equipment, and technology enablers.
Hiring, training and migration – Migrate processes, people, and technology from corporate, BUs, and regions to GBS operation. Implement a change management solution.
Continuous Improvement – Implement initiatives for improving GBS performance.
There is an increasing adoption of the Global Business Services Model for supply chain processes to increase operational efficiency, lower costs, and improve quality and compliance. GBS Global Business Services is a more integrated and mature version of the Shared Services Model which is generally used to centralize back office functions. GBS services, on the other hand, delivers higher value functions such as business analytics and consulting. This kind of knowledge-based function is one reason why GBS is moving into supply chain processes.
A Global Business Service is global, multi-functional, has shared technology platforms, value based, single reporting system, brand equity, and outcome-based process. There are few things to consider before starting your own GBS migration. You should:
Determine the scope of your global, end to end process to drive standardization and streamline the organization.
Develop a set of key performance indicators and metrics for measuring GBS performance in order to drive continuous improvement.
Determine GBS location and what part of the process you wish to outsource.
Determine the structure and sizing of the GBS.
Determine the technology you need to enable your GBS vision and strategy
As you adapt the GBS for your business, you will see the benefits of this new model and how it makes your supply chain process better overall. If you are interested in how digital tools can help you manage and streamline your supply chain process, contact us at CBX for more guidance.