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2008TA-Services & Global Sourcing Journey
Transcript of 2008TA-Services & Global Sourcing Journey
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Services and the GlobalSourcing JourneyLori Yelvington
Vice President Sourcing & Procurement Solutions
Allstate Insurance Company
December 4, 2008
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The Allstate Insurance Company
Largest publicly-traded U.S. Personal Lines insurer in theUnited States $ 38 Billion in revenue in 2007 $156 Billion in assets in 2007
Distribution force of more than 30,000 (Allstate agencies andsupport staff)
Insures 1 out of every 8 cars and homes in the U.S.
Offers a wide range of financial & retirement products
Offers customers convenience and choice to interact 24
hours a day, 7 days a week through multi-channels: Allstate Agencies Toll free telephone access Internet
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What Does Allstate Buy?
$15 Billion Direct Spend (Claims) $11 Billion sourceable Carpet/Carpet installation Home building materials/repair (contractors) Auto parts/Windshield repair Rental cars/Temporary living arrangements Medical providers Legal services
$3 Billion Indirect Spend Technology Hardware/Software/Telecom/Consulting Travel/Office supplies/ Furniture Meeting and Events Contingent labor Employee Benefits Advertising/Marketing Professional services/ Management consulting Legal services
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Allstates Global Sourcing Journey
AGENDAAGENDA
Getting Started
Initiating a Global Sourcing Strategy
Where Are We Today
Whats Next
Q&A
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Getting Started
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Pre 1997: Decentralizedpurchasing acrossAllstate
No centralizedcontract repositoryor suppliermanagement
1997 - 2000 Established centralized procurementwith governance and authority oversupplier expenditures
Implemented consistent sourcingprocess for traditional services anddomestic outsourcing and expandedProcurement reach throughout Allstate
First look at Offshoring by establishingcaptive in Northern Ireland (Y2K & laborarbitrage) delivered initial success
*Excludes Real Estate leases, M&A, Bank Relationships, Allstate International, Natl conferences, Sterling shop equipment and supplies
The Journey Begins
Examples: Flood Insurance Processing Real Estate Support Services
(security, cafeteria, construction) I/T programming Employee Benefit Administration CAT Claim Adjusting Collections Marketing Fulfillment / Lead
Generation Call Center
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The Journey Continues early 2000s
The Call To Action: Personal Lines insurance is a low growth industry Direct carriers emerging with lower cost business models Insurance competitors adopting off-shore strategies Initial successes with captive sourcing model Offshore sourcing is one of many levers that can be utilized
to enable corporate goals (improve cost structure, fundinitiatives, find skills/talent, and enable service delivery)
Decision to explore non-captive offshoring based on the ability to: achieve variable resource levels access unique service or expertise deliver comparable services at a reduced overall cost
acquire a product/process that we could not cost effectivelydeploy ourselves
access highly skilled resource pools to enable Allstateprocesses
Initiating A GlobalSourcing Strategy
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Initiating an Offshore Strategy
We started by defining our desired global footprint (locations/countries)
Factors to consider in selecting countries: Government Support Labor Pool Infrastructure Educational System Cost Advantage
Cultural Compatibility Time / Distance Advantage English Proficiency Data / IP Security
Captive (Ireland)Captive (Ireland)
IrelandIreland
Offshore (India)Offshore (India)
India &Philippines
India &Philippines
Onshore (US)Onshore (US)
North BrookNorth BrookIndia &
Philippines
India &Philippines
CHINA Okinawa
TAIWAN
Taipei
HongKongMacau
Manila
South
ChinaSea
MALAYSIABRUNEI
INDONESIA
Wewak NewIreland
PAPUANEWGUINEA
ArafuraSea HoniaraSOLOMONISLANDSPort
NewBritain
Bougainville
Philippines
Offshore (The Philippines)Offshore (The Philippines)
Allstate established a sourcing strategyto broaden their existing footprint beyond
the U.S. and Northern Ireland by adding
additional locations in India and thePhilippines.
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Initiating an Offshore Strategy
With the global footprint in mind, we established a system to identifythe processes best suited for offshoring
All Business Processes And I/T Operations
Mature Processes
Potential Outsourcing Processes
1. CompetitiveAdvantageFilter
2. Supply BaseMaturity Filter
3. ProcessMaturity Filter
4. Capability &EconomicsFilter
5. RiskManagementFilter
Non-Differentiating Processes
Externally Accessible processes
Outsource-able Processes
Source: Booz Allen & Hamilton
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Initiating an Offshore Strategy
After filtering business processes, three waves of potential projects
emerged for further exploration
InformationTechnology (IT)
Back Office
Call Center
Finance & Accounting(F&A)
Help Desk
HR
All Business Processesand I/T Operations
Expand IT, F&A, HR, Call Center,Back Office
Procurement Out-tasking
General Accounting Payment Support Policy Processing Analytics
Wave 1Wave 1
Waves 2 & 3Waves 2 & 3
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RFI/RFPSCREEN
DUE DILIGENCESCREEN
Key RFI/RFP Scoring Criteria Insurance Industry
Experience Process Capabilities Case Studies Quality Assurance and
Performance Management Service delivery,
Compliance and Security
Pricing Employee Policy Demonstration of
ImprovementOpportunities
Differentiating Factors Company Profile / Risk Geographical Site
Coverage
Based on the footprint and potential processes, we completed anintensive sourcing and due diligence process to select primary suppliers
Initiating an Offshore Strategy
Initial List ofPotential Suppliers
SupplierDue Diligence
Key Due Diligence Criteria Company Strategy Quality of Management Team Relevant Experience Operational Capabilities HR Capabilities Demonstrated Customer Experience Infrastructure / IT Financial Risk Operational Risk
Primary Suppliers
Allstate CaptiveAllstate Captive
+
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Initiating an Offshore Strategy
Allstate needed to create a platform for broader relationships with theprimary suppliers which led to the development of a new contractstructure and template
MSA
WPA(ITO)
WPA(Back Office)
WPA(Call Center)
SOW(App. Dev.)
SOW(Testing)
SOW(Policy
Processing)
SOW(Inbound
Calls)
SOW(Dispatch)
Illustrat
ive
Master Service Agreementestablishes structure of therelationship and many of theterms and conditions
Work Process Agreementcreates process level terms andconditions, as well as high levelprocess expectations
Statement of Work definesthe operational requirementsassociated with a specific work
stream (process, SLAs,milestones, businesscontinuity, operation manuals,and specific pricing)
Negotiations were long and complex
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Initiating an Offshore Strategy
As the strategy took shape, internal resistance and politics emergedwhich lead to utilization of a Decision Rights chart to enable progresson the potential offshore opportunities
SourcingAction Plan
Sourcing
Action PlanSupplierShortlist
Supplier
ShortlistContract
Negotiations
Contract
Negotiations TransitionTransition Sourcing
Management
Sourcing
Management
Program
Manager
BusinessUnit
Procurement
Finance, IT,HR, Risk
Mgmt
SteeringCommittee
ExecutiveSteeringGroup
P = Propose A = Approve D = Decide C = Consult E = ExecuteP = Propose A = Approve D = Decide C = Consult E = Execute
P
C
P, E
P,C, E
C
D
A, C
D
P, C
C
C
C
C
P, E
C
A, C
C C
D, E
C
D(process
relationshipmgmt issues)
D(contract mgmt
issues)
D(overall
relationshipmgmt issues)
C
C
P, D
Overallresponsibility
C C
D, E
C
Illus
trativ
e
StrategyStrategy
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Allstates offshoring strategy is relatively conservativetakes into considerationstrategic importance to Allstate, cost and quality
No corporate mandate but offshore strategy supports overall corporate goals
A pool of preferred providers in place
The geographic footprint is limited to specific locations/countries
Utilize a sourcing continuum (concept pilot expand) to implement
Consideration of sourcing alternatives from insourcingto staff augmentationtooutsourcing; onshore and offshore (including Allstates captive)occurs prior tomoving any process
Process must meet sourcing objectives in order to move forward
Strategic Sourcing Strategy
The exploration of a corporate offshore strategy led to the followingapproach:
Achieve or exceed current day Customer Satisfaction and Quality Levels, leveraging vendor expertise Provide an option that assists the enterprise in achieving Expense Reduction Targets Allow the organization to focus on Core Competencies Establish relationships with a competent Offshore Resource Pool
Where Are We Today
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Sourcing &Procurement
Solutions(SPS)
Area ofResponsibility
(AOR)
Limited to primarysuppliers
Assist inplanning forfacilities visit
Providebusiness casesupport
Lead negotiations
Create WorkProcessAgreements &Statement of Work
Provide counselon TransitionPlanning and tollgating
Consult onestablishment ofanalytics reportingaround SLAs
Perform ProjectManagement Leadrole for functions(optional)
Lead quarterlyreview meetings
Business CaseRealizationTracking
Establish overallReporting
EstablishGovernance
Provide & Consulton OpportunityAssessmentTools
Identify potentialprocesses
Consider sourcingoptions
Agree on suppliershort- list
Visit facilities (ifneeded) /reviewprocesscapabilities
ApproveAgreement
ProjectManagement
Develop transitionplan
Monitor key SLAs
& delivery dates Establish
Transition Support& GovernanceTeam
Manage operationalrelationship
Monitor ChangeControl Process
Business Case
RealizationOperationalGovernance
StrategyStrategySourcing
Action Plan
SourcingAction Plan
SupplierSelection
SupplierSelection
ContractNegotiations
ContractNegotiations Transition
Transition SourcingManagement
SourcingManagement
Contract
ClientAlignment
Where Are We Today
A consistent, standardized approach is in place across all purchases,
the offshore processes have a few notable points or nuances
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Allstate has established its global footprint
India
Delhi
Pu ne
Noida
Bangalore
Bombay
Chennai
Mexico
Canada
Philippines
Manila
Ireland
Belfast
Derry
Strabane
Where Are We Today
(Approved Countries -
no current engagements)
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ApplicationDevelopment
Help Desk Infrastructure Support Staff Augmentation Testing & QA
ITO
Analytics BackOffice Support Services Customer Contact/Call
Center Finance & Accounting HR
BPO
More than 2,000 Resources Offshore(BPO & ITO)
Where Are We Today
The following processes have transitioned and are in a
productive state with a primary offshore supplier
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Virtual Expertise
Security & PrivacyAudit
Corporate RelationsFinance
Human ResourcesImagingLegal
Technology
Business Strategy &Opportunity Evaluation
Offshoring Policies &Procedures
Global Research& Trending
IT SolutionsVendor
Management
EnterpriseMeasurement &
Vendor Evaluation
Due Diligence &Transition Support
Enterprise Sourcing Governance
Business Unit Governance
Performance
Evaluation &Reporting
ProcessOpportunity
Assessments
Education & Training
SystemsChange
Management
Transition VendorEngagement
ProcessChange
Management& Compliance
Operations Governance Leadership
Service Delivery Organization Retained Organization
Where Are We Today
Enterprise and Operational Governance Models established
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Enterprise Risksowned by Procurement
Operational Risksshared ownershipProcurement/Business Units
Identification and mitigation of risk is another key role in the
offshoring strategy; examples include:
Country RisksCountry Risks Economic Political Legal and Regulatory Resource Availability Business Interruption Concentration TechnologyInfrastructure
Supplier RisksSupplier Risks Supplier Performance Concentration Supplier Default TechnologyInfrastructure Price (fluctuations &right price)
Process RisksProcess Risks Communication Supplier Performance Retained Organization Concentration Supplier Default Operational Compliance Regulatory Compliance Privacy andConfidentiality Intellectual Capital Transactional Data andProcess Technology Infrastructure Systems and DataIntegration Brand Image Employee/AgentSatisfaction Accounting and Reporting
Examples of Mitigation Options: continuous monitoring limitation on countries unexpected occurrence wouldbe assessed and contingencyplans utilized
Examples of Mitigation Options: monitor supplier performance Business Review Meetings withenterprise view develop contingency plans monitor distribution of business
through SPM infrastructure guidelines inplace utilize contingency plan ordevelop a sourcing strategy toreplace supplier
Examples of MitigationOptions: contract provisions day-to-day supplierinteraction and oversighton process performanceand improvement guidelines on technicalinfrastructure Enterprise reporting work through processimprovements to resolveopen issues monitor supplierprogress and providefeedback negotiate contract
changes contingency plan orsourcing strategy toreplace supplier
Sourcing Risks & Mitigations
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Where Are We Today
Lessons learned have been translated into best practices which areleveraged across the sourcing life cycle
Utilize the RFI/RFPprocess; even withinlimited supplier poolto identify best fit
Scoring Processneeds to include keystakeholders, leadersand process leads
Supplier needs tofocus on the "how
Allstate determinesthe "what
This period of time isTHEtime todetermine if you areable to easily interactwith a potential
vendor's leadership Make certain to
choose a group orteam of individualsthat you can workwith!
Visit potentialvendorsoffshore to createalignment andvisually reinforcecapabilities
Budget for sitevisits build intobusiness case
Understand contractcosts: Transition vs.Steady State,provisions for missedor extended milestonesand technology
Build flexibility intothe contract toaccommodate changesin business direction,strategies, technology,process and volume
Communicatecontract details to allparties and mgmt sets expectations
Know how to leverage
the contract; exitclauses, businessresumption and SLAs /milestones
Make sure toaddresstime zoneuniqueness
Ensure leadership isengaged
Establish clear projectteam roles andresponsibilities
Create a toll gateddelivery plan
Understanding,agreement andcommunication oftransition plan
Detailed skillrequirements foroffshore and staffing
Understanding ofvolume f luctuationsand the impact to
staffing/capacity Benchmarking of
Service Levels
Test and ensuretechnology readinessat offshore location
Utilize SupplierPerformanceManagement Process
Setting up governanceneeds to be viewed asan investment early inthe process
Manage daily serviceexpectationscommunicating on aweekly/monthly basis
Continually utilize SPSto ensure the contractis updated as needed
as processes changeit is imperative that yourcontract reflects those
changes Articulate theresponsibilities of theoperationalgovernance team andretained roles
Clearly define theEnd State
Conduct full processreview & opportunityassessments
Dont outsourcebroken processes
Create clear anddetailed statements ofwork (SOWs):
Start small and pilotthe process
Establish a dedicatedsourcing team
Dont do it all at once create a 3-year planwith rolling waves
Establish retainedorganization &governance modelupfront
Develop a solidbusiness case
StrategyStrategySourcing Action
Plan
Sourcing ActionPlan
Primary SupplierSelection
Primary SupplierSelection
ContractNegotiations
ContractNegotiations Transition
Transition SourcingManagement
SourcingManagement
Communication & Change Management- Regular and frequent communications Open communication early and candidly, - Determine business unit readiness, - Assess training needs:
Cultural & Vendor/Relationship Management Training, - Assess capacity for change, Create a communication/cha nge management strategy withdedicated resources, Make sure employees know the whats in it for me
Communication & Change Management- Regular and frequent communications Open communication early and candidly, - Determine business unit readiness, - Assess training needs:
Cultural & Vendor/Relationship Management Training, - Assess capacity for change, Create a communication/cha nge management strategy withdedicated resources, Make sure employees know the whats in it for me
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Other benefits achieved:
Improved quality, increased efficiencies and enhanced customer servicethrough measures and service level agreements
Improved risk management
Allow Allstate to invest and focus on its core competencies
Attract and retain critical skills and talents
Provide opportunities for Allstate employees to expand or retool their skillsets
Provide access to a talented global workforce
Enhance customer service
Lead to innovation On average steady state hasbeen achieved within 6 monthsand financial benefits average25-35%
Where Are We Today
As processes achieve a productive state, they are
delivering the benefits projected in the business cases
Whats Next
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Continuous Strategicchange while Outsourcing
Process Improvementwhile Outsourcing
Cost Reduction
Continue to build existing relationships toward Business Transformation;
enabling greater return on investment and additional benefits
Whats Next
ReturnonInvestment
We are here
ProcessChange
Focus on core business
Increase flexibility/adaptquickly
Reduce barriers to change
Innovate, improve, transformprocesses
Speed time to benefits
Improve decision support
Reduce costs
Benefits
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Drive toward Business Transformation
Continue to develop outsourcing opportunities
Leverage Best Practices
Ensure that Governance is in place across the entireorganization
Continue to monitor industry trends/dynamics (next country,currency, etc.)
Whats Next
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Questions ???