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Shared Services Centers and Business Network Transformation

Shared Services Centers (SSCs) refers to the provisioning of services in one location that were previously done in multiple locations within an organization. This an interesting trend that often involves a transformation within the organization. Often companies with various divisions, departments and geographical locations would maintain many different Accounts Payable teams (as an example). If a Shared Services Center strategy were implemented, you would see the consolidation of accounts payable services into SSCs. This SSC would provide AP services to the rest of the organization.

The SSCs strategy often involves reengineering and transforming many different parts of the organization. Let’s discuss a few of them.

  1. When many different Accounts Payable departments and responsibilities are consolidated into one SSC, people will be made redundant.
  2. The phone numbers, mailing addresses, contact people etc, may change
  3. The AP processes in place in many locations may need to be replaced with scanning and OCR technologies that will permit invoices and other business mail to be scanned at or near the place of delivery (mail room) and forwarded to the SSCs. How do you transfer or forward the mail received in the Atlanta mail room to the SSC in Seattle or Munich? You digitize the data so it can be processed in your ERP anywhere in the world.
  4. Scanned/OCR documents need to be processed and entered into an automated work flow that would enable the SSC to have visibility to the information where ever they may be located around the world. Someone needs to design and develop this automated work flow process, data cleansing and data verification process.
  5. The different software applications, ERPs and EDI systems that were in place in all the different locations should be consolidated into as few as possible that can be supported by the SSCs. You do not want to simply transfer the existing chaos to the SSCs. Ideally the SSC for Accounts Payable would be working with just one ERP and would be exchanging electronic data with trading partners via one EDI system or B2B platform.
  6. Part of the reengineering that needs to take place when implementing an SSC strategy is to move from paper payments to automated electronic payments, and from receiving paper invoices to receiving electronic invoices. This allows the SSC to support large geographical areas quickly and cost effectively via electronic data exchanges with trading partners. SAP’s Business Network Transformation strategy is relevant here. It is intended to reduce the number of EDI systems and costs that are required in traditional EDI and to reduce the complexity of supporting them.
  7. e-Invoicing and digital signatures that support the requirements of various tax authorities can be managed centrally in the SSCs and the service provided by the SSC or by professional e-Invoicing managed services providers.

The SSC strategy is intended to reduce the duplication of efforts, save money and reduce complexity. Often the purpose of maintaining multiple accounts payable teams, systems and locations were to support different businesses, processes, tax authorities, accounting systems and geographical requirements. If these inefficiencies are to be reduced, consolidation must take place in many areas. All internal business functions need to be reviewed and analyzed to identify areas of duplication and inefficiencies that may benefit from the implementation of a SSC.

All of these transformational steps require a strong vision and strong leadership. Leadership that can stomach the challenges and resistance that accompanies any major transformation and reengineering effort.

I read a good paper on SSCs from JPMorgan.

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