Last week we received an e-mail from Mark Lisso, VP of Strategy for the Americas, copying the entire Americas and Latam/Brazil board of thyssenkrupp Elevadores at the conclusion of the successful incorporation of the entire Latin American operation into the Brazilian CSC. The e-mail was in response to the leaders of that journey, Fabiane Sum, Daniel Santanna and Reynaldo Moreira, who reported that Chile, the last of the 13 countries and the largest operation, had been incorporated into the service center that month. Reading that email, it didn't seem like almost two years had passed since the day we set foot in the Latam <em>headquarters</em> in Santiago de Chile to begin this endeavor.
The first steps — The Operation in Brazil as an inspiration for Latin America
To tell this case, we need to take a quick look back at the Thyssenkrupp Elevadores (TKe) Shared Services Center (CSC) in Brazil. Implemented in 2010 and with a wide range of macroprocesses and more than 200 employees, the CSC helped TKe Brasil achieve one of the best financial results of all operations Elevators Technology of the group, coming to be recognized as Global Best Practice.
Meanwhile, the neighboring operation TKe Latam, with thirteen Castilian-speaking countries, had an EBIT indicator on sales 6 times lower (%EBIT) than the one calculated by Brazil.
In this context, Brazil's former CFO assumed the position of CEO Latam with the objective of making this operation profitable by bringing %EBIT to the global minimum level.
Felipe Condessa found operations with a maturity level at least 10 years before the Brazilian operation: disintegration of systems, different practices between countries, and many manual procedures such as cash receipts and payments. To generate scale and gain control over the operation, Felipe Condessa initiated the CSC Latam project.
Planning and Business Case — Flexibility and the search for the global optimum in the design of CSC Latam
In August 2015, we landed at the Latam headquarters in Santiago de Chile to begin studying the feasibility and scope of the processes, scaling the center, and planning the deployment through a Business case structured. To this end, in 12 weeks, operations from six countries were visited and mapped, including some Guys like Guatemala and Panama and big ones like Chile and Colombia. Such analyses were always carried out in the light of CSC Brazil's practices. However, not all practices could be transferred to the Latam design.
The level of banking maturity in some countries is so low that it was necessary to design processes in which part of the activities were still in the country, such as the issuance of invoices and collection of checks. In parallel with the CSC, other initiatives would increase the maturity of the processes, in which the CSC would also benefit.
In this planning, it was defined that Financial processes would be centralized (Accounts Payable, Accounts Receivable, Accounting and Reporting), Supplies (Purchasing, Importing) and Business Backoffice (Pricing and Contract Registration).
In addition, a study was carried out on the location of the center. Even though some Latam countries, such as Colombia, had lower costs, it was decided to implement it in Brazil, given the synergy with the Brazilian CSC. The benefits of being able to rely on the experience of professionals who were already operating the CSC, even with a potentially more expensive operation, outweighed the risks of an implementation Blue Print in another country.
Having approved the implementation of the center, in January 2016 we began the internationalization of the Brazilian CSC of TKe in Porto Alegre.
Building the Porto Alegre Bridge — Montevideo — The incorporation of Uruguay
To implement Latam's processes to CSC Brazil, we chose to follow a sequence of countries, bringing all of that country's processes at once. To begin with, we defined a pilot country, where we were able to work on the details before proceeding with the additions of the other countries. We chose Uruguay because it is a small, relatively controlled operation and, especially, because of its proximity to Porto Alegre. Due to the proximity, we could take CSC managers to Montevideo or bring professionals from Montevideo to Porto Alegre quickly and cheaply.
To this end, before starting the incorporation, we carried out 3 months of preparation through detailed design of procedures, definition of a personnel hiring plan, development of a system of Workflow and Setup of the telephone platform. Even though the ERP of the Latam countries was the same, the system architecture was fragmented by country, making centralized management impossible. Therefore, we needed to create a single interface for receiving calls, making it possible to share teams and provide service per queue.
Our objective was to define cells per process in which the same professional could execute the transaction for any country, regardless of the “ERP version”. The way to do this was through the system of Workflow unified, even if initially the user needed Log in in the ERP of that country in a disintegrated way. As for telephony, the solution via a link via Embratel would take more than three months. Both for ERP system improvements, implementation of Workflow and Set Up of telephony, our strategy was not to wait for the perfect model. To comply with the project schedule, we began the incorporation of Uruguay with simplified versions of the final design of the technological platform. For example, a single Workflow generic before the various Workflows specific, telephone call via Skype and interface As Is for access to the ERP. The most robust scenario came a few months later, with proof that the Shared Services model was successful.
Another important activity that began during the three months and continued throughout the implementation was the formation of the Operation Latam team. As an implementation strategy, the team was formed to serve Latam operations in a dedicated manner, without synergy with cells in Brazil. Only leadership positions were shared between the two operations. The strategy was taken taking into account that the maturity levels of processes between Brazil and Latam are different and a model of Full integration could pose risks to operations at first.
Latam cells have Spanish language proficiency needs, in addition to cultural issues inherent to a Global CSC. Searching for professionals who met these requirements in the market was a risk mapped from the business case. To this end, different actions were taken to obtain these professionals: specialized recruitment companies, partnerships with foreign consulates in Brazil, and the transfer of TKe employees from the Latam operation to Porto Alegre.
Exploring America — The journey of incorporating a country per month
After completing the pilot in Uruguay, an intense pace of bringing one country a month to the CSC was implemented, while our change management plan was put to the test. Each country, more than a month in advance, was exclusively mapped and CSC conceptual presentations were made to its leadership. Based on the individual mapping of each country, we designed what the future personnel structure of each of them would be like and deadlines for dismissals. For two weeks, one before the Go Live of the country and one after that, part of the project team formed a basis for, in person, training and supporting with assisted operations.
After Uruguay, we had a journey of eight operations ahead of us to be incorporated. After five of those eight operations, a two-month stabilization period began. This strategy was successful because it allowed the CSC's internal teams to recover, the processes to be adjusted for a larger-scale operation, and for training to be applied again to the countries already incorporated.
During the implementation, we learned that TKe Latam's Northern operations, such as Mexico and Central America, were very open to change, but required renewed training to ensure the correct execution of the processes. The southern operations in Argentina and Uruguay, on the other hand, caused greater conflicts by questioning the new processes much more.
A highlight, during the acquisitions, was the Panamanian operation. Before joining the CSC, Panama had undergone a major restructuring, where the country's management and several operational positions had been replaced. Panama, the third country to be incorporated, embraced the concept of Shared Services and made it its lever for restructuring, achieving excellent financial results in a short time.
Examples of the execution of Panamanian processes were used at various times as good practices for other operations.
CSC Implantado — Porto Alegre, the Latin American capital of TKE operations
Almost two years have passed since the beginning of Business case, Porto Alegre now has all of Latin America at home. Today we carry out 12,000 transactions a month with a team of 75 professionals. Throughout the implementation, execution, financial, and service level indicators of the project were closely monitored, so that the financial closing of the CSC implementation period closed at 97% of the planned budget in the business case. In addition, the last country, Chile, was implemented on time. In the last month of the project, service level agreements and transaction costs were established for all of Latam via the CSC Internal Clients Committee, with the presence of leaders from four incorporated countries.
It's been a long journey here. We now have an entire integrated continent with solid foundations for even more audacious projects that will make Latam equalize its profitability with the global level of Elevators Technology from thyssenkrupp.
Figure 2: Meeting of the LATAM Client Committee to define SLAs and Transaction Costs
About the authors
Breno Jácome is a partner at Visagio, acting as consultant, project manager and quality assurance, with emphasis on organizational restructuring projects, business process engineering, logistics and supply chain, and PMO/Change Management. He worked in sectors such as consumer goods, retail, services, mining, insurance, in the countries Brazil, Chile, Peru, Germany, France and Spain. He specializes in business logistics from COPPEAD/UFRJ.
Lucas Felix is a Visagio consultant with experience in organizational restructuring projects, implementation of a shared services center, operational transformation center, and asset sizing through simulation models. He worked in the oil and gas, consumer goods, service and agribusiness sectors. He worked in more than 10 Latin American countries such as Brazil, Argentina, Chile, Peru, Colombia, Panama and Guatemala.
Fernanda Becker is a Visagio consultant, working on zero-based budgeting projects, the implementation of a shared services center, and commercial restructuring in the financial and service sectors.
Fabiane Sum is Project Coordinator at thyssenkrupp Elevadores.
Daniel Santanna is manager of the Shared Services Center at thyssenkrupp Elevadores.