Danone’s SSC Story: Moving Beyond Cost Savings

[0:00] Jacob Whetstone:

Thank you all for coming. A pretty sparse crowd so far, so nice and intimate I guess. So this is kind of what we’ll go over. So yes, the myth in the title of the presentation talks about what that is. It is really just shared service centers that are all about cost optimization. But how they evolve over time, some of the scopes that we can focus on or that we’ve always focused on to try to optimize the shared service center, as I talked about how we’re setting up some of the things that our journey that we’ve gone through, and then some of the lessons that we’ve learned. So again, the title of the presentation kind of gave this away, but the shared service centers, there’s a myth that it’s just to really drive costs down, which is true and part of it and a lot of the reason why as businesses do it, but it’s not the only reason that we go into a shared service center. So this is, you know, pretty explanatory and pretty basic, I think, but a lot of the reasons why shared service centers get started is because there’s a lack of processes and again, I know in the agenda, I was going to talk more about to know and specifically later on, but just to kind of talk about what we did to know. So what I’m over is not a global shared service center, we have different regions that Danone is in and different parts of those regions.

So right now, we just covered, basically the United States and Canada. And so those are the different regions that we cover. And so we are already going to have a shared service center. That’s the service, both the United States and Canada and all of our business units that were in there. And so as we were looking to do this, we noticed that each of those business units followed different processes, they had different systems, different tools, different KPIs. And so just all across the board things were very different. And then Danone as a whole we’re trying to look at how performance was, whether it was hard to measure performance or hard to track these different units because everybody was very different. We also saw a lot of duplication of efforts and even as small as just being able to work with our customers. So we had one that was trying to get Walmart to do one thing we were trying to get Walmart to do another, we’re still trying to have the same end goal but multiple people were involved. So a lot of duplication for it’s across the board, and then no real-time visibility into what was going on with all those ones.

So those were just some of the reasons why we wanted to go into a shared service center with a lot of other ones, but really just trying to focus on some of those and draw those out, which I think a lot of companies are pretty basic like I said, and that’s the same reason why a lot of companies do a shared service center. So, you know, again, something that’s not earth-shattering here. You won’t walk away, dumbfounded by this, but a lot of it is how our shared services center is set up. It’s a long term project, it’s not something that can be done easily. There’s a lot of planning at the front end of it, there’s a lot of work to actually do it and then even afterward, making sure it’s successful. It’s not something that’s done quickly and easily. There’s a lot of stakeholders that are involved that we need to get the buy-in for. And so for us, it was for each of those different business units that we had and making sure that each of those leaders had confidence in us that we could perform in the shared service environment and be able to make it work but also that they were bought in there was also a lot of buy-ins that we had to have from the former employees. So we would go in and try to take over these businesses. They knew that there was going to affect their jobs. So we but we needed their help in order to understand their best practices, and understood what was going on for them. And so we needed their buy-in as well that this was going to be something that they bought in and felt that they could help us out with. And it was going to be something that we knew would disrupt the current business. So as they were going along, they had their best practices, they knew what was going on, their leaders understood what each of these business units was performing, how they were going to perform. And as we were going to come in, we’re going to be a disruption to that process, and where they were headed as a company.

And then, of course, lack of visibility is through all this change in coordination and making sure that everything was good. So there were a lot of problems and challenges that we knew we had to face as we went into this. So getting back to more kind of the topic of this, which is really cost optimization. And what this chart is trying to show is that a lot of times we go into this knowing that we can save costs by moving into a shared service center shared service environment. And at first, a lot of it is around, as we bring this in and we save costs, customers are satisfied. So there’s a lot of customer satisfaction. But over time, as we continue to look for those cost savings, and we drive it down, and we get more and more cost savings, we get less and less customer satisfaction, or potentially if you’re not careful, and I guess, not in all cases, but if you’re not careful, you could be so focused on the cost that you lose satisfying the customer and making sure that they’re still bought into this model. So this is just trying to show as shared service centers grow. And as time passes, if the only focus is on driving down the cost, which you have to deliver back to the business, you may lose in customer satisfaction. So you know, everybody may be in different stages of where they’re going in the shared service environment, whether you’re just starting out, whether you’re thinking about it, whether you’re part of it and again, this is just a known as experience. So I know everybody else may have different experiences depending on what stage you’re in.

[4:55] Jacob Whetstone:

But then going back again to the title of this, and really the myth is that it’s more than just cost savings to it. There are other things. And so some of the things we wanted to highlight were that we need to be able to focus on the customer experience and truly focus on what is best for the customer. And sometimes it does sacrifice some of those cost-saving opportunities to really make sure that the customers are having a great experience. And then standardization across the globe. And again, you’ll see in the next couple of slides, the word global or global is used, we’re not a global shared service center. So where I was, as we were working on this presentation, and I was trying to relate to them. So some of the principles can apply to global shared service centers. But for us, it’s more of global business. And what we did in Danone is where that comes from. But being able to have standard processes across all of our business units, and then being able to have a strategic leader and there should be like strategic leaders that helps drive this and make sure that this shared service center is successful, and we’ll talk about some of the things that we felt did but then also being able to have a leader that can help not just drive the cost, but drives some of those other things and making sure that everybody on the team feels like their leader. So it’s not just the director or the managers, but actually the people doing the work, feel that they’re a leader, and they can make a difference. So again, as I said, this talks about, you know, uses the word global and some other things, but it’s still again, focusing on just the company as a whole and what the company is trying to accomplish. So really making sure that we have that business model, we have that customer experience and then making sure that we have strong leaders.

So for us, data is everything and being able to have data that we can trust, and especially as you move into a shared service environment, and there’s a lot more data than what we had before. So being able to use that data for multiple businesses, being able to understand it data really is key and being able to understand data at a very bottom level so that we can identify root causes, identify deficiencies, identify other things that are going on, so being able to have that data standard as we’re moving to this shared service center to be able to understand how we can look at each business across the board, and then consistency in the business operations. So how we are set up, how we’re functioning, a lot of these systems play into this making sure and the same with the next point is the standardization of the roles and workflows. So being able to know that everything is going to be done the same. So yes, there are some nuances and again, for us as we were really the United States and Canada, Canada had a lot of different nuances for us. So we started out in really just North America, and we were just doing yogurt brands, I guess.

Hopefully, people have heard of Danone and if not, go to the store. You can see it but you know we have Active Eats as one of our big brands. And so we really just started off. Our shared service center was just yogurt. And then we brought in some of these other businesses that we had. We brought in a waters business, and I’ll actually I’m going to skip ahead and then I’ll come back here. So these are the different businesses. We have Danone Waters. So Danone Waters is one of our businesses. And that’s the first business that we ended up, bringing in. And that one is a much smaller business and so it was a lot easier for us to just integrate that they had a lot of the same processes; where it was different though, is some of the processes were slightly different because, in the dairy world, they had their own different processes, the customers. We talked to dairy managers, you know, dairy VPs, but then Water fell into a different category. So there were some slight differences because the product was different but overall was a smaller business so we were able to bring that in easier.

After that, we brought in another company that we had that we sent sold, but still it was a US yogurt business. So it was really easy to kind of fit in and we felt that we had this model that we could just plug and play these businesses in and it would just be really easy. We thought we were really good. And then Canada came along and had our little piece of humble pie a little bit. So Canada was very different, it was yogurt that we were selling in Canada, so dairy products, something we thought would be very similar to the US, we could just kind of plug and play and put that into our model and start servicing them. But then we found out they had a lot of differences too. So how it went to market, how they operated with the stores, and even the French language is really through a kind of kink in our system and realizing that we had a correspondence to the customer in French as well as English. So, we had automated correspondence or templates setup or other things, we had both English and French. And more of the emphasis of this presentation was around the customer experience. And like I said cost savings is part of it, but also being able to service our customers. So the first question, you know, you’ve got to ask is who is your customer in this sort of situation? Who is it that you’re trying to serve in a shared service environment? Who is that customer?

So for us, it was really sitting on business. I don’t know if that’s me or not. Making sure that the business has those leaders who are happy with what we’re doing. And they could see the results and they could see the benefit of a shared service environment over them doing it separately and individually. So we needed to, from the very start, make sure that those customers were highly engaged. And so we would meet often with the leaders of the different businesses, we would talk to them beforehand, kind of help them understand our game plan, we would afterward debrief with them, make sure that things went well. But then also here, those customers at that time that we really needed a lot of engagement.

And, again, we’re a lot of those people that were eventually going to lose their job, those people that we were taking their work from to bring into our shared service environment. So still helping them to feel engaged and they were willing to share with us their best practices and share with us their knowledge of those customers, the different nuances that they knew. So making sure that they were highly engaged in order to share things with us, and so really took an approach with them that we could earn their trust. And we’re going to cut off a little bit here. But really, as we met with those lower-level employees, that those people that were going to lose their job, like we showed up, we would take them out to lunch, we really tried to be friends with them, help them understand that this wasn’t a decision of us so they didn’t have anything personal against us. But they would trust us. And so we met with them very often, we understood their ideas, we spent a lot of time truly understanding their customers, their business, what they did. We helped them to be viewed as leaders as part of this, that the things that they said mattered and were important to us. And we also looked for best practices.

We were willing to say that that model was the backbone that we had proof that it worked, but there could be better ways to do things. And so being able to understand from those customers, what works best for them and being able to implement it, and if needs to be changed our whole process to fit these best practices in but also really to reduce the touchpoints. So we wanted to be able to have direct contact, and the customers didn’t have to go through multiple different channels in order to converse with us or talk to us or give us those ideas or other things. And then lots of feedback. So not just as we went live with this being able to get feedback on how things were going. But also feedback, after we went live and continuing even now, a lot of feedback with those business leads to make sure that they were still meeting their requirements, and they are truly satisfied.

[12:20] Jacob Whetstone:

So with that, we were able to achieve a lot of cost savings. And I’ll go over some of those numbers. But maybe where we didn’t achieve some of those cost savings, we sacrificed that a little bit in order to get a good customer experience. So the way we’re organized, we have people that are dedicated to certain parts of the business that are working those parts of the business, that maybe if we wanted to push you in more cost savings, we wouldn’t have those dedicated resources, but we feel that that’s important to help with the customer experience. And then again, making better-shared service leaders. I think it is important because it’s not just one leader of an organization but it’s across the board to make sure that for us those entry-level people were specialists making sure that they felt like their leaders, that the ideas that they have that thing that they’re doing matters and that it makes sense. So really not just focusing on the process, but also having a strategic role and how the services set up, but also how the training of the employees how they feel, and they understand that they interact and that they feel part of it. And then again, data is a key, like I talked about before, being able to make sure that we had a lot of data, data that we trust, good data that we could count on, and being able to make decisions based on that data that we feel confident of because we knew that the data was good.

And then and I’ll get into this a little bit more but then I know there’s some other sessions that really focused on this. But in the line here is more touching your experience, experimenting on automated solutions, but what came down for us was trying to identify non-value added activities and how we could not put resources to those but still get the work done that we needed to. So we looked into a lot of different automation and I’ll go into one example of that that we were able to do, but really focused on trying to say- Okay, this is something that has to be done. It’s not a lot of value, we could use those resources elsewhere. And so how can we automate that. And so a lot of focus on automation, and trying to drive that. And something that we’re still doing is still trying to do that. And as technology and other things keep coming on how we can eliminate that nonvalue task and really focus on automation. And so one of the examples that I have, and I’ll talk more about this, but just see some of the numbers.

So one of the things where we knew it was something that had to be done, but we weren’t seeing a lot of value to it was the cash application. And so just the very basic of the whole process is just customers making payments, us closing out the invoices, and applying the cash creating any short payments productions. And so something that, of course, has to be done, it has to be done accurately. And so prior to our shared service center, most of the locations that we had, we’re doing it pretty much 100% manually. So they would have basically the remains from the customer on one screen. They’d have an SAP environment. On this, the second screen and they were going line by line, or they would print it out and go line by line and apply the cash. We were able to get some automation through some SAP lockboxes, upload a file, but it was still pretty manual.

[15:15] Jacob Whetstone:

As we looked at it, you know, like Dannon and Evian, and Canada. At that time, we had about a different full-time headcount that we’re doing nothing but cash application. So they would come in the day, they would start applying cash, they get lockboxes, everything else. So we were able to realize that we needed a solution there. So we looked for some technology. And this is where HighRadius comes whose technology we chose. But we worked really hard to use their cash application module to where they were doing most of the work for us. So we were able to drop from eight, full-time headcounts down to two, and we were able to have those savings. So that’s where some of that cost savings went in. But also, it wasn’t just that we let people go and that’s where the second numbers yet come in, as we were able to redeploy some of those six headcounts to focus on more value-added activity. And so with Canada, as we brought them in, as we figured them out and came across some of the challenges that we had, we were able to put more people on that side of it and candidates in our business at the time didn’t focus on trying to get deductions repaid if they were taken validly. And so that was an area we realized that we could provide a lot of value and quickly show some of the advantages that Canada could have by being part of our shared service. So we were able to redeploy some of those employees to really focus on collecting back invalid so that our first year after go live and it was actually after about five months, we were able to click close to $6 million back in value. And that was an easy conversation for us to go to the Canada business leads and explain to them how things are going by having that real money back towards them.

We’re also able to clear deductions a lot faster and be able to get through those, so we are able to identify faster which helped us collect the invalids but also be able to get information back to the business a lot quicker through clearing the deductions faster. And it wasn’t like smooth sailing all from the very start. So we actually, as we went live with our shared service center, things got worse before it got better. And so being able to have that buy-in from the leadership at first to be able to help them understand that, and we were upfront with them and told them that, “Hey, things may get worse before they get better”. Things got really worse before they got better. And so some of those were very tough conversations that we did have with them. It got more so than what we thought and some of them were with those nuances with Canada that we didn’t foresee. But very quickly, once we got through that we were able to bring it down dramatically. And that’s where we saw the savings. So being able to have the buy-in at the time, our Canada leadership team stuck with us, they threatened us a lot of different times but we still had the buy-in that they stuck with us. We were able to bring the numbers better than they had ever been in history. And so they were very happy with that. It just took some time to get there. But overall, we were able to reduce it by within that same six-month timeframe by a six-month timeframe by 25 days and bring down that so.

[18:11] Questioner:

Is DDO the Days Deductions Outstanding?

[18:16] Jacob Whetstone:

Yes, DDO is Days Deduction Outstanding. So it’s very similar to a metric like DSO but we were counting production. So just trying to track how fast it is for us to resolve that production. So, thank you for that. So one bottom box here is that we did have the same ERP system. So again, we use SAP. So our shared service center, that was actually one of the requirements that we had to try to help bring things in a little bit smoother as we did require these businesses to be on our SAP environment. And once they were on that year, our SAP environment for their ERP systems, we were able to bring them in. And then we brought in some of that other technology with HighRadius and other things. But that was something we had and it honestly made it very simple for us that we didn’t have to worry about separate ERP systems. They performed that implementation and we brought them on after that. And then again, going back to the standardized process with local preferences. And that example would be with Canada being able to have things that we have the same process of when we send our collection notices when we send the invalid letters to the customers, but the local preferences were that we would send it in both English and in French. We actually identified that instead of trying to go through and identify which customers should be English, which customers should be French. We just sent both letters to both and it wasn’t offensive to them at all, or anything, which we were kind of worried about. But it was able to work and whoever got the letter, they were fine with it.

So again, I feel like I’ve talked about this kind of throughout the presentation of some of the lessons that we learned but it’s really just focusing a lot on not just trying to drive down the cost but the customer experience and again, understanding who your customers are and who’s going to benefit from this. So for us, that was the big key. And as we continue to look in and bring happy family or nutrition for us, it is really trying to learn from those things and focus mainly on the customer and what we can bring to the customer. So just some of the small points here are happy employees mean happier customers. And this is honestly a challenge that we constantly have. Our employees are maybe happy is not the right word, but least satisfied with what they’re doing. So that, again, as we’re trying to make them be viewed as leaders that they can make decisions, they can contact the business, they can have those discussions themselves, that they’re satisfied with what they’re doing, they understand it, they’re happy with what they’re doing, so they can provide that high level of customer service. Like said it’s something that’s an ongoing thing. It’s very hard to do.

At times, I think we do really well at it. And then other times I hear things that I’m not sure if we are doing so well at it, and especially in this environment where its credit collections, deduction management. It’s very process-oriented and a lot of transactions and that’s a lot of people that are just processing transactions that can get old and can be something that’s hard to do. So trying to make sure that our employees are happy and motivated is very good. But also not just our current employees. But again going back to those employees, the companies that we were taking over, making sure that they were happy to give us the information that we needed, and being able to do that. But a lot of things that that help our current employees be happy is, like I said, taking away that nonvalue added stuff, having someone who’s just spending all day. Applying cash wasn’t the greatest, we still needed those two people who can apply cash, but we needed to change their mindset a little bit like how can they think more systematically to change rules, to make less exceptions so that they’re not having to apply the cash where the system is doing a lot of it and they’re only dealing with the exceptions, and how can they get to the root cause and not have to deal with those exceptions and that a lot of employees find that a lot more engaging of a job and make them a lot happier.

So, and it’s not just with a cash application with deductions and everything else, all these transactions instead of getting people that are just going to come in and process transactions, we’re trying to move to get people who think a lot higher than transactions still need to be processed. But how can they almost work themselves out of a job? How can they focus on way to not do those transactions and focus on higher value-added stuff, which is bringing back some of that imbalance, bringing back some of that money to it to the business and being able to see that and get joy from having that accomplishment?

So again, being global business leaders just across the different businesses. Being viewed as a leader, having conversations with our sales leadership team or supplier leadership team, getting their buy-in as we’re cross-functional, and a lot of what we do affects them making sure they’re involved with that. And the last point again, as you continue to scale so for us, not necessarily globally, but as we bring in these other businesses of Danone, making sure that we plan ahead of time to see where can we do that plug and play and just bringing these businesses to the model that we have for our shared service center.

[23:09] Jacob Whetstone:

But where do we need to also have those differences and be able to understand what’s different about a medical company than a yogurt company? You know, off the bat, what do we know that we have to do differently? What can we still do the same and what processes we can bring in? So really just understanding. So I know these presentations are short, and there is not a lot of time. So it’s a very high level. But the point is, we are working on this presentation that there’s a shared service center, there’s a lot of cost savings. There’s a lot of good things that can come from that a lot of ways you can bring value back to the business, but not forgetting the customer satisfaction part and who are your customers, they’re the business, they’re your own employees, they’re the everybody that’s being touched by this and those are the people that we want to be satisfied.

So all right. Thank you all. I appreciate it.