Retail

Facing competitive pressures from the larger players in a low-margin retail business, midwestern retailer implements strategic sourcing opportunities to improve profitability and operational quality.

Scope: Call Center, Applications, and Non-Merchandise Procurement
Geography: North America

Situation
As part of its ongoing transformation efforts to reduce SG&A costs and improve quality, this company wanted to investigate and capitalize on the merits of outsourcing back-office functions. We developed and evaluated the business case to outsource F&A (including a customer Call Center), HR, IT (Infrastructure and Applications) and Non-Merchandise Procurement. The team concluded that the cost savings estimate for HR and IT Infrastructure did not warrant further evaluation; however, we recommended and led further analysis of the Call Center, IT Applications and Procurement functions.

Approach and Solution
We analyzed approximately 1,000 employees on a cost basis of over US$150 million across the gamut of SG&A areas, working with the client to evaluate the outsourcing alternatives that best met the decision criteria of lower cost and higher quality.  Everest helped develop the business cases, detail the scope of services and service levels, perform market research, create a change management plan, and negotiate the contracts. 

The supplier selection process for the Call Center solution was unique in that it considered not only the traditional outsourcing providers but also regional, home-based agents. In the end, the client partnered with a not-for-profit organization that specializes in recruiting physically disabled Americans; this solution transformed the traditional centralized call centers to virtual call centers, with the majority of the agents working from their homes within the client’s five-state footprint. 

Results
The client entered into ‘best of breed’ outsourcing agreements with different service providers for the three business processes. The solution is expected to achieve significant cost savings in the future, improve service quality and allow the client to focus more of its resources on maintaining its position in a competitive retail industry.

Scope: Evaluation of Information Technology, Human Resources, Finance & Accounting, Legal, Marketing, Merchandising, Store Services, Supply Chain, Service and Warranty, Web Business, among others.
Geography: North America

Situation
The new CEO of this Big Box Retailer asked us to evaluate the cost savings and service quality impact that sourcing models could bring to a variable workforce of 60,000 to 100,000 employees in the United States. The project’s primary focus was to identify those outsourcing opportunities that would enable a newly hired executive management team to transform the company into a future market leader. 

Approach and Solution
Everest evaluated 37 functions across ten areas of the client’s business, which represented over half of the company’s SG&A spend.  The functions were divided into different process groups and evaluated for potential cost savings and process change resiliency. Those functions that met the threshold for further evaluation were then grouped according to the areas that offered the lowest risk and highest return. Ultimately, the team evaluated the possible solutions against the client’s preliminary decision criteria to determine the optimal solution, and developed a prioritized implementation plan that would accelerate savings and minimize organizational strain.

Everest facilitated the solution development, solution evaluation, and contract negotiation processes to outsource the client’s Human Resources function and recommended a structured framework to effectively manage ongoing relationship governance.

Results
The sourcing strategy findings suggested that the client would capture over US$230 million in annual savings across 26 functions through outsourcing and process reengineering.