Global Shared Services Case Study Carrefour
When Carrefour, the worlds second largest retailer, adopted a new global vision the challenge was integrating global information technology and management infrastructure. With the help of select partners Accenture, PeopleSoft, and EDS, Carrefour reengineered to a shared services model, streamlining its processes. The infrastructure now supports over $70 billion in business.
By reengineering its accounting processes, creating a shared financial services organization to support the business change, and implementing a common information technology and management infrastructure, Carrefour was able to reduce operating costs, streamline its financial processes, and position the company for an aggressive growth strategy.
With more than 9,000 outlets in 27 countries, Carrefour is the worlds second largest retailer. It operates a variety of store formats including hypermarkets, supermarkets, and convenience stores. When Carrefour adopted a new global vision, to embrace the challenge of building a worldwide company, not only geographically international, but truly global in vision, leveraging each countrys experience as we optimize our resources and technology, that called for leveraging investments in addition to standardizing and streamlining processes across all geographical locations.
The challenge was to shift from local to global information technology and management infrastructure. Carrefour partnered with Accenture to help them make this vision a reality by creating a common and reliable information and management system consistent across its entire organization.
The Globalization Challenge
For some industries globalization has been a reality for years, but retailing has stubbornly resisted the trend and remains essentially local in character. A global pioneer, Carrefour operates in more countries than any other retailer in the world and is in the process of expanding further across Europe, North and Southeast Asia, and Latin America.
The companys chief executive officer since 1992, Daniel Bernard is committed to foreign expansion to increase future sales and earnings growth. Daniel Bernard articulated Carrefours current vision in the 1997 annual report, focusing on foreign expansion by leveraging diversity while operating a global retail organization.
Historically, when establishing its presence in local markets, Carrefour used local IT platforms and applications, for example Sun Accounting in Korea and Anabel in France. The approach worked well, but was not ideal because of the slow management reporting that resulted. Then, Carrefour adopted a new global vision that called for consistent systems across the entire organization. The companys new vision was applied to the finance organization by setting the following goals: standard financial processes and systems around the world and in all stores, a global interface model to streamline information flows, and a global data center to support finance operations.
In 1998, Carrefour focused its goals on becoming the leader in retailing (based on sales) in each country it had a presence. Consistent with this goal, Carrefour was set on growing the size of its global business quickly to establish and extend its global presence. In order to realize its goal, Carrefour was determined to operate globally with mobile resources, standard processes and practices, and a common technology support infrastructure. While management felt it was critical for front-office processes and systems to reflect the local business climate, company objectives would more easily be obtained through standard back-office processes and systems. This approach would also promote additional productivity and efficiencies.
Turning a Global Vision into Financial Reality
Carrefours first global system deployment initiative intended to create a solution designed, built, deployed, installed, and maintained in all countries where Carrefour was present. To help tackle such a large-scale project, Carrefour chose to work with a limited number of partners, including Accenture (overall program partner), PeopleSoft (application configuration), and EDS (data center).
Carrefours new financial information system program Thales, took approximately three years to complete starting in March 1998 and ending in late 2000. The total project cost was $170 million. The project entailed redesigning Carrefours accounting processes, creating a shared service organization to support the business change, and implementing PeopleSoft Financials in four modules.
Carrefours first task was to identify potential benefits and shape the business case. Once the business case was completed, the Thales team began the search for a fully integrated financial system, such as SAP or PeopleSoft, in the spring of 1996. The Carrefour Steering Committee chose PeopleSoft as the software provider in January 1997 since this was already being implemented across its home territory. The project chose to implement four modules within the PeopleSoft financials group including: general ledger, purchasing, accounts payable, and asset management with additional modules, such as budgets and treasury, to be added later.
The Thales team implemented the new organization and financial systems, with project coordination managed by a central team at Carrefours Paris headquarters. Local teams, including people of 14 different nationalities, were involved at each step of the design and implementation process. This ensured that the solution addressed local needs and was used in a similar manner across boundaries. All of these factors were important because global does not mean centralized and local specifics retain a strong influence while synergies are the key advantage.
Thales was implemented in four countries in 1999, expanding to 17 countries by the end of 2000, with remaining entities such as Promodès (acquired by Carrefour in December 1999) completed later. Within three months of the first pilot, 119 stores were live with Thales in France and more than 4,300 users worldwide were working on the system.
In late January 2001, Carrefour achieved its first full-scale, year-end close using Thales. In an internal newsletter, Sergio Dias, then group controller, declared Thales a success and recounted the idea-to-reality journey:
Pursuing the logic of globalization, we defined an extremely ambitious plan which we have succeeded in setting up. Whereas the pessimists, based on past statistics and the failures of so many implementation projects (since only 16 percent of ERP projects reach a normal conclusion) were forecasting certain failure. Quite clearly, the close that we have just carried out is proof of the accuracy of our strategic orientations.
The success of Thales was attributed to Carrefour and its partners and their working relationship to realize the goals and benefits outlined in the business case. Carrefour took account of Accentures relevant successful experience in the design and implementation of integrated global IT and management systems, shared services organizations, the firms global reach, and the ability to provide on-the-ground worldwide support, in choosing to work with Accenture. Dias has credited Accenture with assisting Carrefour in achieving its vision of global expansion and diversity, We turned to Accenture to help make this vision a reality their involvement was critical to the programs success.
An SSC Example: Requisition Through an SSC
Requisitions from the stores are now processed by the shared service center (SSC) located in each country. The mission of the SSC is to optimize both costs and the administrative management flow. Through the PeopleSoft purchase order (PO) module implemented as part of Thales in October 1999, Carrefour created an SSC in each country for all of the requisitions processed by its stores.
The new purchasing process involves the vendors, stores, and SSCs, or procurement SSC, located in each country. This center is responsible for the centralized management of purchases and negotiation with the suppliers. It is part of the assets direction and carries out the operations that were executed, up to now, in the stores. It provides the stores with the vendor and item master files and handles the management of information flows (transfers of order forms and follow-up of orders). In the future, confides Philippe Capillon, certain shared service centers may be multinational and cover several countries in the same geographic zone, in particular those where the number of stores is low.
With regard to the vendors, for the most part they deliver directly to the stores in accordance with negotiated conditions. Reception is carried out in the store by the requester who issued the requisition, making that person responsible. Nevertheless, Carrefour retains the possibility of carrying out deliveries to logistic platforms. In practice, each store issues purchase requisitions to the shared service center, explains Philippe Capillon, These requisitions are consolidated with those issued by the other stores. The order form is then sent to the vendor. There are fewer orders and therefore fewer invoices and payments overall. Processing is streamlined and administrative costs are reduced.
The requisitions are issued based on electronic catalogues updated by the SSC and include several thousand items available from approved vendors. The simple fact of using referenced items makes the accounting, tax, and payment information reliable from the beginning. This information is then managed throughout the purchasing process.
The SSCs mission is to optimize purchasing. To do this, it reviews certain requests and checks the reference of assets. In addition, it checks the justification of generic requisitions (requisitions made outside the item master file) in order to try to channel maximum requests towards the item master file. The SSC also approves all the requisitions in which one of the lines is higher than a predefined threshold, which can also be configured. However, according to Philippe Capillon, This procedure only aims to optimize the requisition and to obtain the resulting benefits by renegotiating the price or the suppliers payment conditions, by looking for alternate sources of supply, if necessary, for an item that is equivalent but cheaper
Delivering Benefits
The benefits realized by Carrefour from Thales include lower operating costs, more efficient streamlined accounting processes through shared services, and standardization of common processes, systems, and data across the entire company. Carrefour now has a unique infrastructure and systems to manage their rapidly expanding finance operations around the world. A three-and-a-half year payback on a $170 million investment program was anticipated primarily based on headcount reduction.
These benefits were achieved due to increased efficiency through centralized accounting functions, reduction of manual work in each store, and facilitation of non-inventory purchasing negotiation with suppliers.
In addition to the benefits formulated in the business case by the end of December 2000, Thales had generated a number of other benefits not anticipated in the original estimate. The infrastructure is so robust and scalable that it is able to support Carrefours rapid expansion including the numerous acquisitions it made in the last two years (such as Promodes and supermarkets chains in Brazil) without significant additional investment. When originally designed the infrastructure was supposed to support a $28 billion business. Currently, it is supporting a more than $70 billion business.
