from increased scope to stabilisation

From Increased Scope to StabilisationA BASF Case Study

21 September 2010KP LauManaging Director, BASF Asia-Pacific Service Centre

04.11.2004 2

BASF – The Chemical Company

“We create chemistry”

04.11.2004 3


An introduction

Chemistry is about every aspect of life.

We are connected to deliver intelligent and sustainable solutions.

Sales 2009: €50,693 mill.

EBIT 2009: €3,677 mill.

Employees (December 31, 2009): 104,779

About 1,300 new patents filed

6 Verbund ( integrated ) sites and about 380 production sites

04.11.2004 4

* Styrenics reported under ‘Other’

Percentage of sales 2009

Chemicals

15%

Plastics*

14%

Performance Products18%

Inorganics

Petrochemicals

Intermediates

PerformanceChemicals

Dispersions &Pigments

PerformancePolymers

Polyurethanes CareChemicals

FunctionalSolutions14%

ConstructionChemicals

Coatings

Catalysts

AgriculturalSolutions7%CropProtection

Oil & Gas

22%Exploration & ProductionandNatural Gas Trading

Paper Chemicals


BASF today – a well-balanced portfolioTotal sales 2009: €50.7 billion

04.11.2004 5


BASF in Asia Pacific

New Zealand

Australia

China

Pakistan

Bangladesh

India Thailand

Singapore

Indonesia

Taiwan

JapanS. Korea

Malaysia

VietnamHong Kong

Customers in 17 countries

Approx.15,000 employees

105 companies, of which 43 JVs

124 production sites

13 R&D sites

Sales* in 2009: Approximately €8.7 billion

PhilippinesSri Lanka

Asia Pacific service center

Regional headquarters

Verbund site

Major chemical production site*

R&D center*

# Due to the close proximity of some production sites,a dot may represent more than one site.

* By location of customerData as of December 2009

04.11.2004 6


Shared Services Strategic Objectives

Efficiency & Cost

Efficiency & Cost

• Implementation of Shared Services facilitates process streamlining and leverages economies of scale improving efficiency and reducing cost

• Implementation of Shared Services facilitates process streamlining and leverages economies of scale improving efficiency and reducing cost

Business Value

Business Value

• Business Units and Local Companies are released from back office administration tasks and focus on core business and front office activities

• Business Units and Local Companies are released from back office administration tasks and focus on core business and front office activities

GrowthGrowth• Shared Service Centre supports the fast integration of

acquisitions into BASF’s business structure supporting our growth strategy

• Shared Service Centre supports the fast integration of acquisitions into BASF’s business structure supporting our growth strategy

Quality & Speed

Quality & Speed

• Shared Service Centre leverages technology and standardisation to drive continuous improvement of processing speed, quality and compliance

• Shared Service Centre leverages technology and standardisation to drive continuous improvement of processing speed, quality and compliance

04.11.2004 7

Kuala Lumpur

Ludwigshafen

Berlin

Sao Paulo

Florham PkRockaway


BASF’s Shared Service Centers

04.11.2004 8

BASF Asia Pacific Service Centre

IT/IS Services F&A ServicesHR Services

A single regional centre, based in Kuala Lumpur, providing shared Finance, IT/IS and HR services to BASF companies in Asia Pacific


Decision in 2005 to setup centre for Asia Pacific

04.11.2004 9

Finance & AccountingAccounts payableAccounts receivableGeneral accountingFinancial reporting

Information ServicesApplication support & developmentInfrastructure support

Human ResourcesPayrollHR data

Countries: 17

Companies: 67

Languages: 6

Finance Transactions: > 1.2 million p.a.

SAP Users: 6,000

Employees: 12,000

+5:00 +6:00 +7:00 +9:00 +10:00 +11:00 +12:00

Japan

Korea

ChinaTaiwan

Hong Kong

Philippines

Australia

New Zealand

Indonesia

Malaysia

ThailandBangladesh

Sri Lanka

IndiaPakistan


Current scope and coverage in Asia Pacific

Vietnam

Singapore

+8:00

04.11.2004 10


Our growth over the past 6 years

Sales +30%*

Employees +40%*

F&A Transactions +40%*

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

2005 2006 2007 2008 2009 2010 20110

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Original scope46 co’s

Original scope46 co’s

Today67 co’s

Today67 co’s

* Estimated

Planned acquisition

04.11.2004 11


Getting the fundamentals right is the key enabler to achieving sustainability

Standardized business processes

Common ERP system

Decide early on scope of services to be offered

Minimize non-standard scope, allowing only for legal exceptions

Set clear expectations on role and responsibilities, Service Level Agreements

Clear rules of engagement, especially for problem resolutions & escalations

Define the right chargeback principles, apply it consistently

Transparent performance measurement on efficiency of operations

Strong governance support

Collaboration with customer entities

Text

04.11.2004 12

Shared Service Platform

HRIT/IS

F&A

Localised Services

HRIT/IS

F&A

HRIT/IS

F&A

HRIT/IS

F&A

HRIT/IS

F&A

Reduce deviations from process standards

Implement rules based processing

Ensure master data is accurate and up to date

ParadigmShift

Standardised and stable processes

Streamlined interfaces

Continuous improvement and establishment of regional best practices

Standardised, Streamlined

Business Processes


Paradigm shift required to reap the full benefits

04.11.2004 13

Country Specific Knowledge & ExpertiseBusiness Partnering

Local C

ompany

Transactional

Shared Services

Governance

Regional

Function


Define your operating model

04.11.2004 14


Have a consistent service transition approach

Business Simulation

Process Changes Design & Imp.

Knowledge Transfer

Services Confirmation

Month 1 Month 2 Month 3 Month 4 Month 5

Go-Live

Service Level Agreement Establishment

Technology Infrastructure & Physical Environment Implementation

Billing Mechanism Communication

ServiceDesk Implementation

Change Management & Communication

Organizational ImplementationOrganization Design

PeopleMatters

Scope &Process

Service Manage-

ment

Technology &

Facilities

04.11.2004 15

ISO9001: 2000

Six Sigma FRC

Internal Control

Control EnvironmentInformation and CommunicationControl ActivitiesRisk AssessmentMonitoring

Internal Control

Control EnvironmentInformation and CommunicationControl ActivitiesRisk AssessmentMonitoring

Quality Management InfrastructureManagement ResponsibilityResource Management

Quality Management InfrastructureManagement ResponsibilityResource Management

Service RealizationMonitoring

ContinuousImprovement

Consistent methodologyProcess capabilityData/facts driven improvementsElimination of defects

ContinuousImprovement

Consistent methodologyProcess capabilityData/facts driven improvementsElimination of defects

Process Measurement

Process Improvement

Management Review

Compliance Audits

Process Controls

Best Practices


Embed quality, control & continuous improvement

04.11.2004 16


Transparent performance measurement

04.11.2004 17


Develop a human resource management strategy

Employee lifecycle management

Employee value proposition

Employee engagement

Knowledge management

Learning & development

Employee retention

Career path and succession management

Strength of internal functions to support rapid growth

Acknowledge industry growth patterns and development

04.11.2004 18


Our key learnings

You can’t do it alone !

Strong governance support

Collaboration with customer entities

– Change management

– Commit to SLA’s

Do not underestimate the complexities of building up a SSC vis a vis internal capability to

Recruit, retain employees.

Ability to scale up operations efficiently

Change management journey does not end with service transition

“What can go wrong will go wrong, usually at the worst possible time”

Be Prepared, Be Pragmatic, Be Flexible, Keep Calm, Communicate.

04.11.2004 19


Post-stabilization : Value creation of back-end processes

Global / regional coverage allows

Comparative analysis

Improvement opportunities

Process standardization

Cost efficiency

Key enabler for global / regional implementation of new or enhanced

Capabilities

Processes

Systems

Injection of new talent into group-wide organization

Development of in-depth functional expertise

04.11.2004 20


Our journey so far and where we’re going

Transited from a successful project into stable operations

Supporting BASF business growth & portfolio management

Consistently meeting service levels

Driving operational excellence

Best-in-class methodologies

M&A integration

Large-scale project execution

Complex systems integration’

BASF global framework

Competence centers

Global systems & processes

Knowledge integration

Globally integrated service operations

Leverage on global cost synergies

NOW FUTURE

04.11.2004 21

Thank you !

from increased scope to stabilisation

Business

basf companies

cost shared service

chemical companygetting

chemical companydecision

chemical companywe

chemical companycurrent

chemical companyour

shared finance