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Operating Model Effectiveness
Operating Model Effectiveness2
To restore and maintain confidence in the long term, businesses must understand and manage risk better through improved operational efficiency, increased transparency and greater global coordination within their organizations. These are elements that can be addressed using a global business strategy and Supply Chain model – often called Operating Model Effectiveness (OME). This has been recognized by future-sighted companies which are using the current economic situation to implement these changes.
Based on our experiences from working with many of these companies, we looked at three strategic objectives that are crucial to the overall business strategy and chosen Supply Chain operating model for companies that are serious about sustaining and improving their business performance.
1. Operational efficiencyTo improve business performance, an organization
needs to increase its operational efficiency. It needs to consider the changing market environment and any changes in customer requirements. In the current climate of economic uncertainty, it is important to have sufficient cash resources to meet current and future obligations.
An overall reduction in Supply Chain costs can release cash
Operating Model Effectiveness
for future investment or for buying back company debt, which would help capital efficiency. Indirect taxes are another area where it is relatively simple to free up working capital. The multinational companies that have implemented Operating Model Effectiveness (OME) models range from pharmaceutical and chemical companies to consumer products and the high tech and automotive industries.
2. Increased integrationThe second area of improvement for multinational and
multi- divisional companies is to increase integration within their organizations, primarily through transparency. Organizations, systems and data need to be transparent in order to leverage process integration. An organizational culture and structure that is unwilling to share information across business divisions and functional areas, will achieve limited organizational learning and improvement.
3. Greater global coordinationIncreased integration and transparency provides
global visibility in the execution of business operations. Companies need to transform themselves from multinational corporations to truly global organizations by following a series of coordinated processes. The implementation of these global processes helps with the creation of global hubs to serve all of
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the countries in which a company operates. In our work with some of our key clients in different industry sectors, we know that they understand the rationale and benefits of having globally integrated and coordinated systems, organizations, data and processes in place. But, having said that, they often are unsure on the best way to achieve this kind of business structure. Many companies have started the journey towards global integration and coordination, but many companies also continue to lag behind and still need to learn the lesson that global coordination is a not a luxury, but a necessity, in today’s interconnected and interdependent markets. Companies need to work, both internally and externally, to promote global
…in globalized world, international companies compete operating model vs. operating model…
consistency in proposing and implementing solutions to the crisis and to anticipate and prevent other potential risks.
Centralization of business management can bring operational improvements such as speed and accuracy of operations, reduced duplication of business processes, improved service, reduced working capital, improved handling of international customers, better decision making in ‘constraint’ situations, central sourcing cost reduction opportunities, harmonization of processes and a good basis for shared services. It also creates an opportunity to simplify intercompany transactions substantially.
BusinessModel
OperatingModel
‘the idea’How will you make money?
How and where you organize yourpeople, organization, processes,
transactions, technology, assets and IP deliver the Business Model
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Why perform an OME analysis?
There are a number of examples of transformational needs calling for an OME analysis.
• Regionalization/globalization trend - moving from nationally focused business to a (sub) regional or global business structure in single or multiple organizational functions
• Supply Chain models in relation to Online businesses or channels
• Cost pressures signal need for cost reduction, improved working capital and efficiencies
• Duplication of functions, and lack of synergies across operating companies, divisions and business units
• International network optimization programmes e.g. for Manufacturing, Warehousing, Sales, R&D, etc.
• Pending or upcoming M&A integrations
• Business expansion or market entry into new geographies, with international supply chains
• Supply chain & trade flow optimization and simplification planned or underway
• Corporate simplification/ legal entity rationalization initiatives
• Upcoming or existing IT implementation programs (e.g. implementation of enterprise resource planning (ERP) systems and/or major systems and process harmonization work)
• Volatile tax profiles, trapped tax losses or reliance on traditional tax planning to manage group ETR
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EY and OME
At EY we have a holistic Business & Tax aligned approach, that foster andprotect the realization of operational and financial benefits.
Finance & Accounting
Direct tax & transfer
pricing
VAT & Customs
Legal and regulatory
Location
Labor and employment
matters
IT systems
Operations
‘Can a revised Operating Model add value?’
‘What does the detailed design look like, how to
drive change?’
‘How to manage risk and protect the value?’
1. Opportunity assessment
2. Detail design & Implement
the Model
3. Sustain the Model
Typical entry points
EY has the most integrated Tax-Advisory team – this
ensures better designs and predictable implementation
Structured methods
150+ projects
Deep industry experience
EY leads the integrated OME space
1. OME Integration
EY differentiators
2. OME methods & Experience
3. OME Leaders
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EY differentiation and how to start?
‘Can a revised Operating Model add value?’
‘What does the detailed design look like, how to
drive change?’
‘How to manage risk and protect the value?’
1. Opportunity assessment
2. Detail design & Implement
the Model
3. Sustain the Model
Typical entry points
EY has the most integrated Tax-Advisory team – this
ensures better designs and predictable implementation
Structured methods
150+ projects
Deep industry experience
EY leads the integrated OME space
1. OME Integration
EY differentiators
2. OME methods & Experience
3. OME Leaders
EY | Assurance | Tax | Transactions | Advisory
Lennart BergvallOME Leader Industrial Products
Mobile: +46 70 318 91 69E-mail: [email protected]
Mikael HallOME tax leader Industrial Products
Mobile: + 46 70 318 92 35E-mail: [email protected]
Interested in Operating Model Effectiveness? Contact us!
EY’s Nordic teamAbout EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
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