shared services transformation

THE PINK PANTHER™ & © 1964-2009 Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved. © 2009 Owens Corning.

Owens CorningShared Services Transformation

IQPC/SSON Finance TransformationPat Cassity, Shared Services Director

September 22, 2011

2

Agenda

• Overview of Owens Corning

• History of Owens Corning Shared Services– Timeline – Process Areas– Captive Centers– Costs

• Need for Change in Shared Services Strategy

• Transition to offshore provider

• What We Learned

• Next Steps

3

Owens Corning At A Glance• Founded in 1938, an industry leader in glass

fiber insulation, roofing and asphalt and glass fiber reinforcements

• 2010 revenues: $5 billion

• 15,000 employees in 28 countries

• FORTUNE 500 company for 57 consecutive years

• Residential Insulation• Commercial & Industrial Insulation• Manufactured Stone Veneer• Residential Shingles• Roofing Asphalts

• Composites

Global Leader

Leading North AmericanMarket Positions• Residential Insulation• Commercial & Industrial Insulation• Residential Shingles• Roofing Asphalts

• Composites

Global Leader

Leading North AmericanMarket Positions

THE PINK PANTHER™ © 1964-2009 Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved.The color PINK is a registered trademark of Owens Corning. © 2009 Owens Corning.

4‘98 ‘00 ‘02 ‘03 ‘08‘99 ‘01 ‘04 ‘05 ‘06 ‘07 ‘09

Owens Corning Global Shared Services Process Areas and Locations Over Time

1993 -1998 U.S.• AP

processing• Hourly

Payroll • T&E admin• Payroll

(salary)• Freight pmt

2000 Europe• Cash

disbursement• AP

processing• T&E admin

2003 India• AP• Fixed Asset

Accounting• Inter-

Company Acctg

• Bank and GL Recons

2004 India• Analytics• OCIL AP

2006 US• Customer

program administration

• More Freight Processing

2008 US• PO creation• Small capital

Sourcing• Customer

Service• Adjustments• Telecomm

InvoicingMoved to India• Europe AP• Europe

consignmentOCV • Thimmapur

Payroll

• Started in 1993

• Began with 27 FTE in Charleston, WV in 1993

• Steadily grew scope of services provided.

CHARLESTON, WVCHARLESTON, WV

WARRINGTON, UKWARRINGTON, UK

MUMBAI, INDIAMUMBAI, INDIA

5

Charleston, WV• Opened in 1993• 90 Employees as of September, 2009• Primarily Supported North American Operations• Tasks/Responsibilities

– Accounts Payable • 560,000 Invoices Annually

– Freight Processing • Over 500,000 Freight Invoices, Rate Maintenance

– Payroll • Supporting U.S. and Canadian Operations (Approx 10,000 employees) – Hourly and Salaried

– Master Data• Vendor Master, Material Master, Finished Goods Master

– Mailroom, Scanning into Workflow– Customer Service

• 15 positions transferred from Toledo late 2007– Travel and Entertainment / Procurement Card

• Processing and Administration– Other (Rebate Processing, HR Support)

6

Mumbai, India

• 40 Employees as of September, 2009

• Supported F & A Processes (moved Corporate Finance)– Intercompany Accounting– Fixed Assets Accounting– Bank and General Ledger reconciliations

• Supported Indian Operations– Payroll– Accounts Receivable– Accounts Payable (also supported N America, Europe)

• 17 people in total supported the three regions

7

Warrington, UK

• 4 Temporary Employees as of September 2009– Reduced from 10 employees in 2007, when AP processing moved

to Mumbai

• Supported OC “legacy” plants (prior to SG acquisition)

• Travel and Entertainment Processing

• Invoice Scanning / Supplier Support– All Invoice Processing moved to Mumbai in 2008

• Payment Runs

8

Global Business Shared ServicesOrganization Size Increased and Cost Decreased

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

98 99 00 01 02 03 04 05 06 07 080

20

40

60

80

100

120

140

160Spend FTE

Budget & Headcount Over Time$ in 000’s

Year ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08

$ / FTE 60 61 61 68 69 64 56 60 51 46 46Low Cost Country 0% 0% 0% 0% 0% 20% 21% 25% 26% 29% 31%

From 1998 - 2008:• Scope of work

increased and cost per FTE reduced

• Shifted FTE mix to more low cost country employees

• Reduced average cost per FTE by 25% vs. 1998 and 33% vs. peak in 2002

HeadCount

9

Transformation of Owens Corning• Emerged from asbestos-related bankruptcy in 2006

• Acquired $900M composites company from Saint-Gobain in November 2007

• Divested two building materials businesses in 2008

• Focused on regional growth – increased manufacturing capacity in Europe and Asia

• Now operating as 2 major business units 1) Building Materials2) Composites

• Consolidated Global Information Technology and Global Shared Services organizations in 2009

NA Building Materials Global Manufacturer

10

OC Shared Services Roadmap

Drive increased value to OC:

Shared services strategy development

BPO partner selection

Transition to BPO Provider

Process standardization & optimization

Evaluate new opportunities –Europe, HR, A/R

New org structure to leverage new delivery model

Drive increased value to Drive increased value to OC:OC:

Shared services strategy development

BPO partner selection

Transition to BPO Provider

Process standardization & optimization

Evaluate new opportunities –Europe, HR, A/R

New org structure to leverage new delivery model

Strategy AssessmentBPO SelectionInitial Transition

A strategic service delivery capability:

Scalable delivery model

Global footprint

Minimize Cost to Deliver

Leverage IT and Business process synergies

Standardize Service Delivery

Enabled for M&A integration with speed

Continuous improvement

A strategic service A strategic service delivery capability:delivery capability:

Scalable delivery model

Global footprint

Minimize Cost to Deliver

Leverage IT and Business process synergies

Standardize Service Delivery

Enabled for M&A integration with speed

Continuous improvement

Not Positioned to Scale and Reduce Cost:

Captive centers limit scalability and cost reduction opportunities without significant investment

Sub-optimized work, focused at task/activity and transaction level

Not leveraging IT and Shared Services synergies

Not Positioned to Scale Not Positioned to Scale and Reduce Cost:and Reduce Cost:

Captive centers limit scalability and cost reduction opportunities without significant investment

Sub-optimized work, focused at task/activity and transaction level

Not leveraging IT and Shared Services synergies

Captive CentersIncremental Savings -Scalable, low cost model

20082008Previous State Previous State

2009 2009 –– 20102010ActionsActions

2011 +2011 +Expansion of CapabilityExpansion of Capability

11

Transition to Offshore Provider Timeline - 2009

• RFP developed: March

• Strategic assessment: June

• BPO provider selected and contract signed: September

• Communication to employees: September

• OC India employees begin working for offshore provider – 34 chose to take jobs with BPO• OC Mumbai employees to do same roles with BPO for 18

months

• Due Diligence (scope) in US and UK: October

• On site Knowledge Transfer begins: November

• Off shore Knowledge Transfer begins: December

12

Transition to Offshore Provider Timeline - 2010

• OC Mumbai employees move to BPO: February

• Ramp down of Charleston employees began in March

• UK office closed in April– Services provided by UK office done by offshore provider

• Charleston, WV office closed in June– 87 jobs eliminated – 3 jobs were kept (operating out of home offices in WV)

• Payroll Leader• Garnishments / Payroll Tax Expert• Accounts Payable Leader

13

People ImpactCharleston

• My focus from announcement to closure (acting as Site Leader)• Very little attrition

– Clear, transparent communication throughout– Retention Packages – State of WV Retraining programs• TAA – Trade Adjustment Assistance act

• Approved by Department of Labor• Up to $20K in educational assistance• Extension of unemployment benefits while in school

• Proactive discussions with other area firms

Mumbai• 34 employees chose to take jobs with BPO

Warrington, UK closed in April – retained P2P expert

14

2010 Actions After Transition• Move from transition to operations focus - stabilization

• Shared Services Organizational Structure

• Governance – Assess and prioritize future opportunities– Cadence of meetings and reports

• ERP Rationalization in Europe – throughout 2010– Standard ERP platform- 2007 Saint Gobain plants– Change from decentralized processes to offshore provider

• Roles Changed– In Shared Services– External to Shared Services

Managing People Managing a Process

15

2011+ Focus - Growth• Build on global, scalable model

– China and Australia - 2011– Korea, Japan – 2012– Latin America – 2012

• Business Platform for M & A activity– Acquisition in Q3 – Template for future – standardization = speed

• Expansion of services– Plant procurement activities – Consolidation of travel management office– HRO– Build organizational structure to drive growth

• Leverage IT and Shared Services

16

Project Outcomes

• Delivered sustainable cost savings starting in 2010

• Met or exceeded process level Service Level Agreements (SLAs) with proper controls

• Enabled a global shared services platform to expand the back office work that can be done across OC regions

• Fully informed organization through clear, simple communication

17

Lessons Learned• Focus, Prioritization and Perseverance

• Even though the execution is offshore, we’re accountable for the process

• People are the most important asset

• Pick the right provider – culture, commitment, values

• Involve stakeholders up front

• Joint ownership• Partnership between Business Units, Finance, IT

• Continue to validate and reinforce policies

• Active management of offshore partner throughout • Succession planning, attrition, recognition