Paul Morrison

Hello and welcome to Retail and Consumer Pulse by WNS. My name is Paul Morrison, and today we're going to see how the consumer goods sector is pushing the boundaries of global business services. To help us to do this, we have no less than Deloitte's UK GBS and BPO advisory leader, Amiya Kagalwala.

Amiya has a long and distinguished career as an advisor, also as a practitioner with leading consumer brands. It's great to have you with us, Amiya. Thanks for being here.

Amiya Kagalwala

Thank you, Paul. Thank you very much.

Paul Morrison

Good to have you. Perhaps you could just say hi and say a few words about yourself.

Amiya Kagalwala

Certainly! Thanks, Paul. My name is Amiya Kagalwala, and as Paul said, I am in the GPS and BPO practice in Deloitte. I've got 25 years in the industry, and during that time, I've been a client buying/using services, captive and BPO. I've also been a vendor with a couple of different BPO vendors and an advisor with two companies as well. During that time over 25 years, I've got a 360° view of the market.

Paul Morrison

Excellent! We will lean heavily on that range of perspectives in this conversation. Today, we are exploring that question about pushing the boundaries of GBS with consumer goods.

Just to frame that conversation, and for those not familiar with the term, let's just have a quick look at GBS and what it is.

Correct me if you see things differently, but I would say that GBS, a term that’s been around for most of those last 25 years, I guess, and I'd see it as an enterprise-wide operating model that brings together the internally provided and externally provided operations for areas like finance, HR and procurement into one framework. So, it's a hybrid umbrella for getting stuff done.

Amiya, does that fit with what you see?

Amiya Kagalwala

Yeah, it’s exactly right. And it's typically made up of captive. So, companies doing that centralization of services themselves or through a third party, i.e. BPO or ITO as well. And within that framework, there's other terms that you will definitely have come across, things like CoEs or Center of Excellences, and we've got GCCs (Global Capability Centers) as well, which all broadly sit under that GBS umbrella that you described.

Paul Morrison

Exactly. So there's a bit of a free through letter acronym SOUP to start with, but I think those are the key ones that we that we need to bear in mind. So, if that's the playing field, then let's turn to consumer goods as a sector, and we may stray into retail and supporting areas as we go. But for consumer goods, I think the starting point is that GBS is super important for consumer goods companies. They were among the pioneers of the GBS model.

It's well known, for example, organizations like P&G, or Unilever and others were among the first to develop GBS operations at scale, and if you look at some of the analysts’ surveys of the top GBS organizations, then names like Estee Lauder and Henkel and Phillips and J&J are at the top of those lists very often. So, it's a super important sector for GBS. So Amiya, let's dive in.

What's your thought on why GBS is important for the consumer goods sector? What's going on there?

Amiya Kagalwala

Well, over the years, you're right to say that consumer goods have been one of ‘The Pioneers’ in the GBS or shared services that started off, and then kind of morphed into an end-to-end, into a more broader service offering, and it sort of became the global business services. And some things like consumer goods, but others as well, telco as well, and the other example industries as well, where there's been actually quite a lot of changing regulation, and no difference in the last few years.

We've seen a lot of regulation around CSDR. We've seen ESG and AI more recently, and packaging waste coming up, and deforestation regulations coming through either EU or different jurisdictions as well. That is all requiring more and more data and information to be provided centrally and information to be captured across these very global companies in a consistent way that they can then report back on the impact of those kind of areas.

In addition to that, I think, and we all know this now, particularly right now, is that the uncertainty in the market and the shifting economic policies that are going on across the globe, from tariffs to power to changing consumer requirements. All of that is turning into real sort of fragility in global supply chain.

There are so many different areas which are being impacted, which is creating the need to have centralization of information, the ability to quickly react to changing demands, to provide information clearly and fast and quickly. I think it's things like that where consumer goods were on their way for thin margins. It's always been the case and has been particularly important to be at the forefront of trying to make sure they make the best use out of some of their back office, but increasingly middle and front office as well.

Paul Morrison

That's really interesting. So, to bring that together, there's a whole series of industry drivers ranging from regulation, the nature of margins, the fickleness of the consumer, and the fast cycle of updates and improvements that are expected from the end customer, all pushing down on the consumer goods organization. And the GBS provides a platform for doing something about it, say for centralizing, organizing, standardizing, controlling and improving compliance.

There's an equation or a dynamic there that's pretty powerful. If you look at some of the statistics, about 70% of large CPGs have gone down the GBS route, the formal GBS route. So, it's well established. Just to add a few thoughts to those observations, that list of requirements or pressures is going up. If you take a process like finance, or procurement or contact, whatever it might be, the expectations are continuing to sharpen. And as more technology and AI is being added to the mix, then many organizations are looking to GBS to lead the way in providing an organized, smart and efficient way of applying AI across large chunks of the business. So, in a way, the need for GBS is getting stronger, not weaker.

Amiya Kagalwala

Even if you think back to the start of shared services back in 25,30, maybe even longer than that - why did finance, the first kind of major function go into a shared service? It went there because companies realized that they needed to have their end of month, end of quarter and end of year information all together quickly and their analysis done on the state of their organization. And every country on different platforms, on different systems reporting in different ways meant that consolidation became really difficult.

So, finance became like the engine and the starter to say, let's bring it together and do things in a more singular way, in a more consistent, standardized way. And then when you fast forward to HR, and procurement, and supply chain and now into some of these other areas like ESG that we talked about just now, you can see the value again where it's a little bit like the ‘Wild West’ at the moment. Again, every country doing their own thing, there's different regulations, yet there is a need to centralize that information in order to provide consistent data back.

Then, you do it quickly. They can't think like six months to put it together like it often does take when you're trying to do with different systems and people on spreadsheets and other people buying one platform that measures things in one way or a different way. The regulations that are coming out are trying to create that consistency and companies need to follow suit by trying to get things together in a way that they can then confidently report back and hopefully back up, not only from a regulation point of view, but also the promises they've made to the market about their net zero, for example, promises on their reduction in carbon. They need to confidently come back and say, actually, this is where we're going along that journey, and we're confident in the numbers we're providing. We are not double counting or undercounting.

Paul Morrison

Absolutely. One way, I like the use of the word, ‘confidence’ there, and ‘predictability’ and ‘control.’ One of the things we talked about previously was the growing profile of GBS and GBS leaders. You were talking about Chief GBS officers as a thing. Is that something you've seen recently or you'd expect to see?

Amiya Kagalwala

Yeah, increasingly. Traditionally, most GBS leaders report to the CFO. That's traditionally how it's been, maybe the CEO in less cases, but certainly, you might have seen that on occasions. But I think now, the professionalization of GBS and the importance of it to organizations where there is some real scale, like there is in consumer goods and in other industries as well, of course means that has elevated that role.

What we have seen now, people become the CGBSO, the Chief GBS officer role, which, again, reporting into the board because I think it's seen as really the engine to make some real fast and quite substantial changes. Certainly, if you're looking to reduce cost, if you're looking to maximize profit, if you're looking to optimize processes, GBS is a really good vehicle to do it.

Through BPO, where companies like yourselves can help financially manage AP transaction, there might be transition costs. There might be technology costs, but you don't have to pay for all up front. There can be ways to financially engineer that. So, you spread that over the length of the contract. There might be an ability to provide an investment in certain areas that otherwise would never be done.
And I think, all of those is where, GBS is playing a really important part, and it's relevant now and whenever.

Paul Morrison

Absolutely. That's great. Well, let's continue to sort of dive into that side of things and think through for CPG or consumer goods more broadly. If they're part of this trend and this balance of shared services and BPM and GBS, what is particularly difficult or different about GBS for consumer goods organization? One of the areas I'll get the ball rolling. I'd be interested in your views as well. I think, one of the areas that is really powerful is that GBS is typically seen as a productivity lever about yes, bringing things together, controlling, but also extracting efficiency. What we see is increasingly it's seen alongside the revenue uplift potential that can come from those GBS disciplines and GBS scope.

In consumer goods, the obvious area is a set of processes like revenue growth management, where you are bringing together your best practices and your approaches around pricing, promotions and trade spend management. So, really focused on the top line of the business and very big numbers involved here for all of the consumer brands that we know and love. There's this extremely powerful set of disciplines, concentration of talent that could be applied in an area like revenue growth management in a GBS organization.

So, the story goes beyond control and compliance productivity to growing the business. That's something that consumer goods does more than pretty much any other sector. I don't know if you've got thoughts on that or other areas that consumer goods do differently.

Amiya Kagalwala

I agree with all of that. Consumer goods is an industry where, as I said earlier, there’s a way for thin margins going on anyway, and most people do a GBS to reduce costs.

In our recent surveys, actually, the number one still remains reducing costs, but almost equal to that now is some of the other benefits. That has been driven through the changes in the environment. Many CPG companies, if they've outsourced, they might have done it second, third, fourth generation. So, a lot of the labor arbitrage has long been extracted from that. They're actually looking for other benefits and other savings that come from a GBS, which it can offer.

And it can be things like just making sure, if you're particularly around AI, where do you get all the best staff in AI? Probably not in the traditional locations that you may have always gone to. You might have to find new places, and you're looking for talent in different places. Because again, as the transactional work could start becoming much more automated, and then almost eliminated, the role of humans is going to change and the skill set of humans is going to change. I do genuinely believe there is going to be a need for people alongside automation, but those people will have a different skill set, and they may be found in different locations.

We know that if you take BPM, for example, India has been the central place for that, and Philippines and Poland and some of the really long-term traditional locations. Will that always be the case? And we're certainly seeing many companies, including your own, really upskilling your teams to better take on this new world, recognizing that the skill set of the past may not serve you as well as it did. And that new skill set is going to be key going forward in order to retain the relevance of people.

Paul Morrison

It's a really big one to get a step through and digest, and I guess, there's a couple of dimensions with the future being unknown and still to be played out in the longer term. Organizations need to make investments now and need to hire and shape their organizations, shape their strategies around it.

What I do see with many consumer goods leaders is that they do use the GBS as an asset in this digital pivot. They are developing capabilities in that space. I think, organizations like Coke, for example, and Nestle in its NBS has brought that very close to its global IT hub in Barcelona.

PepsiCo, again, in its wider GBS organization, has got a digitalization CoE. So, it's using the GBS as a platform for approaching and attacking the question about getting value from digital and from AI. So, some very broad and big questions to be tackled. And that's in the here and now. That's in the rollouts and deployment of use cases in the next six to eight months. The bigger, longer term question about how AI and the mix of human intelligence and artificial intelligence will play out in the shape of GBS, we might need another podcast for that one.

But, definitely options are being tested with all these organizations we're talking about, and how that balance will change because it definitely will.

Amiya Kagalwala

We would talk about some of these locations. We are seeing these new locations emerging. I think new companies in Portugal have been on the radar now for a number of years, but certainly gaining in prominence with its language capabilities, multi-language capabilities, its proximity to Europe and its time zones. It’s a very attractive tax regime to help companies come in there, particularly GBS organizations and expats as well.

So we're seeing that kind of shift. And as new processes become part of the GBS organization, that's also dictating new locations. And if you take, for example, like cybersecurity, and I did a project on that where it was a shared cybersecurity shared service center. When I was looking at locations, and where do we hub this, it wasn't the traditional locations like Bangalore, Poland, Romania, Philippines, Costa Rica or any of those. It was Denver, it was Munich, it was London. Those high cost locations, the skill sets, how do you get enough people with the right skills in the right place with the ability to create careers out of it rather than just kind of ones and twos. So, it does turn traditional thinking on its head a little bit.

That's really interesting. These are the key questions of GBS strategy that the answers will never stop shifting. I think, in a way, maybe they're moving faster than ever, but definitely resonate with what you're saying there.

There are certain global locations for the organizations we're talking about that will continue to be absolutely central around the different regional hubs. But many of the consumer goods specialities that we talked about, things like RGM or loyalty management or ESG, we're talking about cybersecurity, these depend and will continue to depend on highly scarce talent that has concentrations quite often in, as you say, more expensive locations or lifestyle locations.

So, I definitely think that will continue to be. And the role of the GBS leader is to understand the future demands of the business, what will grow, what will be worked out with a third party, how will that balance will change. So, continuing to understand the mix of services and the different hybrid combinations that are being used, that's central arts and science of the GBS leader. That continues, albeit now, with the added complexity of AI and opportunities of AI being layered on top of that as well.

I want to add to your point there that you are talking about this hybrid. I genuinely think there is an increasing prevalence in people choosing hybrids as well. It's obviously always been there, but sometimes in the past, people have been like I am going to do outsourcing, and I don't believe in outsourcing. I am going to do it myself, but as a captive.

But we're finding that both models are insufficient. So actually, most of the big companies that I'm working with have both, or if they don't have both, they're planning to have both because maybe one model just doesn't take you far enough.
Yes, on the way, there's some things you're not going to outsource, but you still want to get all the benefits of outsourcing in terms of centralization, in terms of KPIs, in terms of rigor of delivery, in terms of being able to be more responsive to your client base and being able to flex up and down. All the things you want from a VPO, you want for yourself as well in many instances. But, you may choose not to outsource that.

But on the other hand, there is still a lot of work that is being outsourced as well. So, we're seeing the hybrid is absolutely key to most reasonable sized organizations. I think that is a trend that will keep going, probably increasingly be more hybrid than less.

Paul Morrison

It's really interesting. It's certainly the picture that we see with our clients in this space. There are elements for business that are strategic and work best in a retained model. There are aspects that work best with a partner like ourselves, and the dividing line between that shifts and changes with time as strategy evolves, as capabilities evolve, as the economics of doing these evolve. So, that's a key thing that we continue to see.

I guess, one thing that strikes me is that question about where BPM, BPO is placed and where head services retain place is an old question. In every few years, there's a prediction that third-party BPM is irrelevant and that's consistently not happened. And I think for the reasons you say and for others, there is something in the mix that provides organizations with more than they can deliver themselves.

If nothing else, we're talking about some very large organizations here that have very big global exposure, have demand for operations at massive scale, and to deliver those through a single organization is extremely complex and risky. So, I think, like you're saying, the hybrid model has a flexibility to it that most organizations still see value in. And we see, whilst there's always an ebb and flow in different parts of the industry, we still see an overall growth of the BPM market to the order of 8 to 10% each year.

Those are the statistics we hear about from different models. So, we see growth overall. So, anything else from your side, Amiya, about the role of BPM in this sector?

Amiya Kagalwala

I'll just comment on what you just said a moment ago about the growth. I absolutely agree. There is a growth going on in the market, and it has been so for 20 years, a growth in BPO. But at the same time, there is an increase in number of companies who are bringing some of the services back in-house again. And we've definitely seeing that trend as well.

Now, the reason why I can co-exist, quite obviously, is the fact that the market is just growing. While some people, some companies are saying, that hasn't worked for me outsourcing it, there are actually more services that're still looking at outsourcing. It might be higher end of finance. It might be more capabilities. AI, we talked about, but there could be other areas like program management, there could be ESG, there could be other areas that are relatively new coming into the frame. And so the overall market absolutely is growing. We see that alongside the number of companies that are bringing work back in-house.

So, let's sort of take stock of where we got to in the conversation. We've talked about GBS and the different related operating models. Next to it, we talked about the importance of GBS to consumer goods. We talked about what's slightly different about consumer goods and how it uses GBS, and now we've just covered the value of a third party or BPM model in augmenting internal offering. There's a lot of moving parts, and a lot of different sort of strategy questions. So, getting GBS right is a complicated multi-year challenge.

So, how do you do it? You know, it certainly is. And before I answer that, there's even more challenges coming downstream as well. And when we look at consumer goods or retail, where consumer goods obviously are sold in those places, we're seeing a change that companies want rapid delivery.

People need to get stock moving from store to someone's home. We're seeing that, and even seeing companies who do 20-minute delivery. We all know that for groceries, it’s very common. But we're also seeing it for things like tools. And we're seeing it also, like recently, what one of the retailers is doing is - in an hour will deliver up to 1,000 kilos of products, not just a pipe or a screwdriver or something like that fits on the back of a motorbike. We're talking about a ton of stuff coming over within an hour and 10,000 lines available in that kind of framing as well.

So, really different models are emerging and how retailers and consumer goods companies have to react to that and many consumer goods companies are going direct to consumer now. So they have to change their models. It's not just through a retailer. So they have to create another infrastructure to better take the orders and then process it. And like all of us, we want things immediately or within a day.

Personally, when I order something, and it says it's three to five working days, I'm thinking that's way too long. I want it today. I want it tomorrow. And that's moving all the time, that kind of demand for it to be as immediate as possible. And we're seeing that also, like rapid response to new product development as well, how the consumer goods companies test something new. They can't take years to develop a product, then go and test it, and then decide it's right, and then buy space in the retailer and then see whether it's successful or it's going to fail. We're seeing again this ability of consumer goods companies needing to quickly produce something different, test it with a small market base, and if it's successful, better roll it out really quickly.

That requires the whole supply chain to work. It requires the retailer or the direct to consumer, whichever part of it, working all in harmony together. And this is where I think, consumer goods companies, the reason why I think back to your first question, why has it been so important to consumer goods companies is because they've got to focus on their core and they need to get some of their other stuff, like their finance and payroll and all these other really important things all done.

They need to concentrate on all these other things, which really is core to their business. And of course, that core is straying into even BPL. You talked about things like sales and marketing support.

It might need store, in-store planograms, which you could say is even kind of core, but, even on the edges there is still a transaction and there are still certain things that are very repeatable that you can actually look to see how you centralize and you can outsource or do yourself in a centralized model. Those are the kind of things we're seeing, which I think, has pushed consumer goods companies to the forefront of what GBS can do.

Paul Morrison

I think that's a great summary. So, stepping back from that and I agree with what you're saying, it seems that when consumer goods organizations are set out on a GBS journey, it logically takes them right into the heart of the business. So we have organizations here with one million, five million SKUs and hugely complicated product sets. We have complex ERPs, product lifecycle software, underpinnings to it as well. And then we have the need to deliver. And I work with and talk to organizations where, it's not just revenue, it's not just productivity and cost, we're talking about speed to market as a metric as well.

You know that's a measure on which GBS is being targeted to have an impact, its ability to get that stuff to you in under three days as opposed to what it could be. So, I definitely see all of this coming together in a particularly complex way for consumer goods and ambitious way as well, because the value you can unlock where the product lifecycle and your logistics and your retail operations and inventory, all of those pieces flow together with GBS is massive. It's a massive prize.

We're going to have to close in a few minutes. What's your top of head thoughts about where to start, or if you're already on the GBS journey with the key things to look at on GBS, making GBS successful in the next few years. Any thoughts?

Amiya Kagalwala

Yes, I think if you embark on the journey, the first thing to look at is to think about what could fit into a GBS. It's going to be all the obvious things like finance and HR and things that are traditionally falling in that space where we see large percentage of companies using the GBS model for whether it's outsourcing or it's captive.

But also thinking far more than that in capabilities as well, and obviously AI is at the top of everyone's mind. Do you want to do that yourself? Do you want to do that through third party and no matter which way you do it, are you going to get the right talent and skills by having it fragmented with ones and twos in different countries and never really creating a critical mass of people? And so actually building that talent base where it should be, how you should do it and how you get that kind of economies of scale is going to be really important.

If you're already on the journey, and you've been doing it for many years, again, pushing the boundaries of what you already do, moving up the value chain and assuming that some of the more transaction work will get automated, will get potentially taken away from the human because actually some of that work will be automatable through AI or various other techniques, and hopefully errors will go down as well in proportion with that.

But then, start to look at where else do you go with it. And we've seen companies move up to when they're doing finance, traditionally who would do FP&A, very few people. It's been talked about, it’s not really done, but people are starting to find now what can we do for the third party or in a captive, and it might be getting the data. It might be getting the information. It might be preparing the report. It might be pulling information from different sources.

So, there’s still areas where you say, I'm just not going to give that to anyone. You might think there's some bits that I can do and that comes in, say in sales and in marketing. Do you want to take away from your salesperson and say that's just admin work? That is just a headache. It stops you getting in the market and selling more stuff, whatever stuff is.

So, better take some of that work away from them or making that process more simple for them to place the orders, to make sure it goes through the system. You talked about companies with millions of SKUs, making sure they order the right one, because sometimes when you've got millions of SKUs, many of them look almost identical but are not quite identical, and then the wrong thing gets ordered, and that gets delivered. It gets sent back again and another one gets sent out again, and it becomes a very costly way of doing things.

Particularly, when you're competing against like new contenders and far disruptors that come in the market who don't have the legacies that you have or many of our traditional bigger companies have, they're kind of online only. They have vast quantities of people, and they're starting on a different base. So, whichever way you're on the journey, starting out, been there, done that, there's still many areas that can be explored.

No matter where you are on that journey, and even if you're super mature, I think there's a lot more mileage to go. Consumers are leading the way, but they're also finding new ways to really take advantage of GBS and get all the benefits that finance people and HR did many years ago, and applying that to new process and services going forward.

Paul Morrison

I really like that. That definitely resonates, and I recognize that in my work, and I think at the end of the day, being able to step back from the scope, whatever it is, and to be able to express or to summarize the end-to-end for a process like loyalty management or finance or FP&A, whatever it might be, and to understand that, albeit there may be a summary or simplification of the complexity, but being able to articulate that and to understand within that end-to-end where the opportunity could be or where the key automation use cases are, the key agentic AI use cases are using that as a way of imagining a better approach is powerful. I’ll add to one thought, my observation, having worked with GBS over a few years, is that what we talked about there is absolutely fundamental, and there are questions of location strategy and so on that are important, but there's always a reality check with GBS and operating model in CPG and other sectors in terms of, for want of a better word, ‘the politics’ of it. The change requirement in that GBS are coming together at different parts of the business, but may not always want to come together or want to come together at a certain time, and therefore there's a need to inspire and to persuade and to tell a story about the change.

I remember some organizations I have worked with, that were able to do that very skilfully with great deliberation to get the story right and to engage with stakeholders across the organization, to get it right, and to position it properly, and to make it meaningful. I've seen organizations that haven't done that where there's a lot of friction. Do you recognize that pattern, or are there any tips on avoiding the problems there?

Amiya Kagalwala

Yeah, absolutely. That is also another podcast for another day. I think you could do another thing, but it's on that one. The kind of change management, which you were describing there, is a vital, important part of GBS and its success. Do you really want to just force everyone into this model, as you'll get them kicking and screaming every time there's a problem. They will be overblowing that problem, making it out as the worst thing that's ever happened, and it doesn't exactly encourage others to follow. So, the change management is a vital bit, and spending that time and effort getting people's hearts and minds in the right place, but also solving people's problems.

We know it's always difficult. We know that GBS or whichever model you choose to centralize BPO or captive, it’s a change. It is a big change for people and customers and end users and whoever is interacting with that organization. So, really thinking about the customer, thinking about the edge thinking about what's in it for them, how they get the best out of it, when there is a problem, how you solve that problem for them. And it's just not just a percentage or a number that typically goes wrong, but really understanding what happened there, how do you fix it, how do you stop it from happening, and then sharing that information with the person or the team or the organization that had that problem, say, we recognize that problem. We've worked on trying to fix it like this. This is what we're going to do. I think everyone accepts there's always problems in the old system and the new system, but it makes sure the new system is better designed to fix them and more transparent in how it does it, rather than it just goes into a hole, and maybe gets fixed, maybe doesn't, but people don't see it getting fixed.

Paul Morrison

Right. There's something there about making things visible, providing the evidence of success, and cutting out perceptions that are maybe more anecdotal or not real. But yeah, the devil is in the detail. So, we have to end there. Amiya, thank you very much for your insights and for joining us today.

Appreciate your time. Thank you very much, and thanks to everyone for listening. We will be re-joining in a few weeks. If you'd like the session, please do like and follow us.

And we look forward to having you again. Thank you.

Amiya Kagalwala

Thank you.