CFO Studio Magazine with David Chambers, CFO, Jaguar Land Rover NA

12 WWW.CFOSTUDIO.COM 3rd QUARTER 2016 FEATURED CFO I n the summer of 2013 Agfa Graphics North America undertook a close examination of the costs it might save by outsourcing its U.S.- based centers handling customer order entry and certain financial processes. These departments were then under the leadership of Gunther Mertens, Vice President and CFO, since promoted to Regional President for North America. In an interview with CFO Studio magazine, Mertens explained the reasons for exploring nearshoring of some functions. “As we are largely operating in a mature business with strong competition, there is a lot of price pressure in the market, so our margins are always under pressure. We were looking for cost-saving opportunities that do not affect our go-to-market approach and do not affect our customer-facing operations, otherwise known as our salespeople,” he says. The company looked at costs and advantages of moving certain operations to a country where there is a skilled workforce, but where wages are lower than in North America. Communications and security were of paramount importance. A certain loss of direct control over the resources might be anticipated. For that reason, it was operations with recurring processes that the Agfa team first considered: accounts payable and collections. Later, certain lower-level accounting functions, dealing with account reconciliations and bank reconciliations, were put on the list to nearshore. Weighing expected costs and savings, then-CFO Mertens determined that those finance functions alone would not save Agfa sufficient money, not enough “to justify going forward with a project of this magnitude,” he says. Like large companies everywhere, Agfa Graphics employs a customer services team. “Some people would call it a call center, but in our world it’s a little more complex than that,” says Mertens. “It’s really a connection between our customer and our supply chain organization.” That group, customer order management, was not an easy choice for nearshoring, but in the end the Agfa team decided that with sufficient training, personnel working for the outsource partner could do the job. A vendor whose core business is providing the functions of accounting and customer service, as opposed to Agfa, whose core business functions are R&D, manufacturing, and selling to the graphic arts industry, can implement technologies and gain efficiency improvements thereby, says Mertens. “We were looking for creative solutions in cost savings without negatively affecting our customers. But [because Agfa employees would lose their jobs,] nearshoring is not a solution that we particularly enjoyed coming to.” The Timeline Once the financial calculations of anticipated savings were done, it was time to select a vendor, says Mertens. The Caribbean, with an educated, largely English-speaking workforce, was his top location choice. The Bahamas, the Cayman Islands, and Jamaica lie in the same time zone as Agfa’s major U.S. facilities. Proximity for training and ongoing management was also important. The team conducted due diligence and site visits between the fall of 2013 and February 2014, when Agfa signed a letter of intent with its partner, Sutherland Global Services, which would run the operation in Kingston, Jamaica. From February to May, Mertens and his team worked on contract negotiations and ultimately signed a contract. In May 2014, an announcement was made internally that the work would be transferred to the Jamaica partner’s facilities. Mid-May to late August, Mertens’ team worked with the vendor to put the infrastructure in place. The customer order management inbound telephone calls would need to be forwarded from phone numbers in New Jersey, California, and Illinois. The accounting operations would need SAP and other software. Redundant phone lines and backups needed to be put in place, so Agfa LESSONS LEARNED A BRIEF CASE STUDY OF NEARSHORING BY JULIE BARKER Gunther Mertens, Regional President for Agfa Graphics North America and former Chief Financial Officer