Shared Services - Is this for you?
Shared services are becoming a hot topic again. Should you investigate sharing merchandising services or completely combining your warehousing and delivery operations with a competitor or adjacent wholesaler? Each market is different, and on the issue of sharing services, it truly does take two to tango. Moving forward with shared services requires at least two willing participants – it can’t be done any other way.
Shared services are a win-win for retailers and suppliers. Service frequency, service levels, merchandising – all improve in a well designed shared services environment. Significant savings are generated which can be driven to each partner’s bottom-line or re-invested in their respective operations.
Here are a few items to consider as you begin investigating shared services:
· This is a significant change. It should not be entered into lightly. As many couples have discovered, getting married is much easier than the divorce.
· It will only succeed if it is truly a win-win relationship. If either party sees this as an opportunity to gain an advantage over their partner(s), it will fail – and failure can have a high cost for all parties. If satisfying your ego is more important than success, don’t attempt this. Please read these two points again. They cannot be over-emphasized.
· Do you need a third-party, like me, to assist in planning and implementation? I would not attempt it without some third party buffer. At the beginning it helps keep important information confidential and helps in building trust. In addition, a relatively disinterested third-party professional can focus on the total picture, rather than on one or the other’s specific interests.
· The reason far too many discussions/negotiations fail is because the parties mistakenly focus first on where they disagree, rather than on where they agree. This leads to arguments and stalemate. ALWAYS focus first on where we agree, on our common goals. Note those areas where there may be disagreement and address them later (kick the can down the road). We don’t need to settle how the trucks are painted in the first meeting. Often in the process of building the new organizations, these supposed disagreements fade into the mist.
· Trust building is important – both parties must work over-time in building this. Trust doesn’t just happen and much like virginity, once it is lost it is quite difficult to get back.
· Although there are many business/organizational arrangements that may work, generally I recommend investigating the formation of a new business organization whose focus is on providing the shared services. In these cases the wholesalers are the owners of this new organization and direct it through the board of directors. It is run at an arms length from all partners. This organization can be operated as a break-even operation or more as a for-profit organization. If desired, its strength can even be leveraged and its services offered to other non-partner wholesalers. NA products, beer, wine and spirits, all can be added to turn the new organization into a profit center for the shareholders.
· Cost allocation is generally not that difficult and can (and should) be reviewed on an annual basis. If the goal it to truly assign actual costs to the activity, this is relatively simple. If the goal is to shift costs to your partner, re-read the first two points.
· Supplier issues can be significant. Do you and your partner(s) have the desire and strength to stand up to them? I can’t answer this question. Don’t even think about this if either partner is going to fold like a cheap suit as soon as some supplier push-back starts. I firmly believe properly executed shared services are also a win for all suppliers (but some would disagree with me). Your sales forces can still fight aggressively on the street (and whatever services you choose not to combine) and total retail service/execution should increase. There is little to no down-side for anyone involved, if it is done correctly, but you must remember to keep your suppliers informed and sell them on the advantages of these new organizations. These advantages can be substantial.
Tremendous change is occurring throughout the entire beverage wholesaling world. The lines between NAs, beer, wine, and spirits are quickly eroding. Are shared services in your future? Who can say, but don’t write them off too quickly.