Service Contract Analytics - Leverage analytics to improve revenue and profitability of after market...

Service Contract AnalyticsLeverage analytics to improve revenue and profitability of after market service contracts

Gianni GiacomelliSenior Vice President, Genpact

David Petrucci Vice President, Industrial Solutions, Genpact

PROCESS • ANALYTICS • TECHNOLOGY 2© 2014 Copyright Genpact. All Rights Reserved.

A Global Business Process Services Leader: Process Transformation and Outsourcing, Analytics, Technology

We help leaders of some of the largest enterprises transform and run their processes and operations, including the very complex and industry-specific

What we do

Unbiased, agile combination of process science, related technology and analytics limits upfront costs and enhances future adaptability

Right critical mass:

• we are large (64,000+ global staff) but our solutions appropriately flexible

• our top management is directly involved in our client partnerships

How we do it

Our impact

We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globally effective and connected…

…by enabling tighter management of costs, risks, regulations, and supporting growth

The results: US$22B* of impact for 800+ global clients


THE CHALLENGE


After market service (AMS) contracts sit at a critical junction of finance, service operations, supply chain, and sales

CEO, Board

External stakeholders

Forecast, Report (financial, non-financial)

Short- and long-term expectations of: margin, earnings growth, capital intensity

Reporting (financial, non-financial)

Performance expectations(financial, non-financial)

Finance

Service operations

(Repair, maintenance)

Procurement Sales & marketing

Budget, KPIs,

allocation and

monitoring of OP/CAPEX, Cash flows

Service costing

(short and long term)

and respective

risk,EHS risks

Demand and availability spares /

repair capacity,respective short and medium term price

Service cost for deals pricing,

MRO capabilities, service supply chain

footprint

Revenue, Working Capital (AR)

Working capital (AP)

SIMPLIFIED


There are significant challenges throughout a contract’s life cycle …

• Identification of new contract opportunities in large installed bases

• Lead qualification and prioritization – weighing economic, technical, risk and legal aspects of an opportunity

• Contract pricing and defending the price – lack of accurate estimate of cost-to-serve impedes optimal pricing

• Long and complex contract negotiations obfuscate the view of projected revenue and profit in various scenarios

Winning new service contracts

• Enforcing T&Cs compliance to avoid missed billing

• Lack of visibility into and defense of contract profitability at a customer, fleet and single contract level – and throughout the life of longer contracts

• Fragmented information on overall contract performance thwarts renewal (renegotiation/exit) decision

Managing existing contracts and renewals

…leading to 10-15% revenue leakage and 15-20% loss of profit


.. which present great opportunities however capturing them requires advanced analytics many don’t possess

• Despite the increasing role of service organizations as profit centers, the respective analytics team is often constrained in capacity, expertise and tools

Constrained resources

Low win rates

• Relatively inefficient processes for prospect identification and limited risk-based pricing leads to less-than-optimal win rates

Suboptimal pricing

• Inaccurate (often up to 50%) forecasting of failures/ maintenance events and the associated costs result into sub optimal pricing

• Overpricing leads to losing new contracts, underpricing renders long term contracts unprofitable

Billing leakage

• Missed billing opportunities and non compliance of T&Cs can result in revenue leakage, often up to 1-2% of revenue


THE SOLUTIONS


Improvement potential for a $1Bn service organization: $80-100 MN in missed revenues and $10-15 MN in lost profits

For every US$1 BN of revenue, average revenue leakage is 10-15%

$100-150 MN

For every US$100 MN of profit, average leakage is 15-20%

$15-20 MN

Negotiation cycle time

New revenue

RenewalOperational

costErroneous payments

T&Cs compliance

50% 2-5% 30% 30% 30% 20-30%

Up to 8-10% revenue improvement

~$80-100 MN

Up to 10-15% margin improvement

$10-15 MN

Source: Genpact experience in servicing global blue chip clients

Managing existing contracts and renewals

Wining new service contracts

Typical industry numbers

Typical in-efficiencies and errors

What can be saved?


Key improvement areas identified by service executives

Areas needing immediate attention Areas needing attention

HIGH LOW

HIG

HL

OW

Bid and Prospect Management

Managing Risk

Contract Pricing

Controlling Cost

Ensuring T&C Compliance

Revenue RealizationContract

Renewals

Source: Genpact-UBM Aviation research

Level of “Pain” Vs. Preparedness Across Dimensions

Level of Preparedness

Leve

l of

Pai

n


Genpact’s service contract analytics solution helps optimize the entire contract lifecycle

Prospect Identification

Support

Cost Forecasting using Reliability Based Failure Forecasting

Scenario Based Risk/Pricing Modeling and Restructuring

Service Contracts Win Loss Analysis

Baseline Measurements-

T&Cs*

Service Planning/Fulfillment/ Warranty Support

Contract Enabling, Monitoring and

Reporting

Billing, Invoicing and Collections

Portfolio Creation/ Maintenance

Risk Profile Measurement

Counterparty Credit Analysis and

Exception Triggers

Portfolio Performance

Benchmarking

Pre - Contract Analytics

Contract Setup and Execution

ContractsPortfolio Risk

Analytics

Contract Appraisal Analytics

Data Gathering and Quality Assurance

Forward Looking Failure and Cost

Modeling

Profitability Analytics, Identify Cost Reduction

Opportunities

Global Benchmarking

A B C D


Pre-Contract Analytics

A

Key metrics: Improved deal win rate %, Improved deal conversion time, Average deal margins, Total market size, Opportunity pipelines, Cycle time, Variance to want time, Lead time, Bid response time, DOA analysis, Average deal margins, Adherence to contract terms, Hit rate/win rate, Lost deals, Time to set up contract, Accuracy in setting up contracts

Service Contracts Win Loss Analysis

Cost Forecasting

Scenario Based Risk/Pricing Modeling

and Restructuring

Analytics tools/methodology: TAM/SAS model, Weibull analysis, Crow analysis, Monte Carlo simulation, Box pricing tool, Deal evaluation tool, Contract pricing model based on market intelligence

Retrospective Analysis of Lost Contract

Opportunity

Competitive Feedback

Forecasting Failure and Cost of Ownership

in Contract Restructuring

Risk Based Pricing using Sensitivity

Analysis

Operating Margin Impact Analysis

Simulation Of Failure Events

Reliability Based Failure Forecasting

Technical and Financial Computation

of Contracts

Prospect Identification

Support

Total Available Market (TAM)

Served Available Segment (SAS)

Forecasted Opportunities

Initial Contact with New Opportunities


Contract Setup and Execution Support

B

Analysis of Terms & Conditions

Identification Of Top Cost Drivers

Warranty Forecasting

Reserve Forecasting

Cost Accumulation

Demand Forecasting

Capacity Planning

Profit Booking

Cost Analysis

Tracking Equipment

Delivery/Vendor Analysis

Cost Reduction Projects

Implementation

Contract Flow Down

Billing

Collections

Database/Workflow For

T&Cs*

Repair, Order, Vendor

ManagementPast Dues

Enabling, Monitoring

and Reporting

Baseline Measurement -

T&Cs*

Service Planning And Fulfilment

Warranty SupportBilling, Invoicing and Collections

Key metrics: TAT reduction, Cost reduction, Customer service levels

Analytics tools/methodology: Cost maintenance common model, Time and material common model, Contract agreement model, Universal component repair and material model

Claims Management

Operational Management

Financial Management

Monitor Contract Execution against

Agreed T&Cs

*T&Cs- Terms and Conditions


Contract Appraisal Analytics

C

Extract and Validate Data

Cleanse and Categorize Data

Evaluating True Cost Per Event

Identification of Top Cost Drivers

Collect Historical Data

Select Appropriate Simulation Models

Forecast Cost/Event and

Event Schedule

Re-assess Financial Impact

Evaluation of Operating Margin

Operating Plan Vs. Actual Variance

Identification of Causes of

Margin Variance

Corrective Strategies

Identification of Productivity

Projects Based on RCA

Estimation of Project Impact

Productivity Project

Fulfillment

Identify Best Practices

Implementation Through Re - Engineering

Monitoring Changes over

Time

Identification of Cost Out Scopes

Data Gathering and Data Quality

Assurance

Forward Looking Failure and Cost

Modeling

Profitability Analytics/KPI Measurement

Global Benchmarking

Key metrics: Contract life cycle profitability, Forecasting accuracy, Forecast Vs. actual variance, Actual Vs. Planned Contract life cycle revenue, Surprise free operations, Risk mitigation, Financial impact

Analytics tools/methodology: Cognos, Cosmos, Oracle, SAS, Minitab

Identification of Cost Out Scopes

Loop Back Learning


Contracts Portfolio Risk Analytics

D

Portfolio Creation/ Maintenance

Risk Profile Measurement

Portfolio Risk Analysis

Reconciliation Score Card

Key metrics: Contract life cycle profitability, Average deal margins, Actual Vs. planned contract life cycle revenue, Deferred balance, Credit risk, Risk mitigation

Analytics tools/methodology: Generic failure forecasting model, Deal profitability model, Risk scorecard, Cognos, Cosmos, Oracle, SAS, Minitab

Counterparty Risk Anaysis/ Exception

Triggers

Portfolio Performance

Benchmarking

Customer Risk Dashboard

Identifying Elements of Risk

Monitoring Past Dues and

Receivables

Assigning Credit Limit and Payment

Terms

Creating Triggers on Exception

Risk Adjusted Valuation


CONTACT GENPACT TO EXPLORE THE “ART OF THE POSSIBLE”


About Genpact

Genpact Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients.

Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability.

We have global critical mass – 62,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally.

Our history is unique – behind our single-minded passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 15 years.

For more information, visit www.genpact.com. Follow Genpact on Twitter, Facebook, and LinkedIn.

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www.genpact.com/home/solutions/aftermarket-services

Thank You

http://www.genpact.com/home/solutions/aftermarket-services

Service Contract Analytics - Leverage analytics to improve revenue and profitability of after market...

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