Today, the Industrial Manufacturing sector faces significant challenges, including cost and margin challenges, supply-chain issues, pressure from competitors, evolving technology, and stricter regulatory guidelines. Though an initial response—to retrench, restructure through aggressive cost cuts, and consolidate through mergers and acquisitions—helped the industry in the last few years, these strategies in isolation may no longer create a sustainable path to future growth or profitability. Industrial Original Equipment Manufacturers (OEMs), especially from the Oil & Gas, Power Generation, Aviation, Mining, and Train industries, have explored for some time a deeper transformation of their business models.

1. INTELLIGENT ENTERPRISE
Helping industrial manufacturing
companies outperform through
right operating models for
support functions
Anil Nanduru
Senior Vice President and Business
Development Leader - Manufacturing and Services
Gaurav Kumar Agrawal
Assistant Vice President, Industrial Solutions
Executive summary
Today, the Industrial Manufacturing sector faces significant challenges, including cost and
margin challenges, supply-chain issues, pressure from competitors, evolving technology,
and stricter regulatory guidelines. Though an initial response—to retrench, restructure
through aggressive cost cuts, and consolidate through mergers and acquisitions—helped
the industry in the last few years, these strategies in isolation may no longer create
a sustainable path to future growth or profitability. Industrial Original Equipment
Manufacturers (OEMs), especially from the Oil & Gas, Power Generation, Aviation,
Mining, and Train industries, have explored for some time a deeper transformation of
their business models. These changes will likely need to be accompanied by an evolution
in companies’ existing operating models—that is, in the way they run selling, general
and administrative (SG&A) functions as well as other operation-intensive, clerical, or
knowledge-based support processes such as reliability and service data analysis.
Global Business Services (GBS), the evolution of shared services with a larger global
footprint serving multiple functions, helps streamline processes by leveraging a unified—
although not always centralized—operating entity, that collaborates effectively with the
rest of the function. GBS serves as a cornerstone for any advanced target operating model
and can orchestrate different sourcing structures - including those that are captive or
outsourced. Decoupling business functions (combined with the advanced use of metrics,
data-driven process management, specialized HR/organizational design, and effective
IT) industrializes operations across the process chain and can improve scalability, lower
costs, increase control, and provide a better-quality experience for the end client. If GBS
is done well, organizations can enable better decisions, pursue growth, and adapt to
market contractions more nimbly. This paper describes a scientific, granular approach
enhanced with industry-specific experiences to adopt the best-fit target operating model
for industrial manufacturers.

2. Manufacturing industry faces multiple,
complex challenges
Multiple business challenges for industrial manufacturers are
exposing them to increased volatility and risk.
• Cost and margin pressure. Price-sensitive demand and a
fluctuating cost for (and availability of) input materials are
also adding pressure, and scalable, cost-effective talent is not
always readily available.
• Supply-chain issues. Supplier identification and negotiations,
low-cost sourcing, and shared cost analyses are making it
increasingly difficult for manufacturing companies to execute
“design to cost” specifications. Moreover, strained supply
chains are often expected to support equipment uptime of
nearly 100 percent.
• Pressure from competitors. Strong local players in new
geographic regions are providing established global players
with stiff competition, and this competition has drastically
reduced the time available to develop new machines.
• New geographies. Emerging markets infrastructure projects
are driving new demand for capital equipment, and these
geographies often have different regulatory and safety
standards—creating new challenges for equipment reliability,
robustness, and safe-failure specifications.
• New technologies. Competition is forcing incumbent
manufacturers to invest in new technologies that suit evolving
performance standards, and the necessary adoption of
new technologies further strains the engineering design of
component manufacturers. Importantly, new materials and
processes mean quality and reliability issues must be routinely
analyzed.
• Lack of in-house capabilities. Supporting innovation in
equipment design without in-house capabilities is often
difficult. In addition, there is a “long tail” for aftermarket
service and refurbishment jobs in the equipment lifecycle. The
capability gap is likely to increase as design engineering in the
capital equipment industry increases.
To address these challenges, the manufacturing industry is
searching for future growth and profitability by incorporating
new advances in scientific technology, industry-wide collaboration
in R&D, innovation in engineering, and investment in highgrowth emerging markets.
Existing operating models often limit a company’s choices,
as legacy conflicts and inefficiencies scatter efforts, resources,
and management’s attention. Often, they limit the company’s
agility. An agile enterprise that can respond to market trends
and implement strategic choices can be supported through a
scientific understanding of GBS operating models and process
performance to serve key business functions such as finance,
supply chain, sales, and marketing.
A solid first step for an industrial manufacturing company is to
simplify complex layers of local, regional, and global functions by
eliminating decision-making and production processes that have
become redundant.
Industrialized operations: the key to agility and resilience
% already industrialized
% industrialization potential
R&D
9% 1%
Procurement
Industrialized Enterprise Ops
Scope and Impact
% not applicable
Research support
90%
30%
10%
Industrial manufacturing companies show higher propensity to share
specific components of ER&D support than back office support services
60%
Sourcing and
procurement support
F&A
HR
Analytics
Inventory and demand
forecasting Product
cost accounting
Manufacturing
0%
100%
0%
Customer Care
Industry specific
Supply Chain/
Logistics/
Procurement
Legal/ Marketing
IT - ADM
Logistics optimization
25%
Distribution
Customer Care
Marketing & Sales
30%
25%
Back-office Support
5%
5%
70%
30%
70%
50%
General Management 4%
1%
Source: McKinsey Research Institute, Genpact Analysis
30%
95%
Contact center support
40%
20%
Sales and Marketing
ops and analytics support
All G&A support
(F&A, IT, HR)
Decision and
transformation support
* includes transport equipment,
power generationequipment etc.
IT- Infrastructure
Engineering
Services/R&D
Automotive
Chemicals
Consumer
Electronics
Source: Genpact analysis, Everest Group GIC 2013 data
* - includes industrial manufacturing, aviation and energy companies
CPG
Industrial
Manufacturing
Others
Figure 1. Significant potential exists for ‘industrializing’ operations within industrial manufacturing
Industrialized operations help access new growth
opportunities, create resilience to hostile market or regulatory
conditions, and facilitate enterprise-wide product and business
model innovation. They also enable faster innovation in volatile
marketplaces.
Increasing the size of a large operation by 20% (or strengthening
business infrastructure in a new country) typically takes a year or
two, but industrialized operations can often achieve this in half
the time. When the scale of business process services is increased
by a factor of 10, the GBS model can deliver a 50% savings in
cost per transaction. (A leaner, more predictable cost structure
also enables resilience and consistent global application of best
practices.)
Figure 1 reveals significant industrialization potential within
industrial manufacturing, which has largely focused on specific
components of Engineering R&D, but not enough, when it
comes to industrialization and inclusion in global shared services
thus far. The figure also shows up to 50% additional potential

3. A closer examination of the Everest Group’s Global In-House
Centers (GIC) data, further validates the point. F&A, HR, IT, and
customer care functions are much less industrialized compared to
ER&D and the same functions in other verticals. Moreover, most
companies manage only specific components of ER&D, mainly
technical documentation and CAD/CAM design, from their
captives.
Similar trends are evident for other manufacturers (Automotive,
Chemicals, and Consumer Electronics), which show a lessthan-optimal industrialization of business support functions
through their captive units. Industrial manufacturing and similar
archetypes could look up to Consumer Goods at the success it
has derived by industrializing back-office support and key sales
and marketing activities.
Above average
adoption of GBS
High
Information services
Media & Entertainment
Chemicals
Travel & Transportation
Insurance
Telecom
Engineering & Construction
Utilities
Healthcare providers
Capital Markets
Banking
Oil and Gas
Retail
Life Sciences
CPG
Low
X
Size of bubble
represents the
industrializable
operations3 cost
35,000
30,000
555
Automotive
906
687
25,000
Opportunity in
enabling
business
impact, beyond
direct
operations cost
Opportunity in both
direct cost and
business impact
637 Hi-tech
Aerospace & Defense
20,000
Pharmaceuticals
122 CPG
15,000
120 Utilities
10,000
180
TTL3 and Infra
5,000
308
Medical devices 442
Industrial manufacturing
0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Source: McKinsey, Genpact Analysis
% industrializable2 spend
1. Average revenues for Fortune 500 companies in relevant vertical
2. % Industrializable spend shows the cost companies pay for operations that can be “industrialized”
3. TTL – Transportation, Trucking and Logistics
Figure 3: Manufacturing companies can realize significant
benefits by industrializing service operations
Evolving through the maturity curve
GBS implementation typically follows three phases, with focus
and achievements shifting over time from foundational (often
cost-driven) activities to more strategic ones. A typical company’s
full realization of benefits using the Global Business Services
model is achieved when the company moves beyond the first
two phases, which can take between five and 10 years.
Hi-Tech
Set Up
Freight and logistics
Government
Below average
adoption of GBS
DIRECTIONAL
All figures in US$ Millions
0-2 years
Reduce complexity,
drive efficiency
Automotive
Industrial manufacturing
Extent of internal shared services
High
Source: Genpact analysis, Everest Group and SSON Survey
Figure 2. Significant variance exists within industrial
manufacturing on GBS adoption
Different sub-verticals within industrial manufacturing display
different propensities toward managing shared services
operations and outsourcing. Figure 2 shows high variance overall
with Oil & Gas OEMs much ahead in shared services adoption
and outsourcing when compared to automotive and other
industrial products.
Figure 3 shows the unrealized potential that industrialized
operations can help accrue to industrial manufacturers and their
various sub-verticals.
• Industrial manufacturing companies, on average, spend
up to US$300 million on service-type operations that can be
industrialized;
• Other manufacturers, for example, automotive
companies and medical device manufacturers can
collectively industrialize up to US$1 billion average spend
from service-type operations
Key strategic challenge
Extent of 3rd party outsourcing
Healthcare payers
Manufacturing companies can realize significant business impact
by industrializing operations
Average revenues1
to industrialize G&A support (including F&A, HR, IT), up to
25% of marketing and sales (through sales and marketing ops
analytics), and up to 30% of procurement (through sourcing and
direct/indirect procurement support).
• Consolidate internal buy-in
• Stabilize operations (people,
process, technology), SLA
• Sharing of processes with a
cost impact of +/- 5-10%
• Ad-hoc solutions with
duplication of activities
between corporate and GBS
Growth
2-5 years
Operational excellence,
efficiency, variable cost
• Process optimization with
defined SLAs and KPIs
• Target global centers with
10-25% net cost savings
Maturity
5+ years
Maximize effectiveness and
continue to drive cost
• Push standardization and
advanced technology (e.g.
cloud computing) with
additional 10-15% cost
savings
• Radical expansion of scope
(functional, geographic)
• Clarify new business case
• Aggressively explore hybrid
models
Figure 4. The full benefits of GBS are realized after the
foundational stages are completed
However, forward-looking organizations have successfully
shortened the path to return on investment (ROI) with a
well-defined target operating model, strategy, and execution
roadmap.
Further analysis of the data in Figure 5 shows that
manufacturing companies are lagging behind their
counterparts from Life Sciences, Consumer Goods, and Banking
and Financial Services on their scope of work delivered in mature
shared services—in-house or outsourced. The result is slowerthan-average progress on attaining GBS maturity and a lowerthan-expected ROI.

4. Average number of processes in GBS
2.0
Industrializing high-touch support operations have enabled
manufacturers achieve faster time to market, improve design
specifications, improve asset availability, and realize higher
service revenues. Some successful examples from Genpact
include the following:
Source: Everest GIC database; Genpact Analysis
1.8
1.6
1.4
1.2
a) Improved equipment uptime for a leading nacelle supplier by
improving maintainability design
1.0
0.8
0.6
b) Two-month reduction in time-to-market through redesigning
a combustion trapped vortex for an energy OEM
0.4
0.2
0.0
0-2 years
2-5 years
5-10 years
>10 years
Maturity of GBS (years)
All industries
Manufacturing
d) US$15 million enhancement in profits for a global aviation
major through contract profitability analysis
Combining strategy with process
delivery granularity
Figure 5. Maturity of practices can enable catch up and eventual
leapfrogging in the manufacturing GBS
Higher-touch operations are also
becoming candidates for operating
model transformation
Early efforts to commoditize, standardize, and outsource business
processes focused on routine, repetitive back-office services such
as payroll processing, help desk operations, and accounts payable
tasks. Later, routine but low-touch promotional, budgeting,
reporting, and information technology front-office services
were added to these efforts. Now, the industrial manufacturing
industry is increasingly outsourcing key components of
engineering services such as fundamental research, new product
development support—design, prototyping, manufacturing
support, MRO and downstream engineering, procurement and
supply, technical documentation and sourcing.
Automotive
• Engineering
services
• Engineering
services
• Industrial asset
management
• After market
services
• Supply chain
analytics
• Supplier
analytics
• Marketing
analytics
• Logistics analytics
• Fleet management
support
a
Boundary
conditions
What efficiency, effectiveness, risk, and standardization
are acceptable during and after transformatiom?
en
ab
lem
Resource
redirection
Will resources released from transaction processing and
controlled reoriented towards decision support?
c
Organisational
choices
What structure and operating model should the Finance
organization have to support the emerging business model?
d
New delivery
DNA
What new process, people practices and technologies
are required to achieve the desired objective
Collections and customer service
Inbound call center | Outbound call center | Mailroom services
Enterprise technology and BI
Enterprise applications | ADM and system integration services
| IT vendor management | Master data management
Run cost-efficiently
Finance and accounting
Measure, benchmark, design
en
t
General accounting | FP&A | Closing and reporting | AP | OTC | T&E
Enterprise
processes
IT
Transform towards best-in-class
• Pricing analytics
A thorough analysis of the following four dimensions is critical
for selecting the right target operating or delivery model.
b
• Network
optimization
• Reliability analytics
Core
industry
operations
Scientific understanding of business processes—such as Smart
Enterprise Processes (SEPSM)—has significantly increased, allowing
organizations to correctly estimate the end-to-end business
impact of target operating model choices, hence facilitating
effective design. Still, some have discovered that building out
GBS capabilities can be more difficult than anticipated. This
variability across scope, location, and delivery models suggests
that while broad-brush strategies and comparables have a place
in this process, each business case is heavily dependent on the
feasibility of the operation’s DNA.
Transportation,
travel and logistics
Create insights from data to drive decisions
Industrial machinery
c) US$1.2 million savings for a leading aerospace component
manufacturer by optimizing product design
Figure 7. Actionable choices patterns emerge by triangulating
four themes
Source: Genpact experience
Figure 6. Manufacturing shared services is expanding in scope
to include non-commoditized, core industry processes. The
combination of process, analytics, and technology delivers far
superior outcome than otherwise
Genpact’s experience reveals that empirical experience and
significant level of granularity help craft the right strategy for
a target operating model. Genpact recommends a structured
approach:

5. 1. Review the as-is state and rationale. Understand the
current state of performance, identify candidates for
improvement, and review the process and sub-process
practices.
2. Identify top improvement opportunities. Use best-practice
metrics and frameworks to benchmark key areas, identify
top areas for improvement, assess the feasibility and risk of
options, and conduct a preliminary analysis of benefits such as
cost, efficiency, or effectiveness.
3. Identify delivery alternatives. Assess options for
consolidating processes into internal global shared operations,
externally sourced operations, or a combination.
4. Determine change implications. Outline both financial and
risk-related implications for each location and structuring
option (e.g. various types of risk).
5. Build business case for each alternative. Compile a highlevel business case that encompasses process improvement,
organizational structuring options, location choices, and
change implications.
6. Develop a detailed roll-out plan. Develop a roll-out plan
to reach the targeted operating model by process and by
location
7. Build the final business case. Identify emerging options for
each process and develop financial and implementation plans.
local regulatory burden, and increased competition can actually
offer opportunities for growth to companies that find ways to
invest in new business models.
As also discussed in a previous paper, “The Adaptive Roadmap,”1
business agility in times of unprecedented volatility is an
imperative that requires a more strategic role for business
operations. Additionally, embracing new operating models
can create organizations that are not only more resilient, but
can also compete best in times of volatility2. This paper shared
Genpact’s analysis and examples of how leading organizations
are transforming their operating models to create a sustainable
path to growth, profitability, and innovation.
For organizations looking to redefine their operating models,
a significant amount of specialized knowledge is needed to
navigate the continuum of design choices. In such a focused
field, strategy must and can leverage the experience curve of
large organizations’ journeys over the past decade. Although
industrial manufacturing companies’ operations present
challenges unique to the industry, they benefit from the
knowledge accumulated in industries in which the transformation
began earlier. Combining this experience with a clear
understanding of an organization’s strategic needs, capabilities,
and industry context can help craft the right strategy for a target
operating model. Contact Genpact’s specialists to learn from our
experience building an industrialized operating model in the last
two decades, first as part of General Electric, and now as a leader
in business processes and operations.
Toward a viable operating model
The industrial manufacturing sector is undergoing a complex,
transformational change. However, the fast-evolving technology,
1. http://www.genpact.com/docs/resource-/the-adaptive-roadmap-whitepaper.pdf
2. http://www.genpact.com/docs/resource-/innovation_and_industrialized_business_operations_an_industry_specific_view.pdf?sfvrsn=4

6. About Genpact
About the author
Genpact Limited (NYSE: G) is a global leader in transforming and running business
processes and operations, including those that are complex and industryspecific. Our mission is to help clients become more competitive by making their
enterprises more intelligent, meaning more adaptive, innovative, globally effective
and connected to their own clients. Genpact stands for Generating Impact –
visible in better management of risk, regulations, costs and growth for hundreds
of long-term clients including more than 100 of the Fortune Global 500. We offer
an unbiased, agile combination of smarter processes, analytics and technology,
which limits upfront investments and enhances future adaptability. We have
60,000+ employees in 24 countries with key management and corporate offices
in New York City. 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.
Anil Nanduru is a Business Development Leader with over 12 years’ experience
in advising companies on driving Business Process Management Initiatives. He has
hands on experience with several major global companies in leading large scale
transition programs as well as, driving process excellence and building end-to-end
process transformation programs.
For more information, visit www.genpact.com. Follow Genpact on Twitter,
Facebook and LinkedIn.
© 2013 Copyright Genpact. All Rights Reserved.
Gaurav Kumar Agrawal has over 8+ years’ experience in shared services
advisory, product innovation and marketing roles.
For more information, contact:
gbs.solutions@genpact.com
Visit us at:
http://www.genpact.com/gbs