Five key benefits of GBS

Five key benefits of GBS

GBS was pioneered in other industries and the pharmaceutical sector is coming somewhat later to the realization that there are considerable benefits to be derived from it.

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KPMG member firms have been active in advising on GBS implementation around the world.

“We provide clients with the knowledge, data, technology and experience to integrate outsourcing, shared services and internal improvement into their broader transformation strategy,” says Ruben Gallego, Latin America lead, Shared Services & Outsourcing Advisory practice, at KPMG in Brazil.

Among the main benefits of a GBS organization are:

Cost savings

Cost reduction remains a major concern of the pharma companies that face continued pressure on their profit margins. By centralizing core functions, companies can continue to extract savings long after companies have exhausted other avenues for achieving efficiencies. “Almost all life sciences companies have reduced the workforce, and yet cost reduction remains at the forefront of executives’ minds. GBS takes cost reduction to the next level,” says Vicki Phelan, Managing Director, Shared Services & Outsourcing Advisory practice, KPMG in the US. When cognitive automation is part of GBS, labor costs are reduced by 40 to 75 percent, more than double the savings derived from shifting operations to cheaper labor markets, KPMG in the US has found.

Stronger compliance

Organizations are able to build more robust structures to comply with growing demands from regulators around the world, for better business conduct. “If a company has standard structures and processes across the organization, it makes it easier to comply with regulators. For example, once you have integrated GBS activities, then within the R&D function you can report to the US Food and Drug Administration in a standardized format and profile, meeting the expectations of the regulator in a way that is easily auditable,” says Phelan.

Faster implementation of corporate transactions

Completion of mergers and divestitures can be accelerated, shortening time-to-market and time-to-benefit. “M&A is top-of-mind for most executives in the pharmaceutical industry. In support of all the portfolio rationalization happening in the market today, they want to know how they can make their organization the highest quality, to be acquired or to be the acquirer,” says Phelan. For example, one pharmaceutical company bought 11 businesses within 2 years “and its GBS organization was able to help disentangle and integrate all of them into the central organization”, says Rick Bertheaud, a Principal in the Shared Services & Outsourcing Advisory practice and a Practice Lead in GBS for Life Sciences.

Increased flexibility

“The recent acceleration of corporate transactions in the industry is creating the need for a flexible and adaptable platform for the back and middle office, enabling it to scale up quickly to meet new business needs,” says Bob Cecil, a Principal in KPMG’s Shared Services & Outsourcing Advisory practice in the US. A strong GBS organization will play a crucial role in creating a platform that is more responsive to business needs globally than a regionally focused, siloed structure of shared services.

Global reach

By incorporating all key services worldwide into a single GBS organization, companies can fully realize economies of scale. “This is a particular asset for Japanese pharmaceutical companies where the English language is not widely spoken and there is a need to standardize processes globally,” says Hideki Machida, Manager, KPMG in Japan. Despite these key benefits, many pharmaceutical companies have not yet taken full advantage of the effect of establishing GBS for their organization. Once they see the wide-ranging gains from GBS and implement it fully, they will be able to realize the value. But they should not underestimate the scope of the changes required and the degree of resistance they might be met within the company. The roles and responsibilities of many people at all levels of the organization will be affected, as one would expect with any profound alteration in governance and processes. Effectively managing the transformation to a full GBS model is essential if all the benefits are to be achieved. Seen from the opposite perspective, “a GBS strategy is inadequate without a carefully thought-out method of operationalizing it,” says Phelan.

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