Outsourcing Excellence Award – Best First Steps – Trinity Industries, Inc. BearingPoint, Inc. and Outsource Partners International
Trinity Industries, Inc.'s decision to outsource included architecting collaboration into the initiative. Although Jake Farkas, director at Trinity, who was designated to lead the project from Day One of the feasibility study, had never been involved in outsourcing before, he had been involved in a lot of merger/acquisition work and business development. He knew from that experience that the keys to success would be collaboration and open communication. "Everything else is a given," he states. "Outsourcers have tons of experience and are qualified to do what they do inside out. They're all well recognized for their capabilities, but we needed a partner who would work to understand our culture and get deeply involved in change management here."
The 70-year old industrial diversified company, based in Dallas, Texas, is comprised of various business segments. It's the largest railcar producer in the world; its inland marine group builds freshwater barges; the construction products group deals with highway guard rails, concrete and aggregates, and bridges; the industrial products group makes LPG tanks and pressure vessels; and there is a parts business for repairs. Trinity's five business segments and 22 business units were operating autonomously and with an entrepreneurial flare - characteristics that make standardization and change very difficult to implement.
Several external experts' assessments identified the fact that business transformational changes were definitely needed in its finance and accounting process. The company's IT systems were old and not capable of supporting its growing needs. Internal bookkeeping required a significant manual effort, and financial information was not timely. There were potential compliance risks and employee retention problems, and company executives were spending too much time fighting fires from the inefficiencies.
Step One: Consultant Collaboration
With an eye toward implementing new financial systems and trying to reengineer their business processes themselves, Trinity retained a consulting firm in 2001 to conduct a risk assessment. Among the risks identified were high implementation and support costs, along with an infrastructure (people and IT) barely capable of supporting the existing business, let alone a major ERP implementation project.
When their eyes were opened to the shorter implementation time, lower support costs, best-practice services, ongoing reduction in cost, flexibility, scalability and strategic refocus attainable by outsourcing, Trinity opted for the lower-risk, best-value solution.
The consulting firm walked Trinity through a high-level pre-qualification of potential providers' capabilities before issuing the Request for Proposal and assisting Trinity through contract negotiations.
Farkas credits the consulting firm for educating Trinity on a piece of the critical path toward success. "They explained the importance of communicating with our employees throughout the entire process. We communicated when we started the feasibility study, just to let them know something was going on - as much as we knew right then. We let our employees know from the beginning what we were doing." When the outsourcing agreement was signed later, employees whose positions were directly impacted received more direct details; but communication continued with the entire enterprise. "We wanted everybody to understand it and wanted to set the right expectations," Farkas adds.
Step Two: Provider Collaboration
Farkas says BearingPoint and its subcontractor for the accounting functions, Outsource Partners International (OPI) were awarded the work because "they clearly understood Trinity's challenges in business transformation and change management." The teamed outsourcers listened to Trinity's needs then collaborated with the buyer on a flexible solution, designed to mitigate those known risks of transformation and the company's concern over ongoing communications after outsourcing. Their onsite solution helped to get buy-in from the various business units' presidents; the outsourced work is now performed on Trinity's campus but in a unique environment separate from the rest of the organization.
They decided to share the risks in the ERP implementation with a fixed price. This meant BearingPoint would need to ensure its overall systems development and accompanying best-in-class business processes came in on time for the April deadline; at the same time, Trinity would have to build interfaces back to its legacy systems on time. Both parties would bear their own costs if additional resources were necessary to make it happen.
Farkas says they had "almost an organizational blurring" in how closely they worked together. "We have open two-way communication when there is a problem or any issue with either of us. And there are a dozen challenges a day on an implementation project like this, but we had the right process in place to deal with that. We don't draw boundaries. Obviously there are contractual requirements on both of us, but we don't try to limit the boundaries of responsibility. We know that this is a joint responsibility if it is going to be a success." To facilitate their working together, Trinity set up offices on its site for managing directors of BearingPoint and OPI who, in turn, set up offices for Farkas at their locations.
The initiative goes way beyond transitioning systems, people and processes, Trinity's director claims. "It's absolutely a culture change." BearingPoint came in with resources dedicated solely to transformation and communication. They have a cross-functional steering committee comprised of senior management from both sides. Farkas reports that he and his counterpart at BearingPoint visit on a regular basis with all of Trinity's business unit presidents to let them know timelines and communicate what's going on. BearingPoint also developed a robust "layered" communication process, with information customized to employees, senior management, middle management and the financial processes staff.
They've encountered challenges, as all outsourcing initiatives do. One constraint has been the fact that Trinity's financial group is a very lean organization. This created situations where BearingPoint had to reschedule or even change the sequence of implementation events because their scheduled activities were "bumping up against Trinity trying to close the books or do a quarter close, or other financial functions."
But their collaborative melding of interests makes the outcome successful in such situations. While BearingPoint shifted the schedule to accommodate Trinity and still accomplish its own implementation objectives, Trinity worked with them on the replanning. "We were very sensitive to that," reports Farkas. "We knew that this sort of thing could put the project at risk or move the timeline out. It's a very dynamic process, but we handled it well together."
The melding process goes beyond the ERP implementation and business process transition phases. To ensure their collaboration on a continual basis to take out costs, improve processes and improve quality, they established a gainsharing plan. Even during the implementation and transition, BearingPoint was already identifying opportunities to improve things such as working capital and vendor management in the purchasing functions.
The 80/20 rule comes into play in this relationship, according to Farkas. He says the consulting firm "made us very much aware that we were going into a 'marriage' here and that we had to really make sure we have the right partner." Still, he credits the consultants with only 20 percent of the relationship's success. "Eighty percent is the real test of success and collaboration - Trinity, BearingPoint and OPI working together. Someone can tell you that's important and help you with the best first steps to structure your arrangement; but then you really have to make it happen."