Business Case on Supply Chain Management

8/10/2019 Business Case on Supply Chain Management

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RBS INDIA

Submitted By:

Saurabh Singh

DoMS IIT Roorkee

13810069

Increase the efficiency/accuracy and turnaround time

in operations Department at (RBS India) Business

centres across India using Financial Supply Chain

Management Solution. (A Business Case)



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Table of Contents

1. Introduction.......................................................................................................3

1.1 Project Name...................................................................................................3

1.2 Project Team...................................................................................................3

1.3 Project Description.........................................................................................3

2. Background.......................................................................................................4

2.1 The Industry....................................................................................................4

2.2 SCM in Banking Industry………………………………………………….5

2.3 The Current Scenario......................................................................................5

2.4 Problem Definition ........................................................................................62.5 Process workout findings…………………………………………………..7

2.6 Why SCM concepts in Refer Centre Process.................................................7

3. Measurable Organisational Values (MOV)……..............................................8

3.1 Quantifying MOVs.........................................................................................9

4. Cost Benefit Analysis ....................................................................................10

5. Evaluation of Alternatives .............................................................................11

6. Recommendations ........................................................................................14



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Introduction

Project Name

Increase the efficiency/accuracy and turnaround time in operations Department at (RBS

India) Business centres across India using Financial Supply Chain Management Solution.

Project Team

The team consists of:-

1) Steering committee: The members of this particular committee include ProductManagers, the SCM consulting manager and the project manager.

2) Technical members like Team Leads, Team members.

3) Operations team which include people like inventory manager.

4) Financial Consultant.

Project Description:

The Project is about implementation Supply Chain Management (SCM) process in Refer

Centre process which is being used in Business centre of RBS India. These Business centres

are located at Gurgaon, Bangalore, Chennai, Hyderabad and Kolkata.

Refer Centre is one of the operation process which work on end-to-end decision of

customer applications on 3 products as Saving accounts, Loans and MTA’s.

Refer Centre process which is being used in 5 branches above when implemented initially

was all manual in use, it is time consuming , slow process and low efficiency process which

takes a lot of time to work upon. Using Refer centre process as such leads to wastage ofresources along with man-hours on daily basis and low in efficiency leads to loss of revenue

for the RBS India.



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Background

The Industry

India is considered among the top economies in the world, with tremendous potential for its

banking sector to flourish. The last decade witnessed a significant upsurge in transactions

through ATMs, as well as internet and mobile banking.

The country's banking industry looks set for greater transformation. With the Indian

Parliament passing the Banking Laws (Amendment) Bill in 2012, the landscape of the sector

has duly changed. The bill allows the Reserve Bank of India (RBI) to make final guidelines on

issuing new licenses, which could lead to a greater number of banks in the country. The style

of operation is also slowly evolving with the integration of modern technology into the

banking industry.

Market size

The size of banking assets in Indiatotalled US$ 1.8 trillion in FY 13 and is expected to touch

US$ 28.5 trillion in FY 25.Bank deposits have grown at a compound annual growth rate

(CAGR) of 21.2 per cent over FY 06-13. In FY 13, total deposits were US$ 1,274.3 billion.

The revenue of Indian banks increased from US$ 11.8 billion to US$ 46.9 billion over the

period 2001-2010. Profit after tax also reached US$ 12 billion from US$ 1.4 billion in theperiod.



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SCM in Banking Sector

Banking Industry extensively uses Supply Chain Management concepts in almost all of its

process and procedures like ERP, CRM. Supply Chain Management play equally important

role in Banking & Finance sector as in any other industry. Few of SCM concepts used in

Banking Industry are as follows

Enterprise Resource Planning (ERP)

Customer Relationship Management (CRM) – Teradata

Supplier Relationship Management (SRM)

Credit Scorecards - SAS, SPSS

Demand and Supply Forecasting Models.

Paperless Transactions/ processes.

Current Scenario:

The RBS Group is a large international banking and financial services company. From its

headquarters in Edinburgh, the group serves over 30 million customers in the United

Kingdom, Europe, the Middle East, the Americas and Asia. Our brands operate around the

globe to provide banking services for individuals, businesses and institutions.

The group provides a comprehensive range of financial services to retail, corporate, and

financial institutions. Markets and International Banking, the Investment Banking arm of the

group, offers a broad range of services enabling major corporations and institutions to

achieve their global financing, transactions services and risk management objectives.

RBS Group had a market capitalisation of approximately £20.4 billion as of 4 March 2014,

making it the 26th largest company on London Stock Exchange.

The Royal Bank of Scotland Group is growing to be one of the largest financial servicesgroups in the world. In the year 2007, the Group increased its presence across the globe

while purchasing several parts of the Dutch bank and the ABN AMRO businesses in India.

The Group serves to large enterprises, multi-national corporations (MNCs) and financial

institutions by offering them consumer and business banking services.

In 2008, ABN AMRO Bank N.V. in India was renamed as The Royal Bank of Scotland N.V. RBS

India offers unmatched client services in India. They offer a wide range of facilities like,

transaction banking, foreign exchange products and services, personal loans, savings

accounts, credit cards, financial planning, insurance services, Personal Banking, etc.



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Problem Definition

RBS India Business centre uses Project Refer Centre as one of the process in Operation

Department at 5 locations in India.

Project Refer Centre is one of the operation processes, which Covers end-to-end decision ofcustomer applications from receiving of application to final decision making

(Approve/Decline) for 3 products of bank namely saving accounts, Loans and MTA’s.

At the time of launch it was very manual, time consuming and low efficiency process where

bank executives utilise lot of time and energy in daily processing.

Traditional Process

Step 1

Customer Application

( 3 Products, 3forms)

Step 2

CustomerDocuments

(Hardcopies/Papers)

Step 3

data entry toSoftwares ( 3

Products, 3 forms)

Step 4

Extracting &Combining

Data

Step 5

Allocating Files

(3 Products,3TLs,15 Teams,20

members)

Step 6

MaintainingDaily Files

and Quality

Step 7

Applicationwise

processing (Manual Copy-paste excel to

system)

Step 8

Checking Applicant

Documents (Hardcopies/Paper)

Step 9

UpdatingFinal Decision

into Excels

Step 10

CombiningFinal Files

Step 11

Uploading FinalDecision into

softwares

Step 12

Preparing ExecutiveLevel Summary



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Process Workout Findings

Process Workout Findings:-

Data entry of customer details is made in 3 different software as per products

applied for and then combining data of all software is very time consuming and

costly process.

Maintaining and checking all hard copies/papers of customers is tedious and affect

TAT (Turn around Time) of application.

Maintaining and combining separate excel files of applicants on daily basis increase

TAT and inefficiency in process (15 team, 20 members each teams and 3 products)

raises the need of data warehouse.

Preparing of conversion rate, executive summary and reason for declines was very

time consuming and inefficient process, done on monthly basis is wastage of Man-

hours on yearly basis.

High chances of errors due to lot of manual touch points.

Why SCM concepts in Refer Centre Process?

Methods Applied

Just-In-Time: It’s a strategy which helps in increasing business efficiency and

productivity by reducing in process inventory and carrying cost.

Lean – Applied concept of Lean by eliminating the in-process step through

innovation or automation.

Paperless Work: Applied the concept of paperless work by using Image and workflow

techniques and software help in getting real time actionable data speed up SCM

process and to reduce Paper cost and time consumed in process.

CRM – Customer relationship management got implemented by combining data of

all three products for which customer applied for by storing customer details at one

data warehouse location using Teradata.



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Measurable Organizational Value (MOV)

By implementing SCM in refer centre process will be updated and new Process – afterApplying SCM concepts will look like below:

The Reduction of no of steps in the process from 12 to 6 provides both Financial and

Operational Benefits to RBS India business centres. The financial Supply chain management

system implemented is Cloud based/Saas based.

Financial and Strategic Benefits:

Increased Capability of process.

Long term Benefits.

Updating decision live into systems.

Saving in Man-hour cost.

Cost saving due to less usage of resources.

Operational Benefits:

Less paper work.

No data extraction in Excel files.

No Manual Allocation of Cases - No copy paste from excel.

All Scan Documents available which reduce TAT (Turnaround Time).

Enhance employee productivity considerably.

Step 1

Customer Application

( Single forms – 3products)

Step 2

CustomerDocuments

(All Scanned)

Step 3

data entry toSoftware

(Single Software)

Step 4

Data uploaded toTeradata (CRM)

Step 5

New Online ApplicationProcessingSoftware

Step 6

PreparingExecutive Level

Summary ( Automation )



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Improved inventory management and also helps in reducing material wastage

Reduction from 3 software each for 3 different products to single software.

Quantifying MOV

In order to calculate whether the project is successful or not it was very essential to find out

a quantified targets which will be achieved with the help of this project.

Turnaround Time (TAT): This means reduction in turnaround time by ¾ time of original time

taken when old process was used. The change in Turnaround time leads to saving of $2.5

per application per day.

• Banks drastically reduces TAT from 30 days per application to 7 days per application

in decision making.

• Introduction of Image and workflow for scanning of documents, CRM, New online

processing software and Automation of excel files for Executive Summary.

Reduction in Cost: By eliminating the waste process and reducing the number of steps in

the process application.

The Cost was reduced from $25 to $6.5 per application end-to-end.

Man-hour cost

• Business have been able to save 3 Man hours per employee per day .

• On an average Cost of 1 Man-hour cost around $15.

•

Daily Saving of around $45 man hour/day

Data Warehouse Cost.

Earlier 3 different softwares are used for 3 different product and 3 different forms for each

product available.

Estimated cost per application or for 3 different product category cost around $50,000 per

application per year.



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Estimated cost of 3 application software for 3 different product cost up to $1, 50,000 per

year excluding maintenances cost. Single software which is being developed will now cost

around $76,000 per year as installation cost including maintenance cost well.

This alone leads to total saving of $74,000.

Teradata ,a CRM software put in place cost around $66,000 per year, total costing around

$1, 40, 000 per year. Thus total saving stands at $10,000 per year for eliminating the no of

steps and warehouse complexity.

4. Cost Benefit Analysis

Cost Benefit analysis done for next 3 years.

• Business have been able to save 3 Man hours per employee per day which give us

Yearly Man Hour Savings to $3.24 Million.

• Calculating Total Man hour saving : 3x240(day)x15(teams)x20(Members per team) =

216000 Man

• Cost of 1 Man hour = $ 15, Therefore Total Man Hour Saving in $ = $15x216000=

3.24 Million $.

Year Year 1 Year 2 Year 3

Hardware Cost 66,000 75900 87285

Software Cost 1,86,000 213900 245985

Cost Saving per Man-

hour per employee

32400 34020 35721

Increased Revenue 40,00,000 46,00,000 52,90,000

*All figure in dollars.



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Total man hour cost per application per day= $15

Total working days=240

Total Man-hour saved per employee=3

Total man-hour saving per application per year=32400

Assuming the cost in man-hour is increasing at 5 % per annum per employee

In the above analysis, we have assumed that the initial cost of hardware installation

including warehouse cost of using teradata is $66,000 and the maintenance cost is $0.1

million in year 1 and increasing at rate of 15% per annum for 3 years.

Similarly, The software developed on its own by third party vendor .Cost for software

installation along with maintenance cost is $1,86,000 and maintenance cost is 10% of

software cost also increasing at the rate of 15 % per annum.

The revenue generated is from Reduction in cost Turnaround time application (TAT) for 3

application over an year, by elimination of waste process and steps, using teradata for CRM

and data uploading, using image and workflow technique and is estimated to be $40 million

over the year 1 and increasing at the rate of 15 % per annum.

5. Evaluation of Alternatives

There are different vendors who can provide financial supply chain management modules:

Option 1: SAP Financial Supply Chain Management (FIN-FSCM)

SAP ERP 6.0

SAP enhancement Package 4 for SAP ERP 6.0

SAP NetWeaver Business Intelligence (SAP NetWeaver BI)

Software Component- FINBASIS 602 and SEM_BW 602

SAP NetWeaver Business Intelligence

Financial package starting at $149 per user per month



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CRM package starting at $89 per user per month.

No of Users=300

Per month cost-Per month cost for financial package-300*238=$71400

Per year cost-$856800

Option 2. Microsoft Dynamics CRM Solution

Supported by Microsoft Windows Server

In order to work properly it needs Microsoft Exchange Server or access to a POP3-

compliant email server and SharePoint Server required for document management.

Claims-based security token service (required for Internet-facing deployments). Microsoft SQL Server 2008 or Microsoft SQL Server 2012.

Minimum system requirement for server is either Quad-core x64 architecture 2 GHz

CPU or higher such as AMD Opteron or Intel Xeon systems or a Multi-core or

multiple 1.8-GHz CPU or higher processor for server.

$125 per user per month for Enterprise Edition

Expected user for company-15*20=300 users

Expected cost for 300 users per month=300*125=$37500

Expected cost for 300 user per year=$37500*12=$450000

Above mentioned cost does not include cost of server and other software estimated to be

around $1,40,000.

Expected per year cost: $5,90,000

Option 3. IFS application 8.0

On Premise Deployment /Cloud Based (Saas) and Oracle available

Window/Linux Server

Windows server 2003/08

Provides account level security along with financial analytics integrated within its ERP

module and onsite training for employees at bulk cost.



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It is supported by Window platform only.

Estimated price for $700000 + Maintenance cost(@10%)+ Installation

Cost(@20%)=$9,00,000

Option 4. Customized FSCM solution.

Developing its own financial supply chain management solution without ERP

implementation on existing system configuration.

Cost of Developing FSCM solution through third party vendor, customized to fulfil the

requirements.

Using Teradata for CRM solution will cost $66,000 per site.

Total estimated cost per year=$4, 50,000(including cost at 4 sites).



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6. Recommendations:

The company has option to go for SAP Solution which is renowned in world for its quality

solution , However since RBS india Business centres have very specific requirement in

operation process, which is used internally by employees of RBS India and to particular

operation process only.Since the no of users using the Refer centre process may increase

over time .Instead of purchasing the completer ERP solution and paying the license fees

they can go for customized Financial supply chain management solution through Third Party

vendor and pay only for the CRM solution of Teradata.