Achieving Cost Efficiencies Through Global Finance and Accounting Outsourcing DOWNLOAD

Abstract

Delta is one of the world’s largest passenger airlines with operations in over 65 countries, 80,000 employees and $32 billion in annual revenues. This global, US based airline transports passengers and cargo both domestically and internationally and also provides maintenance, repair and overhaul services to other aviation and airline customers. Faced with a competitive economic environment, the carrier sought cost savings opportunities across their finance function of 600+ FTEs. Deloitte was requested to perform a strategic assessment and then retained to advise in the implementation of the offshoring initiative.

The Challenge

In a challenging, recessionary market, with global selling, general & administrative costs (SG&A) weighing down profits, the company needed to take decisive action in order to improve profitability. Additionally, Delta had recently acquired Northwest Airlines whose strong presence in the Pacific region and its legacy ERP systems was also prompting the need to standardize and integrate the Northwest Airlines acquisition. Delta needed to considerably reduce SG&A costs and efficiently standardize and integrate Northwest Airlines business and so it looked to outsource elements of its finance and accounting (F&A) operations as a way to quickly contribute to cost savings and standardization.

How We Helped

Delta asked Deloitte to perform a strategic assessment of Delta’s Finance and Accounting function, which comprised over 700 employees. Upon completion of the strategic assessment, which provided Delta with an executable strategy for outsourcing its F&A function, Delta asked Deloitte to be its advisor as it continued on its journey to implement the outsourcing plan. Deloitte won the work due to previous advisory work for Delta, credibility as a trusted advisor for highly complex projects and knowledge of the outsourcing market.

Over a ten month period, Deloitte deployed a team of skilled practitioners from both the US and India, with deep experience in the outsourcing market. Deloitte helped Delta identify cost saving opportunities through the recommended outsourcing strategies and implementation.

Solution

In this project, it was essential to hit the ground running. Delta already had a contract with a Business Process Outsourcing (BPO) Services Provider in the EMEA region and though Delta was highly satisfied with the service provided, the contract still needed to be reviewed given the expansion of scope of services. From Deloitte’s experience on similar projects, the leading way to tackle this problem was to bring in a mix of knowledge, experience and established processes in the outsourcing space.

Deloitte established a team of consultants, both from the US and India, who worked closely together providing support and advice based on their specific areas of experience:

• Deloitte contributed experienced project leadership in global F&A Business Process Outsourcing and global financial shared services
• Team members from India had extensive experience in the outsourcing space, including having worked with leading outsourcing service providers
• Deloitte’s rich experience in the F&A outsourcing space brought to the table pricing and functional benchmarks, knowledge of the service provider landscape and tools and processes to help facilitate and accelerate the outsourcing initiative

A multi-phased approach was used to evaluate the finance functions and implement the offshoring opportunity which included Phases 1-3 of Deloitte’s Outsourcing Lifecycle Methodology:

Phase 1: Strategic Assessment Phase

• Examined Delta’s Business Model and Strategy and developed a Current State Assessment
• Developed a Total Cost of Ownership (TCO) Business Case
• Defined Strategy and Roadmap for the Future State Delivery Model

Phase 2: Operating Model and RFP Development

• Developed Functional / Operating Model Plans
• Updated and refined Business Case
• Determined Retained Organization and Communication Strategy
• Developed and issued an RFI and subsequently a detailed functional RFP to the shortlisted vendors
• Developed a vendor evaluation Framework

Phase 3: Vendor Evaluation and Contract Negotiation

• Managed the RFP process, evaluated vendor responses, conducted vendor site visits and down-selected vendor
• Developed SOW / Contract Documents and assisted Delta in Final Contract Negotiation through to signing

This was a complex project that required a high degree of interaction between Deloitte, Delta and other stakeholders. The project successfully met all of Delta’s objectives, by

• Identifying positive annual savings on the in-scope functions from a combination of outsourcing, renegotiated current contract and process efficiencies through consolidation and standardization
• Developing a go forward contracting strategy

A good working relationship between all stakeholders was a key to achieving these objectives.

As used in this document, "Deloitte" means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.