Solectron Corporation, a $12 billion global electronics contract manufacturer, needed to consolidate and improve its receivables portfolio and also establish a technology solution to support its migration to shared service centers. Economic slowdown, especially in the tech industry, impacted Solectron’s business and forced it to look at new ways to contain costs while continuing to run a global organization at full speed.
Solectron had grown quickly through acquisition and inherited a patchwork quilt of disconnected systems such as Baan, SAP and other legacy environments. Using the Emagia system, Solectron created a single, comprehensive A/R portfolio with global, real-time access. Since implementing the Emagia solution, Solectron has successfully implemented a combination of Shared Service Centers supported by the Emagia software solution to better manage receivables, accelerate cash collection and optimize working capital.
Fueled by demand for its contract manufacturing services, Solectron became one of Silicon Valley’s fastest growing companies. When the high-tech market began to decline, Solectron management returned their focus from accommodating fast growth to operational efficiency and disciplined cost cutting. In late 2002, Solectron transitioned to a Shared Services Center model and deployed Emagia Cash Inflow Manager as a means of automating and streamlining all aspects of its cash collection process. Using Emagia has resulted in immediate cash efficiencies, measurable productivity gains, improved cash flow as well as effective, accurate cash reporting and forecasting.
The Challenge: Maximize Global Cash Flow Operations and Improve Working Capital
After analyzing various avenues to improve business performance, Solectron decided to first focus on the cash inflow process. Solectron’s team examined Solectron’s entire global accounts receivables organization and identified a number of major deficiencies in credit and collections:
- Inability to consolidate data from disparate ERP systems resulting in lack of global view of customer accounts
- Inability to create accurate, real-time reports making cash collections forecasting challenging and ineffective
- Time-consuming, highly manual processes for rudimentary collections tasks and dispute resolution
- Globally dispersed customer base and collections offices dependent on multiple ERP systems using Excel spreadsheets for reporting and other basic functions seriously weakened internal control structure
The Solution: Shift to Shared Services Centers Anchored With Emagia Software
The move towards Shared Services was seen as a natural organizational shift that would allow a smaller, specialized staff to service Solectron’s global requirements. With Emagia software powering its Shared Service Centers, Solectron could conduct collections activities with customers at a reduced cost. Additionally, individual members of the Shared Service team could focus on globally distributed customers ensuring transactions were performed in a consistent manner and offering higher levels of customer satisfaction. To carefully coordinate and ensure consistency within the Shared Service organization, the Emagia solution became critical.
The Emagia platform offered:
- Consolidated , real-time global view of receivables portfolio
- Significantly improved portfolio management due to enhanced visibility
- Automated daily collections activities such as faxing, emailing of invoices, dunning letters, etc.
- Flexible reporting capabilities for development of accurate cash forecasts
- Rapid implementation for multiple back-end ERP systems keeping transition time short and project within budget
“Accounts receivables collectors log on to the Emagia Workbench when they arrive at the office in the morning, and then they work in Emagia all day long instead of jumping from system to system”, said Val Plotkin, Solectron Credit Manager. “ Emagia presents critical data from the ERP systems in a consistent layout and structure, giving both collectors and their managers instantaneous access to real-time information on receivables, customers, aging, cash forecasts, and more – all in one place.”
With a careful balance between people, process and technology Solectron was able to achieve significant business benefits. “We chose the Emagia solution because we felt that it had a comprehensive solution that fit the requirements of our cash flow initiative,” said Ken Berger, Solectron Program Manager responsible for Emagia implementation. “The rapid deployment of the solution as well as the built-in best practices allowed us to quickly roll out across the globe in conjunction with our Shared Service implementation. It has played a critical role in the success of this project and clearly helped us achieve our objectives.”
Bottom Line Impact: Total $15 Million Savings Per Year and Robust Infrastructure for Shared Services Centers
Emagia gave Solectron the ability to aggressively pursue market share and top line growth without compromising cash conversion efficiency. The productivity gains from automating processes in its Shared Service Centers enabled:
- Access to significant amount of previously locked up cash in its receivables giving savings of an additional $14 million per year based on reduced interest payments
- Reduction in total headcount saving Solectron approximately $1 million per year\
- Increased productivity (estimated at double) of Solectron’s employees in credit and collections
- Dynamic reporting capabilities for accurate cash forecasting and strategy driven initiatives around cash flow management
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