SAP Credit Management for Distributors

Transcription

1 [ CRF SAP RM User Group 2015 Chicago, IL] CASE STUDY SAP Credit Management for Distributors

2 Presented By John Fahey Director of Credit Edward Don & Company

3 Agenda About Edward Don Challenges Implementation and Process 4 Solution Deployed 5 Results 6 Quick Tips

4 About Edward Don

5 Distribution Centers 6 Distribution Centers Locations & Square Footage Chicago 365,000 Los Angeles 210,000 Dallas 187,000 Ft. Lauderdale 161,000 Philadelphia 147,000 Atlanta 85,000 TOTAL 1,155,000 Serving Domestic & International Customers from Each of Our Six Distribution Centers

6 Company Profile Distributor of Equipment & Supply to foodservice industry. Everything But The Food National Distribution network some international 5 Direct Reports with a staff of 40 Sell restaurant, lodging, healthcare and institutions through a sales staff of 350. Our most profitable accounts are the Independent operators (mom & pop). Also most challenging from credit perspective. Approximately 50,000 active Customers Credit Decisioning Methodology * Automated * Statistical Scoring for Open AR * Bureau Scoring (Judgmental) for New Accounts

7 Credit Operations and Challenges

8 Before : Team Structure Decentralized with Regional Credit Managers reporting to Director of Credit Operated Credit Shared service center with Cash Application, Adjustment & Return processing, and National Account Credit handled out of our Woodridge, IL Corp HQ Challenge : Needed Consistent credit decisions across the country

9 Before: Process Utilized a credit scoring model and worklist functionality based on delinquency rules. Home grown system on an AS400 that was originally based on Daly & Wolcott DW+ AR Software that was so customized it was no longer supported. RPG programmers were very difficult to hire Challenge: Credit System was outdated and could not support growing business needs

10 2008 Before: Credit KPIs % 6.3% DSO Current AR Over 60 Past Due 3-4 days reduction in DSO would free $ million in working capital

11 Need of the Hour Consistent centralized credit decisions Help the geographically dispersed team in making consistent credit decisions across country Provide robust and scalable credit platform Needed an easy to use platform Should be able to meet the business growth needs

12 and most importantly

13 Need of the Hour Improve Visibility Improve visibility and control on: KPIs Team performance Business performance Business risks

14 KPI - Target KPI KPI Targets from the Project % 6.3% DSO Current AR Over 60 Past Due 45 75% 3.5% DSO Current AR Over 60 Past Due

15 Implementation

16 Implementation Timeframe and Early Lessons Phase 1 Started planning and testing in 2007 We Planned for a Big Bang implementation Phase 2 Went live in April FSCM Credit & Collection modules were not yet completed Our team was struggling with FSCM. Phase -3 High Radius was brought in to assist and we went live with Credit & Collection May 2010 HighRadius helped us in limiting the scope and going live with FSCM implementation Early Roadblock During the first year - DSO increased to 53.2 days - Per Cent Current declined to 65.4% and - Over 60 increased to 10.5%. Note: there was also a Recession occurring at this time and it was difficult to determine if true credit risk/collection problems or system billing and other issues were the reason for not getting paid

17 Unique requirements of Edward Don 1. Inclusion of our current process for Risk Class-Profitabilty (GMROI) score for all customers 2. Importing credit scores from our 3rd Party bureau that scored our data base (Predictive Metrics now part of Sunguard) 3. Lack of AR Data Warehouse needed to store A.R., sales and profitability data in newly created tables within SAP 4. Extract of the AR data created for scoring and providing Aging data to credit bureaus 5. With 50k active accounts needed automated mass update functionality monthly for credit limits, which did not exist

18 Implementation Key lessons Change Management was the biggest factor in our Implementation Few key lessons - - Its necessary to provide comprehensive training and do an effective knowledge transfer - We brought in Jeff Hirsch one of the developers of FSCM to provide guidance to our consultants who were inexperienced and struggling with FSCM - We made sure all employees were properly trained and created training modules - We realized the reliance on relational databases required better Excel skills for many employees and separately provided Excel training - Our goal was on day 1 of go live no employee would be able to claim they did not have the training to perform their job - Entire training process took 6 months to complete

19 Solution Deployed

20 Customer Risk Class & Credit Check Rules

21 Risk Class and GMROI Rank The General Rules and GMROI Code: Class A B C D E Good Caution Hold Judgment

22 Risk Class GMROI Risk Class GMROI is a great tool as it considers profitability in credit decisions Standardized Credit decisions across all D.C. s Senior Management support of process Eliminated most of the Sales Credit conflict around the order review and release process

23 Using The Statistical Portfolio Score To Establish Credit Limits Credit Limit Update Table Company: 1 New C.L. =Multiplier factor * High Credit 90 days Risk Class Multiplier Factor A 2.00 B 1.50 C 1.00 D 0.50

24 Scoring for Credit Limits Integrated Into SAP

25 Parent Level Credit Limit Sharing Limit

26 FSCM Collection Module - Worklist

27 Collection Strategy

28 Actual Results

29 Expected Vs Actual Results Actuals Planned 45 75% 3.5% DSO Current AR Over 60 Past Due 38 90% NO DSO Current AR Over 60 Past Due

30 Quick Tips

31 Quick Tips # 1 Change Management Ensure Accuracy of Master Data We held an all Sales Management meeting in Jan 2010 to stress accuracy of master data We created master data group to check accuracy of data Sales Orders are based on information entered into SAP at the time the order is created. Before an order is entered vendor contracts (pricing) had to be loaded, sales tax coding accurate, freight conditions set, and invoice delivery options entered. This was a huge cultural change for Sales. Their prior philosophy was get the order out and the support functions will correct any discrepancies after the fact. Only when we forced this change did our A.R. results as well as business profitability improve.

32 Quick Tips # 2 Demand the required credit tools to support your credit goals. For Don as a large distributor with over 50k active customers we needed Agings and Statements as Sales and Management tools to make quick, sound credit decisions. The standard reports in SAP were not sufficient and we demanded custom reports before Go Live. Most important requirement for us. Also required were different invoice versions and Invoice Output Determination to deliver multiple invoices by a variety of ways. This took months to get correct but was well worth all the efforts.

33 Quick Tips # 3 Make use of Collection Strategies The Collection Strategies worked well and we loved the flexibility to change strategies and points assigned. However it was a cultural change to get the Collectors to enter notes when in the Collection Worklist. Only after we made this a position requirement and tied this to their job description and annual review did it get done. If there is no note there was not a call.

34 Quick Tips # 4 Ask for help from your colleagues Ask your colleagues at CRF or through other credit networking groups for assistance. Those going through an implementation looked for advice and are willing to reciprocate.

35 ? Questions

36 [ CRF SAP RM User Group 2015 Chicago, IL] CASE STUDY SAP Credit Management for Distributors