You Can Take that to the Bank: Semiconductor Manufacturer Financial Operations Case Study #56

Dramatic reductions in per-check costs and invoice approval times, month-end close cost reduction of $40K per month, consolidation of seven fixed assets systems that netted $500K per year in tax savings and local tax rebates of over $1M…


The company was an international semiconductor manufacturer that decided to implement three shared service centers (in North America, Asia, and Europe) to manage the financial operations for its 19 international entities.

Project Description

The objectives of the project were twofold: To reduce the overall cost of financial services by $3 million annually; and creation of a service center model that would be scalable to accommodate anticipated business expansion. Each servicing center would establish a service level agreement with its customers and would become a profit center. The initial phases included:

  • Provide detailed as-is process mapping of all financial activities for each department
  • Conduct thorough analysis of each department’s activities and customers
  • Conduct root cause analysis and evaluations
  • Interview department customers throughout the world
  • Engage subject matter experts to drive the cultural change and championed the value of a service center system throughout the organization

These actions resulted in rapid completion of the initial phases of the project implementation and valuable process innovation across all finance areas: Accounts Payable, Fixed Assets, General Ledger, Accounts Receivable and Inventory Control.

Results

The company met its $3 million cost reduction objective.  It also saw improved transaction times, reduced costs and resource involvement through the use of bank-provided ACH vendor payments, implementation of an invoice document scanning and invoice approval workflow system (read more about this phase of the project here), implementation of a purchase card system, and establishment of metrics, Sarbanes Oxley audit controls and service level agreements. 

Accounts Payable Improvements

  • Reduction in per-check costs from $30 to $0.25
  • Reduction in the number of days to obtain invoice approval by internal customers from 30 to 45 days to 1 to 2 days
  • Complete visibility for users of the invoice approval process
  • Significant reduction in the amount of time AP personnel spent on open invoices issues (which had previously consumed 10 to 20% of overall AP staff activities)
  • Obtained $150,000 bank rebates for each $5 million in purchase card transactions
  • 15-20% staff reduction

Accounts Receivable Improvements

The company benefited from improved process, tracking and controls of the various forms of organizational receivables, and established AR hold processes for both system and administrative controls. This resulted in:

  • Improved metrics
  • Improved operational management performance
  • Improved compliance with Sarbanes Oxley

General Ledger Improvements

Overall general ledger reviews of all systems at the enterprise and local levels (in order to migrate to one central system) allowed new standards by which the unified general ledger could be established. In addition:

  • Improvements made to the monthly close cycle reduced the monthly close cost by $40,000 per month
  • SEC quarterly reporting (at a cost of $100,000 per day) was reduced from 6 days to 4 days

Fixed Assets Improvements

CTI designed and implemented a new global fixed asset system which eliminated seven different systems used by the nineteen world-wide entities, achieved global reliability and visibility of assets to all functional departments throughout the life cycle of assets (from initial purchases, through depreciation to final disposal). 

The physical inventory reconciliation netted a 5-20% equipment retirement, which resulted in an estimated tax savings of $567,000 per year. The company was able to reconstruct actual asset relocation dates, which they anticipated would result in overall local tax paybacks of $1-1.5 million. Additional improvements:

  • Systems for appraisal of all assets
  • Establishment of a central tagging system
  • A viable system of recording and maintaining equipment physical inventory by plant operations (rather than by financial personnel) via hand-held scanning technologies
  • Establishment of metrics
  • Policies and procedures, and comprehensive training manuals
  • Reduced sales tax by $170,000 per year on sub-assemblies sent from U.S. to the company’s Asian partners

Inventory Control Improvements

Uniform product inventory reporting policies, processes, procedures and standards were established so that financial data was consistent throughout all entities with production inconsistencies eliminated, and a savings of 7-10%.

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