Single Database, Multi-Domain Configuration: A Practical Solution

Posted on: November 4, 2008 | By: SuperUser Account | QAD Financials

The Client

The Company, a Consumer & Industrial business, provides LEDs (light-emitting diodes) solutions. The Company offers a wide range of world-class, environmentally responsible LED solutions and systems for signage, architectural, transportation, display lighting and general illumination applications. When compared to older, traditional lighting sources, The Company’s robust LED technology enables: Greater reliability, Substantial reductions in maintenance costs, longer life, up to 90 percent energy costs savings. These performance achievements are of particular interest to such sectors as retail, restaurant, hospitality or grocery, where companies look to drastically reduce energy and maintenance costs across hundreds or even thousands of locations around the globe. The Company LED value proposition also resonates with Federal, State and Municipal government agencies responsible for signaling operations that are relied upon to keep both vehicle and pedestrian traffic moving safely and efficiently 24 hours a day, 365 days a year.

The Opportunity

The Company, a six year old company, has experience rapid growth from an entrepreneurial initiative into a medium size organization. The company recognized that their current business processes did not align well with the size of the organization, the current supply chain and distribution model, and their multi-national reporting requirements. The company embarked on an ERP software upgrade initiative in early 2007.

The company has operations in the United States, Canada and Mexico. The US operations include an Ohio office with senior management, customers support, finance and accounting, product management and engineering and information technology and a distribution center in Texas. The Canadian office provides research and development services as well as operational oversight for the Mexican operations including materials planning. The Mexico facility assembles LED products to support the product lines of the business.

From a financial standpoint, the company’s reporting functional currency for all operations is US dollars. The company has two financial reporting entities; a US entity and a Canadian entity. Finally, there are transfer pricing models in place to account for the inventory that was sold or transferred between the US and Canadian Entities. The company has statutory reporting requirements in Canada in local Canadian currency.

Logan Consulting was engaged to perform a Project Management role for the ERP upgrade initiative, as well as subject matter export support in finance and distribution.

Over the years, changes in the way The Company performed their business resulted in a large gap between the day to day transactions of the company and way financial results were reported. These gaps became the goal of the project to correct:

Financial	Operational
1.       Define Product Line profitability accurately through contribution margin level 2.       Consolidate to a single Chart of Accounts to simplify the close cycle	1.       Eliminate cumbersome intercompany order process 2.       Implement multi-site planning (DRP)

The Solution

Specific to the financial reporting requirements of the business, the company and Logan Consulting developed a single database multiple domain configuration.   The operational domain includes both the US and Canadian Entities, all the planning and inventory sites as well as supports the business for all the manufacturing, distribution and financial reporting requirements (to the parent Company in US dollar functional currency). The Canadian Domain is a financial account domain only. The Canadian entity in the Operation domain is consolidated and translated (from US dollar currency to Canadian currency) to the Canadian Domain. The charts of accounts in the old databases were consolidated into a single chart of accounts that was also aligned with The Company’s Oracle reporting structure.

Product lines were rationalized in a manner consistent with the current business practices of the company. Product lines were created at a more logical level that allowed for determining true contribution margin by product.

Results

Financial

New product line definitions allowed for not only a true contribution margin for each product line but even provided operational margin visibility. This had immediate impact with determining the profitability of one of the company’s latest product lines, Refrigerated Display.

Accelerated monthly finance close cycle by over 40%. Most of this savings came from eliminating work around reporting from two separate charts of accounts.

Enhanced GL Account security reduced transaction errors by 80%. These errors were primarily incorrectly assigned accounts and cost centers on purchase orders and work orders. Previously they had to be manually corrected during the monthly close cycle. Now the system would prevent them from being used at the point of entry.

Operational

The Company had a very manual intercompany order process that was put in place in order to satisfy Canadian financial reporting. The new financial structure introduced during the project eliminated over 80% of the required intercompany transactions.  A small customization handles the remaining 20%.

Reduced inventory variances by 79% (based on an absolute posting of inventory variances of 954M in 2006 and 197M in 2007) through the use of bar-coding.

New physical inventory process resulted in a 55% decrease in man-hours during the 2007 physical inventory. This process relied heavily on eagle’s RF technology to be successful.

Bar-coding improved inventory related transaction errors driving 1.5 FTE in savings.

---

---