Whilst larger organisations leverage the benefits of an ERP system across their major platforms, subsidiaries using outdated and manual processes can cause severe bottlenecks, particularly for cash-flow. As companies grow and acquire subsidiaries, particularly in emerging markets, the need for streamlined and efficient processes has never been more prevalent.
Q. How do you define a subsidiary?
A. A subsidiary differs between organisations but they can generally be defined as smaller operating divisions, distribution or sales offices, joint ventures or limited liability companies. The parent company holds the overall power and majority shares but specific processes or operations are managed independently. A higher number of subsidiaries results in a wider range of processes and hierarchies. Fortune 500 companies often control hundreds, sometimes thousands, of subsidiaries.
Q. Why do subsidiaries not always use the same system as the parent company?
A. Cost is a major deciding factor, especially if there are several subsidiaries. Larger enterprises often decide to implement an ERP system such as SAP ERP (often referred to as SAP R/3) only within the ‘main’ or parent company where the executive team or major operations benefit the most; data from subsidiaries can be fed into the main SAP system using individual, manual processes.
Smaller subsidiaries often also employ legacy systems which cannot scale to meet the increased requirements as the organisation grows; in some cases this means manual and inefficient processes have long been depended upon (e.g. spreadsheets, silo team structure and misaligned procedures). Such inefficiencies result in too many dollars and man hours leaking from the organisation.
Whilst this ‘wait until the company grows’ approach is effective for some companies and saves up-front investment, we often see that once a company experiences growth and/or further acquisitions, the move to an ERP system can actually cost more as well as causing further change management requirements across the entire organisation.
Q. What is the effect of a subsidiary working on an independent system?
A. Using less efficient, manual systems and processes can have a major impact on cash-flow at the top level of larger organisations. The order-to-cash cycle can be severely delayed when only one element of the process takes place on an advanced ERP system; delays in communication, purchasing, customer service and accounting can all have detrimental effects on the overall business process.
Q. How can organisations benefit from using streamlined systems and processes within their subsidiaries?
A. By coordinating their end-to-end processes, an organisation can release cash (and man hours, equipment, purchasing etc) in the following ways:
• Availability-to-promise status can be provided with accuracy and confidence to clients; often resulting in improved customer relations, retention of clients, repeat customers. In today’s market this is vital in keeping your competition at bay.
• Inventory management and purchasing decisions can be made with the full data at hand; this can often mean reduced storage costs, less waste and high product turnover.
• Timely and streamlined accounts receivable processes improve cash flow at all levels.
• Streamlining purchasing, orders, delivery, credit management and accounting processes improves visibility and cohesion across the entire organisation; allowing for lean business models such as build-to-order and pull-based manufacturing.
Q. How can an ERP system such as SAP Business one ease the inefficiencies within subsidiaries?
A. With a trusted end-to-end business process management solution such as SAP Business One, a large organisation, with any amount of subsidiaries can work smarter, improve cash flow, enhance visibility and provide improved services to customers and clients.
Sales Opportunity Tracking – Record, track and share sales opportunities in any location around the world. Learn More.
Intelligent Purchasing – Ensure your warehouses have the raw materials and products they need at all times; be the best in your industry for lean purchasing. Learn More.
Inventory Management – Create customised item master lists and inventory reports so your company can stay on top of deliveries and purchasing cycles. Learn More.
Production – Manage supply chain effectively whilst proactively managing your customer’s needs and expectations. Learn More.
Banking and Financials – Leverage streamlined processes to track incoming payments, create automatic reminders on overdue accounts and reconcile your month / year-end reports. Learn More.
Administration – Access organisational management and customised standard reporting, many of which can be automated. Learn More.
Stay Mobile – Allow key employees / subsidiaries to stay up to date with business and customer data, check inventory levels, receive customised alerts and provide instant approval anytime, anywhere. Learn More.
Organisations which run on independent, silo systems are risking their growth potential like never before. SAP Business One grows and expands with your company which means that once you have it implemented, your systems can be streamlined to move your organisation to the next level.
Would you like to learn more? Blue Ocean Systems’ team of ERP consultants will guide you through how an SAP Business One solution can propel your business today. Contact us.