Electrolux was over-reliant on local banks for collection in countries where international banks lacked branch presence for over-the- counter transactions throughout the Asia Pacific region. Bank balances in the local bank account needed to be monitored and transferred to Citi regularly. Poor references in bank statements created difficulty in identifying who had paid and posting in the customer ledger was a manually intensive process. In addition, there were fragmented processes and uneven payment terms across the region. Overall, this had an impact on Electrolux’s working capital management and reconciliation processes.
All elements of net operating working capital such as accounts payable (AP), accounts receivable (AR) and inventory were of prime focus. Key efficiency gains were achieved after a portion of the transactional handling and operations work was assigned to the shared services centre (SSC) in Malaysia.
To drive digital productivity, a review of accounting processes was actioned across in AR, AP and general ledger (GL). Further productivity improvements were also observed through the application of six sigma techniques (Electrolux Continuous Improvement Programme).
There was a collaborative approach where treasury, finance, working capital and the procurement teams joined forces to overcome various challenges including standardising payment terms and payment cycles. The focus on indirect purchasing spend led to increased transparency of spend and setting of minimum payment terms with suppliers. Electrolux also carried out a direct material inventory consignment programme (VMI) in factories, and had a robust inventory planning process for reducing multiple stock keeping units (SKUs).
Technical solutions in the following areas were implemented:
Initially Electrolux experienced teething challenges, both operational and technical in nature, but increasingly the solutions described were normalised within the group. Robust improvements are still being made to processes so that, for example, RPA projects, can yield maximum benefits.
Electrolux incorporated multiple solutions, solicited a large variety of providers, and was able to bring together multiple teams and stakeholders internally, each of which had different KPIs, in achieving the goal of improving working capital and reconciliation. Many companies are not able to fulfil clear alignment and improvement in such a short time because of differences in objectives internally.