|
|
|
Texas Instruments |
|
The Educational Division
of Texas Instruments produces calculators, programmable
calculators and educational software. Texas Instruments
produces the main electronic elements of this product
range in facilities in the Far East or in the US.
Many in-house activities such as design and central procurement
planning are conducted in a global manner with immediate
participation from all regions. The specific regional
activities are concentrated in sales, distribution, and
some final packaging and assembly. Also, some multi-language
user documentation is produced by subsidiary companies.
The Educational Division of Texas Instruments is operating
through 16 different subsidiaries in Europe and Asia.
All European subsidiaries are organized in Commissionaire
relationships, all Asian ones in Buy-Sell relationship.
The “Principal”, the US Corporation of Texas
Instruments, is registered in Holland and in Singapore
to operate a regional warehouse, to receive and ship goods.
This corporation also owns all inventory stocks in the
warehouse. While sales are processed through the
appropriate country entity, all shipments are made centrally
from the Netherlands directly to the customer. The
customer will receive an invoice containing the legal
information of the local company deemed to have made the
sale. The sales, customer service, technical
support and finance operations are concentrated into a
small number of shared service centres (Brussels, Nice,
Munich, Stockholm).
With the decision to upgrade to Oracle Release 11, Texas
Instruments faced the challenge of how to best represent
this multinational structure within the Oracle applications.
Prior to this implementation Europe and Asia both operated
on stand-alone systems that had been heavily customized
to accommodate the organizational setup.
The standard approach for handling multiple companies
within Oracle applications is to have each company represented
separately. Each legal company has it’s own set
of application modules; a Set of Books in GL, an Operating
Unit with Receivables, Order Management, Payables and
Purchasing and Inventory Organizations dependent on each
Operating Unit. This approach will provide a working solution
and generally meet the legal and fiscal requirements.
However, it does not represent the streamlined cross-entity
business organization and tends to ignore the benefits
of the “Commissionaire” and Shared Service
Center models. In fact, for purposes of the Oracle
implementation Texas Instruments would have to establish
and operate full trading companies in each country.
This meant setting up each module for each legal entity,
and maintaining them into the future. The significant
effort involved in a full period end close procedure for
each company independently, with the attendant reconciliation
had to be addressed. Discrete company representation
would break up the operation of the central warehouses
into separate order allocations and pick runs by selling
entity, instead of allowing the cross-entity prioritization
and optimization.
The processing of inter-company transactions was problematic,
but core to this trading model. Two inter-company
transactions are needed for each customer sales transaction
(deemed purchase and deemed sale). Oracle Release
11 has a suite of concurrent programs that will create
Inter-Company Payables and Receivables invoices from a
‘drop ship’ transaction. However, in the current
releases, inter-company pricing is based on a fixed Inter-Company
price list by item, not on a flexible “Sales price
minus Commission” or “Inventory cost-plus
markup” price. Lastly, with standard inter-company
transactions each of these Payables and Receivables transactions
must be individually cleared through payment. Most companies
prefer to settle with a single net inter-company transaction.
Overall, the effort involved in the processing of these
inter-company transactions had no added value to the organization.
Business analysis capabilities needed consideration.
Inter-company transactions often tend to distort the analysis
of enterprise sales and profits. They may inflate the
sales figures through intercompany sales and distort the
margins through intercompany markups. Only the month-end
intercompany reconciliation and elimination provides a
true financial picture. For daily operational analysis
customized reporting or data warehousing facilities are
needed.
The final consideration was over the operation of shared
service centres. The standard approach requires separate
responsibilities to be used for the processing of data
for each separate company. This requires users to frequently
switch responsibilities in the normal course of their
duties. This causes restrictions in visibility and processing
of data across companies and makes cross-country shared
service centers for sales and customer service particularly
problematical and time consuming. As a shared service
centre is responding to activity across many different
companies, it is not always obvious which company a transaction
has been registered with, in order to find and process
it further.
The alternative approach implemented for Texas Instruments
streamlined the use of the Oracle applications and avoided
these problems. The key for the organizational representation
was in the understanding of the TI Commissionaire agreements.
All the separate transactions, processed and reconciled
across companies, are mirrored directly from the trade
sale to the end customer through the Commissionaire agreement.
The key feature of the installation is to operate all
the trade activity for all the separate legal companies
through only one operating unit, and thus one Order Management
and associated Receivables module. Although some impact
occurs from this approach, the key issues around the logistics
operation, shared service centers and full regional visibility
disappear. This single operating unit that holds the data
for all the legal companies is often referred to as a
‘Virtual Operating Unit’.
As all the data is held within one operating unit, each
responsibility can see and process data for all of the
companies involved. All orders can be processed through
a common point of entry. Picking goods for delivery can
be accomplished in a single strike. Cash can be matched
to invoices across different companies. Some
customizations were necessary to provide printed invoices
with the appropriate company details. A form was provided
to maintain the static legal and commercial data about
each of the Commissionaire companies. In addition a simple
facility was produced to print the various headings and
titles required on the invoice in appropriate languages.
A modification was provided to generate invoice sequence
numbers based on the Commissionaire company responsible
for the trade sale, to comply with local legal requirements.
From this base, two main functions could be provided.
Firstly a program was provided to print all the Inter-Company
Invoices directly from the associated trade sales.
These contained the details of the shipping organization,
and the agreed inter-company prices. Secondly a program
was provided to produce all the necessary data from which
each subsidiary’s VAT/GST tax returns could be compiled.
This included both the trade and inter-company transactions.
As all the financial transactions were within a single
operating unit, Texas Instruments closed all order processing,
receivables and payables for the 16 subsidiaries with
a single period end close. Texas Instruments has a corporate
ledger of record hosted within a separate SAP system.
All the financial transactions posted to the Oracle GL
for the invoices and cash receipts etc., were transferred
to this ledger system. Each transaction provides
sufficient information to identify the individual subsidiary,
its customer trade transactions and the derived intercompany
transaction. This Oracle application model for Texas
Instruments went live in April 2000 and has operated successfully
since then. |
|
|
