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Case Study: Tektronix, Inc.

Tektronix inc., Beaverton, Oregon

The Company

Tektronix is a leading supplier of test, measurement, and monitoring products, solutions and services for the communications, computer, and semiconductor industries - as well as military/aerospace, consumer electronics, education and a broad range of other industries worldwide. With 60 years of experience, Tektronix enables its customers to design, build, deploy, and manage next-generation global communications networks, computing and advanced technologies. Headquartered in Beaverton, Oregon, Tektronix has operations in 19 countries worldwide.

Tektronix has been an Oracle user since 1995, and had invested heavily in customizations around inter-company and shared services activities. These had provided significant business benefits for its worldwide operations. However, the challenge of modifying the customizations to accommodate acquisitions and upgrading to the latest Oracle release was seen as high risk and costly.

Tektronix took on Virtual Trader as its solution partner in 2002 to replace these business critical customizations. The Virtual Trader projects have met all objectives and went live on schedule. Return on investment was realized within the first year. Virtual Trader continues to be deployed on new projects.

The saving on customizations alone were almost US $1 million.

Inter-company Requirements

Tektronix has 3 manufacturing entities and 3 distributing entities which supply products through a network of 21 subsidiaries. Most trade sales pass through two inter-company tiers.

The delivery timescales and the need for installation and acceptance stages further complicate the process with changes in legal ownership, movement of costs and consequent revenue recognition. Each inter-company step requires a different transfer price.

These requirements also extended into our service operations in terms of inter-company materials movement and part usage sales.

The immediate problem was how to integrate the service accounting and invoicing for a newly acquired company. The new company operated its own instance of Oracle GL and AR and was integrating into Tektronix' Service application OpenUptime.

Prior to Virtual Trader, the automation of these inter-company requirements was handled through a complex customization referred to as the ICA Engine.

OpenUpTime Service Application.

Tektronix uses the 3rd party product OpenUpTime to support its service requirements. We had developed complex interfaces into Oracle General Ledger for labor, material movement and part usage, and into Oracle Receivables for customer billing and revenue recognition.

The customization identified the companies involved and created all the accounting and inter-company activity required. However it was based on integrating with a single Oracle instance and a single chart of accounts.

Virtual Trader is designed to operate across multiple instances, and is not restricted to only working with Oracle applications. This positioned it well for resolving the integration issues, creating the transactions from OpenUpTime data, and posting them into the appropriate company and Oracle instance.

The core functionality of Virtual Trader provided all the necessary functionality to replace our customizsations.

For labor, material movement and parts bookings:

• It recognizsed and the companies and intercompany relationships involved.
• Identified the business scenario involved and the number of inter-company steps required.
• Evaluated the transfer price of each step.
• Created the necessary journals and appropriate accounting including Inventory, Cost of Sales, Revenue, and Receivables.

All transaction details are recorded within Virtual Trader which acts as the Subledger for inventory, cCost and inter-company. This activity posted straight to the general ledger in summary.

For customer billing:

• It identifies the company making the billing, and on which instance it is located.
• It populatesd the AR Interface, and also evaluates the accounting necessary and populates the accounting distributions.
• It populates the Transaction Type and Oracle Batch Source necessary to ensure the appropriate sequence is used to create the invoice number.

Upgrade to 11i

Following the successful integration of our global service accounting, Tektronix moved to implement Oracle 11i. This involved a major review of Tektronix operating procedures, moving some customizsations to standard functionality and looking to upgrade a number of others to Oracle 11i.

Inter-company requirements were to be replaced by Virtual Trader.

With an increased sensitivity to revenue recognition, the business needed to automate the impact of significant shipping times and the contractual obligations such as installation and uplift.

Delivery, Hold Release and COGS

To address a number of these issues, Tektronix developed a front end facility to record completion of each delivery stage, from the initial issue of the goods from stores, through various optional holds for iIntransit, configuration, and acceptance, to completion and customer billing.

The customer invoice created by Oracle was automatically put on hold within a custom table for delivery hold stages.

At each delivery stage Virtual Trader is used to consider the impact if any, on legal ownership, transfer price and accounting. Where a financial transaction is required Virtual Trader creates the necessary journals to Oracle Ggeneral Lledger. On change of ownership this will update both companies involved.

Typically this includes:

Converting the initial COGS booking from Oracle to in-transit.

Transferring the transaction value between appropriate 'hold' accounts.

Actioning change of ownership at the appropriate transfer price, and recognising COGS & revenue.

Recording completion and customer COGS, and releasing the customer invoice.

Receivables & Invoicing

A number of difficulties had been encountered around legal compliance on invoicing in various parts of the world. Functionality was required to fill these gaps along with the upgrade to Oracle 11i.

The two main areas of problem were the need to apply different grouping rules for different countries and business scenarios, and the need to control the format of invoice numbers as well as their sequence.

Virtual Trader was used to define and execute the grouping rules against the invoice lines being processed. This then allowed Virtual Trader to apply an invoice number in advance of Auto-Invoice. Tektronix created a front end form to define the format and sequence to be used in each case. Virtual Trader referenced this customizsation to create the actual invoice number to be used, and populate the receivables interface.

To meet the Tektronix accounting requirements, Virtual Trader was used to evaluate the accounting required and populate the distributions interface.

Follow-on Projects

Tektronix hasve continued to make deployments of Virtual Trader to address new business requirements. The following are a couple of examples.

Bundled Services

An increasingly common activity is to bundle services in with product sales. In many cases the services are bundled in at zero cost to the customer. However the increased sensitivity to revenue recognition makes this a problem in receivables.

Virtual Trader was used to evaluate an 'average' discount for the invoice, and to create an adjustment transaction that reduced the effective cost of the goods, and created a deferred invoice for the services at their discounted value. This left the original customer invoice in place, whilst creating appropriate deferred revenue accounting in general ledger.

Indian Tax

India has a multi-layer tax system, with a number of unusual requirements. One of which is the need to break out certain invoice lines into separate service and goods components based on a set ratio.

As Virtual Trader was processing the customer invoices, its use was extended to identify these lines and substitute them with the appropriate two new lines based on the approved ratio.

Summary

Tektronix faced a number of complex business and system requirements which were resolved with the deployment of Virtual Trader. Its core functionality replaced a large proportion of our existing customizsations within its core competency of inter-company and shared services. The application more than paid for itself within the first year based on the time savings of alternative routes.

What had not been foreseen were the additional benefits we would continue to be gained after the initial deployment. The flexibility of the Virtual Trader product has allowed us to continue to meet changing business needs without redevelopment. The advanced diagnostics and testing facilities greatly reduces the time to create and test new applications.

Configurations held within rule sets enables changes to be made without wall to wall retesting. As the rules are at a business level, it provides a greater visibility and understanding within the business community. Much of the control is held by super-users within the business community rather than IT, making changes, testing and deployment more immediate.

Virtual Trader has paid for itself many times over in terms of its continuing benefits in new applications, reacting to changes and supporting the business.