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Dell Global Financial Services Consolidates 21 Service Centers
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"Now that we've standardized on Oracle, there's no excuse for
poor performance."
— Alan Cunningham,
Finance Director,
Dell Emea |
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When it comes to operational excellence in its global supply chain, not many companies can compare with Dell Inc. AMR Research has called Dell the world's best example of a demand-driven supply network, thanks to its obsessive focus on metrics around inventory, cost, technology, supply predictability, and customer service.
Not surprisingly, Dell brings that same rigor to driving operational excellence across its Global Financial Services (GFS) division. The backbone of GFS is Dell's network of shared service centers, which are increasingly located in low-cost sites worldwide. Because of its central location, Dell EMEA has played a key role in establishing that network, piloting the creation of finance hubs in Europe, India, and Asia to support GFS worldwide.
"Our finance strategy is divided into the back office, which handles transactional activities such as collections, accounts payable, and accounts receivable; the mid office, focused on value preservation activities such as compliance, reporting, accounting, and tax; and the front office, which is responsible for value creation," explains Pedro Farah, vice president of finance for Dell EMEA. "We manage each of those three functions like a factory, ensuring them in effectiveness, efficiency, and quality."
To support its GFS operations, Dell is rolling out Oracle Financials 11i10 around the globe to create a standard set of tools and processes that are not only world class, but can be replicated in any Dell shared services center, regardless of language or local business practices. Dell EMEA is piloting the rollout, having already implemented Oracle's General Ledger, Order Management, Accounts Payable, Accounts Receivable, and iCollections applications.
Taking the First Step
An old Chinese proverb says that a journey of a thousand miles begins with one step. Dell EMEA took that first step back in 2002, when it began a pilot program to consolidate 21 different finance office locations across Europe into shared service centers. At the time, each of the 21 countries within Dell EMEA was run as a separate organization, with its own general managers, finance directors, and finance processes.
Moving to shared services wasn't an easy task, recalls Alan Cunningham, Finance Director for EMEA Financial Services. "Dell EMEA's management started by centralizing cash collections and giving functional ownership over that process to me and my team. Although there was some resistance at first, once country finance directors saw the dramatic improvements in DSO levels, the level of opposition fell away and there was good support for the initiative."
Bolstered by that success, Cunningham began to evaluate lower cost sites beyond continental Europe to drive further efficiencies. His move to centralize cash collections in one location led to a reduction in 90-day DSO rates by 60 percent — a huge improvement that allows Dell to be extremely precise when it comes to predictability around cash forecasting. The close and consolidation process was centralized to streamline management and regulatory reporting. Now, the entire close process takes just three days, a world-class benchmark.
"Now our European finance managers realize they can leave the back office liquidity to me, and focus on the commercial front office activity that is going to drive revenue for Dell in Europe and around the world," adds Cunningham. Cunningham is especially excited about the benefits Dell EMEA is beginning to reap with its deployment of Oracle iReceivables 11i10, which provides customers with the ability to manage their own accounts online. "Using iReceivables will allow all of our customers to pull their own invoices, print them out, and pay them online," he notes. With over $4 billion in home and small business sales each year, Dell EMEA will achieve huge savings using that self-service functionality, not to mention the satisfaction customers will receive by managing their own invoices.
Location is Everything
Decisions about where to locate Dell's global production or support facilities must support the company's direct sales model, and are rigorously evaluated based on criteria such as labor costs, transportation and information infrastructure, market access, proximity to customers, and government incentives. Decisions about where to locate Dell's shared services centers are subject to similar evaluations, from cost and language considerations to performance benchmarks on invoicing, collections, margin management, and growth objectives.
Since its early success with cash collections, Dell EMEA has moved aggressively to centralize most of its finance processes to hubs in India, Asia, and Europe. Today, a significant portion of Dell's global transactional activities are handled in these locations. "We have created centers of excellence in optimum locations to manage payables, cash applications, collections, and financial reporting and analysis ," explains Farah. "We located payables in Malaysia because most of our production is in Malaysia and we have few suppliers, so it makes sense." India handles many of the back and mid-office functions because its English-speaking workers are language neutral, while Bratislava and Casablanca handle credit and collections and customer-facing activities for German and French-speaking customers.
Farah also has high hopes for consolidation of more front office activities. "More and more of our high value services are moving to Bratislava. All my reporting is done there, as well as more sophisticated activities such as international financial planning and pricing," Farah notes. As Bratislava assumes more front office responsibilities, Dell's business units are freed up to focus on more customer-facing activities that drive real value for the company.
Why Oracle?
Now that Dell is highly centralized in low-cost hubs like Bratislava, Casablanca, and India, the company is moving aggressively to implement additional modules of Oracle Financials 11i10 to further extend the benefits it achieved from consolidation.
"When we first started down the road toward shared services, we decided to create centers of excellence, then standardize tools and processes with Oracle 11i10," explains EMEA's Cunningham. "We knew we could deliver world-class service by standardizing on Oracle once we had more people concentrated in fewer locations."
Using global and country scorecards with information taken from Oracle, Cunningham and his team monitor and measure the progress of each shared service hub, looking for performance variations across low-cost sites. Standardizing on Oracle will eliminate many of the systems-related performance problems, enabling Cunningham and his team to evaluate low-cost sites based solely on employee performance and business practices.
"On the AR side, we monitor how quickly our folks apply all cash receipts," says Cunningham. "We analyze why we see different levels of performance in certain countries. Now that we've standardized on Oracle, there's no excuse for poor performance. Standardizing on Oracle not only helps us drive productivity and efficiencies in our hub sites, but also helps improve our benchmarking and standardization efforts. "
For a metrics-obsessed company like Dell, it doesn't get much better than that.
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| Advice from Dell EMEA |
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- Create functional ownership for processes selected to be centralized in efficient locations.
- Deploy and consolidate processes in low-cost, efficient environments first, shortly followed by standardized tools and processes.
- Once you've achieved "critical mass" in your shared services center, drive process effectiveness and efficiencies by standardizing on a world-class finance system such as Oracle.
- Build a great place to work for finance professionals, in order to develop and retain key people.
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Dell Inc. is a diversified information-technology supplier and partner, and sells a comprehensive portfolio of products and services directly to customers. In 2005, Dell was recognized by Fortune Magazine as America's Most Admired Company, and ranked third globally in that same category.
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