How Danone Reduced Overall Costs by 75% While Delivering an Exceptional Customer Experience – A Shared Services Success Story
What you’ll learn
How Danone:
- Achieved a 75% Reduction in Overall Costs
- Accomplished 100% Touchless Cash Posting
- Recovered $5.9M in the 5 months following the creation of its Shared Service Center in Canada
About Danone
Danone is a global consumer goods provider, founded in Barcelona and now headquartered in Paris. This industry-leading multinational corporation has a customer base of more than 1000+ food distributors, consisting of both small mom-and-pop stores and major retailers, like Walmart and Amazon. With similar global businesses moving towards a shared services approach for their operations, Danone was already a step ahead – preemptively identifying the biggest obstacles it would face in the transformation of its shared services and coming up with a plan on how to best manage these challenges.Setting Up a Shared Service Center (SSC): Understanding the Challenges
Establishing an SSC requires a lot of thought and meticulous planning for several variables, be it infrastructure, budget, policies, etc. While the primary motivation for establishing an SSC is to reduce costs, organizations often end up inadvertently increasing their overall expenses, thanks to inefficiencies, poor planning, and other unexpected challenges.
What are some of the main challenges that organizations face while adopting a shared services approach?
Multiple Processes and File Formats
For businesses like Danone, with operations in multiple countries, an SSC often uses different service providers in each country for different functions, such as scanning, banks, e-invoicing portals, ERP systems, etc., because most providers don’t operate globally. This lack of standardization across multiple lines of business (LOBs) results in staff following different processes. This happens with supplier payments or invoicing, for example, which require different formats depending on the ERP system or the country in question. Businesses need an agile process in place that integrates with their ERP systems across multiple geographies.
Inability to Track KPIs for Business
With siloed systems in place across multiple LOBs and different geographies, there is often a lack of visibility, which is necessary for global control and governance. Businesses need a single source of truth for tracking KPIs to identify focus areas for improvement.
Poor Customer Experience
With most global businesses operating under a typical shared services model, prioritizing cost reduction over customer satisfaction has only led to diminished customer retention. The inability of A/R teams to partner across their organization and interact or work with each other in real time results in a poor customer experience over the long run.
Danone Shared Services - Before HighRadius
Danone’s shared services enterprise faced several challenges related to redundancy. Before automation, almost 100% of Cash, Collections, Credit, and Deductions work was performed manually. That meant the analysts had to go through the entire cash application process with precision to handle specific errors.
1. Increased Process Complexity
- Payment formats were mainly in the form of electronic fund transfer (EFT), automated clearing house (ACH), and Wire Transfer, meaning a significant amount of dollars came in electronically. Some payments, however, were also accepted through checks, which contributed to almost 5% of the total dollar amount, leaving EFTs as nearly 95% of the total share.
- Danone had multiple lockboxes spanning across various geographies. While electronic payments were fast to receive, processing them was an entirely different story – as there were more than 25 portals in use for collecting remittances. From the portal itself, the cash analyst had to capture the valuable information of remittances, such as decoupled payments. Sometimes the remittance came in separately through emails. In some cases, it came in through electronic data interchange (EDI) files and regular bank file formats.
- Remittance aggregation and payment linkage, along with code deduction and manual input into the SAP system, led to several shortcomings.
- This entire process consumed almost 128 hours per week for processing electronic payments and 140 hours for checks.
- Delay in cash posting with dispute identification and resolution caused customer dissatisfaction.
- With the A/R team spending a majority of their time in cash processing, dispute identification, and resolution, the collections process at Danone took a hit. Danone had no automation in place for its collections. As a result, the analysts dealt with mundane, repetitive tasks, including customer segregation and creating promises-to-pay (P2Ps), rather than focusing on at-risk accounts that required dunning.
2. Working Capital Bottlenecks like Increased Days Deductions Outstanding (DDO)
At Danone, 85% of the overall disputes resulted from trade promotion deductions and required 100% manual intervention. With 90% of the deductions found to be valid, a substantial manual effort was needed to identify and process the 10% of deductions found to be invalid. Delay in deductions resolution due to the lack of automation also increased the DDO to more than 45 days.
Danone’s Need for Automation
Danone was looking for a technology partner with an intelligent solution that was easily deployable and customizable with the flexibility to integrate with their existing systems.
The objective behind automation was:
- To increase accuracy and efficiency while improving inspection of A/R operations
- To improve the transient speed at which A/R is processed and, in turn, improve cash handling
- To counter any costs incurred during manual processing or low value-added activities
Generating a 75% Increase in Productivity with HighRadius
Danone partnered with HighRadius to automate their end-to-end A/R setup, integrating the siloed systems they had in place. With the first phase of implementation in North America resulting in a noticeable reduction in overall costs as well as improved revenue and working capital impact, Danone expanded its scope to its six SSCs in Europe.
The key features constituted:
- Multi-ERP and Bank File Integration: The solution integrates their multiple ERPs and all bank file formats.
- Email Parsing: The solution automatically parses emails and their attachments to collect and process remittance information.
- Optical Character Recognition (OCR): The solution has a distinct AI-enabled OCR feature, which automatically extracts remittance information from paper images.
- Web Aggregation Capability: The solution also has a web-based technology that can log in to website portals to download and obtain remittance information.
- Automatic EDI Parsing: The solution can parse all formats of EDI files, including EDI 823, EDI 820, 812, bank BAI, and BAI2 formats.
- Real-time Payments: The Cash Application Cloud within the solution allowed for real-time payments with no lag, therefore increasing the cash posting rate for Danone by 95% within 90 days of implementation.
- Code Deduction Management (Deductions Cloud): The solution identifies, matches, and applies code deductions with specific reason codes. The cloud solution also seamlessly integrated with their existing ERP solutions to trigger invalid deduction workflows for collectors, helping them recover more than $6 million.
Danone Shared Services - After HighRadius Solution Implementation
The pain of manual and error-prone cash application that negatively affected downstream processes, like deductions and collections, was no longer experienced.
With HighRadius’ cloud solutions, Danone achieved the following results:
- 75% Reduction in Overall Costs
- 25% Reduction in Days Deductions Outstanding (DDO)
- 100% Touchless Cash Posting
- $5.9M Recovered Post SSC Creation in Canada within 5 months
- Smooth ERP Integration with Existing Systems
There's no time like the present
Get a Demo of Cash Application Cloud for Your Business
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HighRadius Cash Application Software enables the end-to-end automation of the cash application process that covers major benefits such as AI-enabled data capture for remittances, auto-linking of payments with open invoices, cost-cutting on lockbox fees and easy compatibility with any system due to its ERP-agnostic Saas infrastructure. Apart from the major benefits that it has, there are some key features which can not be missed out, some of them are Email Remittance capture, Discounts and Deductions Handling, Check Remittance Capture, Web Remittance Capture, Invoice Matching, and RDC & Mobile Payments.
