The Ferrero Strategy to Maintaining Positive Cash Flow in an Unpredictable Economy

Kay Rogers

Kay Rogers

Vice President - North America Financial Transactions
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Kay Rogers is the Financial Transactions Vice President at Ferrero North America which includes the USA, Canada and Puerto Rico. She is responsible for all of Ferrero’s A/R and Treasury related activities including Credit, Collections, Cash Application and Deduction Management.

Session Summary:

Takeaway 1:
Inefficient A/R Operations due to Massive Volume of Customers and Business Units Extending Globally
Key Points
  • With siloed systems and no define workflows, the A/R team was failing to take real-time actions
  • The lack of inter-team visibility obstructed them from making better decisions and enforcing customers’ rules falling into various risk segments
  • Cash application was all made manually in SAP. So, reaching each of them individually took a lot of time for customers who had hundreds of invoices.
Takeaway 2:
Enabled Inter-Team Collaboration and Better Visibility with HighRadius Integrated Solution
Key Points
  • The solution enabled automatic deduction coding and provided collections analysts with all the information. The inter-team collaboration due to an integrated system accelerated the entire process, enabling faster and timely deduction resolution and blocked order processing
  • The Cash Application Cloud within the solution allowed for real-time payments, enabling 85% Straight-Through Processing
  • The solution, automated correspondences, and follow-ups for collections.
  • The solution deployed different rules to put orders on hold for customers belonging to different risk segments
Takeaway 3:
Ferrero’s Strategy to Mitigate Economic Impact due to COVID-19
Key Points
  • Enabling Better Visibility For The Senior Management:
    Ferrero was able to create working capital reports and shared those monthly with the executives to collect their insights. These reports were focused on high-value and high-risk accounts, their past dues, and balances.
  • Balancing Customer Expectations With Business Objectives:Identifying the customers with genuine cash flow problems. Collection strategies were made for the customers affected due to COVID and also came up with alternatives that suit the interest of both parties.
  • Ensuring Collaboration Between A/R, A/P & Treasury Teams:
    A system within which everyone has visibility to the cash flow and collections. Ferrero achieved an average of 97% accuracy rate on our cash forecasting.
  • Enabling and Managing a Remote Workforce:The HighRadius system helped visibility to any factors that were going to cause a negative impact on the KPIs. It also helped manage existing KPIs and to aggregate information from multiple sources to make informed decisions.
  • Leveraging Automation Capabilities to Elevate the A/R Team: Deployed different rules for different strategies of customers. And can identify customers who raised their deductions to manage the wrong cash flow. Even collected a significant amount of money in invalid shortages this year.

Kay Rogers

Hi everybody. I guess this is what happens when you after lunch, everybody’s kind of tired and whatever. So glad to be here. Just to give you a little HighRadius trivia before I start. Sashi talked earlier about being 15 years old. Well, I was one of his first customers 15 years ago, Jessica and I were working together at another company. And Sashi came in and met with us and I had the need for about 1000 PODs for the likes of Walmart and Target. I gave him a spreadsheet and the next day we came in and all the PODs were there. Thus became my love story with how to HighRadius systems. Okay, so how does this move the green arrow? Got it? Okay.

So a little bit about Ferrero. We’ve been in business over 70 years, we started as a very small bakery in Alba, Italy. We came into the market here in the US in 1969 with Tic Tac mints, everybody knows them, right? And we continue to win hearts and share joy with Rocher, Nutella, Kinder and Fannie May chocolates. We also bought Nestle and we now have Butterfinger, Crunch, Baby Ruth and Raisinets in our portfolio. We’re proud to be a family-owned business. We’re a private company, we have 3000 employees in eight offices and ten plants in the U.S., the Caribbean and Canada. And instilled in every aspect of our business at every level is the entrepreneurial spirit of our founders.

So a little bit about our journey. In the beginning, we had very manual processes, inefficient, worthless workflows, our credit application and risk management was done all manually going, pulling out by me, doing financial analysis by you know, putting in Excel and calculating ratios, which basically drove our order process. So the fact that it was manual, slowed it down. Our cash application was all done manually in SAP. So you know, when you have customers who have hundreds of invoices, and you have to reach each one of them individually, it takes a lot of time. Collections, you know, basically there was no prioritization other than establishing yourself manually by dumping into Excel, a spreadsheet, trying to figure out who is a high risk that you should focus on right away, also took time. Same thing with deductions, all manual research, you had to go to your customers portals, you had to pull the backup, you had to research internally, to find out whether or not it was a valid deduction, all very time consuming or very manual. And basically, even within the whole order to cash, the A/R, it was all silo driven. So within the same department, meaning the A/R department, there wasn’t a lot of communication that was easily shared. So for example, credit was one area. Cash application was another area. Collections was another area and deduction management was another area and none of them integrated, right. So there was not a lot of collaboration or communication that went between the different areas of the company.
So what we did was we implemented HighRadius, and we broke down the silos within our own department. And later on also within all the other departments. So we have one system. We had credit collections, cash application deductions. And this was also a network that connected to the customer and our internal customers, because we all have internal customers too, right? So there was a lot of better information sharing. Each department within the A/R function had visibility into each of the modules, they could see the credit, they could see the collections, they could see the cash app to see the cash app being applied real time. So it was much smoother information sharing.

So what did we do by automating the A/R processes while cash application for example, aggregated all of the remittances from multiple sources and multiple formats. Credit worthiness was established by algorithms that were set up within the system, automatic retrieval of the D&B reports. The categorization of customers into high medium enrolled low risk, okay? Collections, we established priorities that the system automatically set up so that the collector could come in in the morning, open up their work list, and it would tell them what they needed to work on that day. And same thing with deductions, deductions were already in the system, the backup was there, because the system goes out and pulls the backup from the customers portals, the trade promotions that come into the system, there’s an order match that happens to match the deduction to the trade, so your processing much quicker.

What did we achieve?

We have an 85% hit rate on our cash application. So 85% of our cash is automatically applied. 70% of our credit reviews, annual reviews are automatically generated. So once it comes in from SAP that it’s there, their annual reviews do, the system automatically generates their review, we increased our collective productivity by 70%. And it took, we reduced the days to resolve our deductions by 60%. So we had some outstanding results by automating and integrating the systems. Also, it changed the ideal world versus the real world. In calculations, I mean, we went from repetitive work being 55%, meaning going out and pulling information from portals to 5%. So that our people had time to do more valued tasks, such as, you know, reviewing, analyzing data, different decisions now a 55% because of all the information in the system so the system can actually make decisions quickly, instead of somebody having to review manually all the information. Okay, poll question. Does everyone have their? Okay, so

What is one area in your A/R that was the most impacted by the changing business dynamics?
Was it credit and collection activities?
Was it deduction/dispute claims validation?
Was it cash posting?
Or was it none of the above?

Audience Member:

All right, so far. So far, about 1/3rd project is a little less than a third of productions to be played out.
Oh, my God, everybody’s got even a little bit now a little bit less than that cash posting, and none of the above is barely registering. So I can’t do percentages in my head.

Kay Rogers

That makes sense, I think. Okay, so do we move on, I guess. Oh. So how did we mitigate the volatile economic climate? What challenges do we have? What strategies do we use? Well, first of all, we had enabled better visibility for The Senior Management. We created working capital reports, my friend, Bob did a great job with that. And we shared the monthly with our executives to collect and show them their insights. The reports focused on our high volume, high risk accounts, their past dues and their balances. So everybody within the organization had visibility to a major customer base and our risks involved.

We balanced our customer expectations with our business objectives. So basically, we identified customers who had genuine cash flow problems against those who use the crisis as an excuse to delay payment. And we all know that did exist, right? We studied the impact of COVID on different customer segments to create targeted collection strategies. So for example, we are in the food business, our food service customers would be severely impacted by COVID. So we set up different collection strategies to maybe be more aggressive with them. So being able to automate that whole process, just like I said earlier, with the collection, workless, and what was going to be our collectors you know, the main focus for that day was establishing those priorities based upon customers. And we also worked a lot with internal and the customers to come up with alternative solutions to help manage jointly through the crisis. You know, some people maybe really did need extended terms, you know. So it was the system that helped us to monitor who needed what and what we could do. And where we needed to focus.

We had a lot of collaboration between the A/R, A/P and Treasury teams, which are all areas of my responsibility. So the fact that we had a system where everybody could see had visibility, especially to the cash portion of it, the collections, we’ve been able to achieve, on average, a 97% accuracy rate on our cash forecasting, which I really don’t think you can get better than that. And that’s been pretty ongoing for several months, right.

We also, it helped us with the whole remote working environment, we had visibility into who was doing what, who was assigned what, where we could have gaps, we could go out into the system real time, we could see the cash applied by 12 noon every day. We could see if a collector had maybe more work than they could manage and another collector had less so we could realign our resources. It also gave us visibility to any factors that were going to cause a negative impact on our KPIs. And just to give a little, one of the things that really helped is so right before COVID we embarked on a project to outsource some of our A/R, and we had our outsource team in our facility in Parsippany training. They’re from an island off the coast of South Africa called Mauritius. So they were in training. And because they came, it happened during COVID. They stayed longer. So they were with us for eight months. Well, when they were finally able to go back, they were part of the team. And they had the system HighRadius is what they were using in Mauritius. So it made the whole transition as far as to an outsource model. seamless. It went beautifully. And it really really helped us. You know, I know I’ve heard a lot of horror stories about outsourcing, this was not one, that was very successful, and the system helped it.

We leverage the automated capabilities to elevate the A/R team, we have automated correspondence. We deploy different rules for different strategies of customers. So a high risk customer, if they have an invoice, one day passes through the road is going to go on hold. If it’s a low risk customer, their order will flow through the system. We applied payments real time no lag, like I said earlier, 12 noon every day everything’s applied. And we are able to identify customers who raised their deductions to manage the wrong cash flow. We collected a significant amount of money in invalid shortages this year.

Where are we going from here? We are going to monitor our metrics. We just finished our fiscal year end for August we’re going to look to see if we are ahead of industry standards on all of our KPIs. We are going to raise the bar this year. Based upon the performance that we had last year, we’re gonna focus on improving the rate of validating deductions. We’re looking at some additional automation activities to take place for our compliance related deductions and integration to our logistics system, which is BluJay. We are going to be integrating Keebler which is another acquisition we made with our Nestle acquisition, we can integrate we completed without any negative impact to any of our KPIs. And we plan to do the same thing with keebler this year, and we’re going to continue to automate processes wherever needed.

So any questions, anybody?

Audience Member:

We should get a recording of the Jeopardy clock. And there’s a good whistle. Wait, let’s.

Questioner 1 :

How much time it took to really have full maturity of the project because I’m assuming that If you’re coming from very paper to very automated, there is a learning curve, there is also a significant change in processes, right? So you don’t necessarily get here from paper like, how long did it take you to get to the industry? You know, right? Top 10%?

Kay Rogers

Well, it’s with it, the project took several years. I mean, we started out with a cash application being our first implementation, what, Michel, five years ago. And then, about a year or so later, we went on to collections. And then when I came in, which was 2016, we put in deductions. And then we put in credit about a year later, and then we also put in what’s called document indexing. So it was several years, it was a lot of refining, it was a lot of enhancements. I would say over the course of the past two to three years, our results have been very good. And as we go along, we find any gaps, and we make improvements.

Questioner 1 :

So in fact, do you recommend taking a piecemeal approach?

Oh, yes.

So not the whole suite of

Kay Rogers

Not all at once now.

Okay.

I think you are better off doing one at a time. Because otherwise, it’s going to be too overwhelming. And you really can’t see where, you know, one system is going to integrate with another. So you’d better off to get one system in place, and then the next and that, that’s my experience, and that’s been the most successful way to go about it.

Questioner 2:

On your outsource on your outsourcing team, bringing them in here to the states for training.

What is that? I’m sorry.

When you brought your outsourcing team to the US for training, what percentage would you say they learned the system to collect effectively as opposed to learning the business culture in the United States to collect effectively?

Kay Rogers

I think the system was the most important part because the system is an automated process. I mean, you widgets a widget, it doesn’t matter if you’re collecting invoices for you know, TVs, or you’re collecting invoices for chocolate, so I don’t really know that it’s the culture that has that much of an impact.
Okay, yeah.

Questioner 3:

Okay. Yeah, I just have a question about your integrations, you mentioned that you didn’t have any impact on your KPIs, your integrations, I’m assuming those integrations came, they came with their own people, their own systems. And so you had to integrate all of that, how long did that take to get everybody on and integrated into the HighRadius in your existing pay?

Kay Rogers

So we kept our existing team, we, our existing team stayed in place.

Okay.

Okay. And basically, part of the reason for the outsource was to help manage the additional volumes that were coming on board as a result of the next Nestle integration.

Okay.

Okay. So what we did is we broke the functionality of the job functions up into different areas. For example, on our collection side, our high risk and critical customers are still managed in the U.S. Our low and medium risk customers are handled by the team in Mauritius. With the deductions piece, the team in Mauritius does what I call staging, so they do the whole preliminary pre process, meaning validating the backup is there for the deduction, making sure it’s accurate and making sure it’s right, and then assigning it to the proper person who has to handle it next, next.

Thank you.

Okay.

Questioner 4:

I actually have a three part question. If I could, I want to follow up on the percentage of increase on cash application. So understood, clearly, you did a compartmentalization by different functions. So just looking at cash alone to get to the 85%. From the time of implementation to that 85% benchmark you just gave us. What was the time period that took place?

Kay Rogers

So the cash app was the first module that we put in, and I would say, up until we did an enhancement project about two and a half years ago. Up until then, it was maybe 70%. And we did an enhancement project, we refined our rules a lot better for our customers, and that’s how we were able to get to 85%. Now it also depends on the business unit. So for example, we also have Puerto Rico, Puerto Rico has smaller customers. It’s not, you know, a lot. So the hit rate is less. But for the U.S., and Canada it was an average of 85%.

Questioner 4(follow up) :

Okay. And in regards to training, training materials, the quality of training, what would you do differently going through that whole experience of working in partnership with HighRadius? What would you advise HighRadius differently about their training materials, or how they implemented that with y’all ?

Kay Rogers

I think they could probably use a little bit more of the historical information from other customers to help their new customers set up this system. So you know, a new customer, you may not know exactly what you need, or how things need to be set up. And I think they could probably go back on their experience with prior customers to help them refine their training a little bit closer.

Questioner 4(follow up) :

Okay. And then the last but not least, is on implementation. Lessons learned from implementation, what would you tell me as a potential new user of HighRadius that I would watch out for working with HighRadius on implementation?

Kay Rogers

Well, I’ll tell you, one of the biggest challenges we have with our DMS system, is that the system was implemented using people from our IT area, rather than people in the business, who do the actual work. It’s very important to have people who do the actual work involved in the implementation. Very important.

Questioner 6:

Okay, another question over here.

Hi.

Thanks. Hi. So I’m on collections. So we’re starting to implement collections. And my team’s very nervous about the automated Dunning letters and the reaction that customers are going to have. Did you have any kind of talk about or experience with the automated letters? And was there any negative reaction or you know how to customer what, you know, what kind of customer impact did you have with the Dunning letters?

Kay Rogers

So I mean, we were going to increase volume and not increase headcount. So I mean, it made it their job a lot easier to have automated Dunning letters, right? Um, also, we both know, we all know in today’s world, there’s not a lot of phone calls that take place within the CPG space, right? So it needs to be an automated activity which you can’t call right? So it made their jobs easier and better. I mean, that’s what we miss Michelle, we didn’t really have a lot of pushback from our team, right? No. Good.

Thanks, everybody. Thanks for being here.

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