Mengniu engaged IBM® Global Business Services® to help design and build a Financial Shared Service Center based on a suite of SAP solutions.
The Financial Shared Service Center delivers accounting and transaction processing services to the entire business from a single location, guaranteeing timely and consistent data.
Meanwhile, process automation and digitization dramatically boost efficiency, ensuring the finance department can maintain a steady headcount even as the business grows.
Centralize, digitize, automate
To realize its 2020 strategy, Mengniu set its sights on developing a model for its finance department that could support the business as it grew.
“We looked at how other leading corporations were addressing similar issues,” says Mei Xiao. “And we saw that centralizing the responsibilities for a specific operational task across an entire business by building a shared service center was an effective solution. By building a Financial Shared Service Center, we would be able to consolidate our accounting and transaction processing staff into one location to serve the entirety of Mengniu, and centralize the processing in a professional way—resulting in economies of scale and unlocking cost-effectiveness. This would also enable us to standardize processes and eliminate inconsistencies, and by centralizing the management of data and expertise, we would be able to improve the quality of finance data.”
Mengniu decided to build the IT platform for its Financial Shared Service Center (FSSC) using a suite of industry-leading SAP applications, and engaged IBM Global Business Services to plan, design and implement the solution.
Mei Xiao explains: “We have a longstanding strategic partnership with SAP; they were the natural choice when it came to developing our shared center.
“We chose IBM because of their unmatched global consulting experience. IBM had already completed many successful shared center projects with other organizations, so we were keen to take advantage of their accumulated knowledge and expertise to successfully implement Mengniu’s Finance Shared Service Centre.
“IBM took us to visit several companies who were already running shared centers, showing us first-hand how successful previous implementations had been, and giving us a good idea of the kind of results we could get.
“The consolidation of accounting and transaction functions was only one aspect of the project,” adds Mei Xiao. “IBM and SAP also helped Mengniu take the first steps in its digital transformation journey.”
Li Na Chai, Head of Mengniu’s Financial Shared Service Center Services Support Department, says: “By building up the Finance Shared Service Centre, we have achieved standardization of processes, automation of the document approval process, and digitalization of decision-making support—all contributing to the strategic transformation of Mengniu’s financial operations and supporting the Group’s global strategic expansion.”
IBM was able to help Mengniu completely reengineer its end-to-end accounting processes, leveraging the new SAP applications to introduce unprecedented levels of automation. So far, IBM has helped Mengniu make 34 workflow changes. Processes that were previously paper-based and unsystematic, for example managing accounting documents, have now been entirely digitized, and numerous manual steps have been automated.
The shared finance center officially started its operation just seven months after the project launched, and the accounting and transaction processing for 57 corporate units has been incorporated into the Finance Shared Service Center after one year’s operation.
In the future, finance sharing will be extended to subordinate legal units across the whole group.
“The implementation was even more successful than we anticipated,” comments Li Na Chai. “Initially, we planned to bring all kinds of accounting and transactional processes into the Finance Shared Centre step-by-step, prioritizing procurement payment, expense imbursement, and file management, with the rest of the business accounting cycle and transactional processes following later.
“With IBM’s help, we were able to bring all the accounting and transactional process into the Finance Shared Centre and build up a full service cycle and a mature operation model in one leap—something that very few enterprises have managed.”
Benefits in detail
- Boosts financial operations efficiency by 25 percent, including 36 percent improved account rendering efficiency and 70 percent improved payment processing efficiency
- Monthly closing work is completed one working day in advance
- Helps ensure consistent data for financial reporting
- Facilitates sharing of best practices for financial processes
- Reduces the labor costs of 51 employees across the company and eliminates the need to recruit at least 50 new accounting staff
- Enhances speed and quality of financial data analysis, delivering insights that help inform business decisions
With the Finance Shared Service Center in place, Mengniu can pursue its ambitious growth strategy with confidence.
Mei Xiao says: “Now that all our accounting and transactional processing, and our finance data, is centralized in one place, we can ensure everyone is following the same standardized approach and using the same master data.
“Thanks to this, we’ve completely eliminated data inconsistency and it’s so much easier to issue reports now. As an added bonus, with all our finance expertise concentrated in the Finance Shared Service Centre, there has been excellent knowledge sharing, and we have been able to simultaneously apply best practices to all subordinate units that use the financial shared service center.”
These best practices, which are based on SAP solutions, have enabled extensive automation and digitization and resulted in vast efficiency improvements.
“Payment processing efficiency has risen by 70 percent,” says Li Na Chai. “And expense reimbursement is 36 percent faster. Overall, our finance processes are 25 percent more efficient—the efficiency of our monthly closing processes has been improved by one working day. What’s more, our processes are so well optimized that even as the business grows, our finance team will easily be able to handle the increased workload while maintaining the same headcount.
“Before we embarked on this project, we were expecting to have to hire at least another 50 people to keep up with the demand for accounting staff because of business growth.
“Thanks to the completion of the Finance Shared Service Centre, we’ve not only been able to avoid employing more people, we’ve actually been able to save 51 staff’s labor cost for the entire group, and our business and finance personnel can devote more energy to focusing on high-value analytics. The transformation is providing an outstanding return on our investment in the shared service center.”
With more finance people concentrating on analyzing data based on the SAP solutions, and with improved data analysis granularity, Mengniu has a far deeper understanding of its operational performance and has improved its business insight. It uses that insight to inform its marketing strategy to deliver effective communications to as many consumers as possible. Even better, finance staff can make this information available to the company’s business units more quickly than ever, enabling Mengniu to react to opportunities as soon as they arise.
Looking to the future, Mengniu has development plans for its Finance Shared Service Centre.
Mei Xiao explains: “Our future direction is to offer accounting and transaction processing services to our whole group, as well as external suppliers and distributors, and turn the Finance Shared Service Centre into a true profit center. We’re also targeting an additional 20 percent efficiency improvement annually for the next three years.”
The shared service center model is proving so effective for finance that Mengniu intends to build additional shared centers for other operational functions. “We’ve approached IBM about building an HR shared service center,” comments Mei Xiao. “And in the future Mengniu will also extend the shared model to IT and Procurement functions.”
Mei Xiao concludes: “With the help of IBM and SAP we’ve been able to transform our finance functions, solved the bottleneck issue, and transferred more finance staff from accounting and transactional processes to concentrate on better supporting our company’s strategic development. In the future, the value of the finance shared center is set to increase.”