Case Studies
WESCO Case Study
Situation
Several years ago, WESCO International launched a corporate-wide best practice initiative to incorporate “LEAN Methodology”, the concept of more value with less work, into a number of their core operational groups. One key area identified as a candidate for best practice efficiency was the Cash Application department.
Goal
As a first step toward “LEAN” best practices, the Cash Application organization implemented online image access to lockbox payment information. This change delivered measurable value and provided incremental productivity efficiency, but the process did not provide adequate improvement of the automated cash application program. The consequence was that the customer experience, both internal and external, and employee productivity did not achieve expectations. WESCO believed that further automation would allow them to achieve
their goal.
Solution
OPEN SCAN® Corporate Receivables Process Management Software Solution
About WESCO
WESCO International, Inc. (NYSE: WCC), a publicly traded Fortune 500 company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating (“MRO”) and original equipment manufacturers (“OEM”) products, construction materials, and advanced supply chain management and logistics services. 2010 annual sales were approximately $5.1 billion. The Company employs over 6,800 people, maintains relationships with more than 17,000 suppliers, and serves over 100,000 customers worldwide. Customers include industrial and commercial businesses, contractors, governmental agencies, institutions, telecommunications providers, and utilities. WESCO operates seven fully automated distribution centers and over 400 full-service branches in North America and international markets, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.
Background
Prior to the introduction of “LEAN” within the cash application department, the process was very manual requiring 38 FTEs. After the bank lockbox processing site deposited the incoming checks, the cancelled checks and remittance documents were shipped overnight to headquarters from various nationwide facilities. Due to the latency in the arrival of the payment documents, the update to the account was up to two days behind, not to mention the shipping costs of large boxes of documentation every day. When the mail arrived, staff would manually post and apply the payment to the customer accounts. As the first step toward efficiency, WESCO had their bank lockbox key the data from the customer remittance advice and image the checks and remittance documents, making the images available online for exception reconciliation. “We saw a 30% increase in efficiency simply from moving from paper to image processing,” said Director of Business and Process Improvement, Kristi Minnick. However, the cash application group was still faced with challenges related to achieving a “LEAN” approach to cash application. This move to lockbox keying introduced a significant new operational cost: data entry fees. In addition, data delivered from the lockbox was often insufficient to post payments at the invoice level. This presented obstacles related to the department’s objective to post cash the same day as receipt. Further downstream, this incomplete information impacted customer satisfaction, additional sales branch involvement, and collections activity issues.
The Solution
In WESCO’s case, the solution integrated with their lockbox deposit process and provided a simplified approach to data extraction that significantly reduced the bank data entry fees. Further, the software was able to increase posting accuracy by intelligently matching incoming customer payment data with existing open A/R data at the invoice level. This feature not only insured auto post rate improvement, but also the posting accuracy.
The Result
When WESCO learned more about OPEN SCAN’s capabilities, their Receivables Process Management Software seemed like the logical next step. WESCO vetted competitors and found that other solutions weren’t built specifically for Accounts Receivable processing. They could be customized to do some of what OPEN SCAN could do, but at a large professional services cost. Other factors that helped WESCO decide to choose OPEN SCAN were: strong references, an intuitive user interface, a solid Return on Invested Capital (ROIC), and domain expertise. “OPEN SCAN knew A/R, we didn’t have to explain it to them,” said Minnick.
A primary driver for the decision was cost savings but after using the system for several months, there was a big “Aha! moment.” OPEN SCAN’s data validation technology increased the auto post rate by 17% without any user intervention. The increased data accuracy enhanced dispute conversations with customers and improved individual employee productivity. In fact, since becoming an OPEN SCAN client WESCO added four operating companies without adding any additional cash application staff.
Initially, WESCO hesitated taking the keying fees away from their bank. In the end, the bank endorsed the change from a process efficiency standpoint. “Don’t hesitate to have this conversation with your banker,” said Minnick.
With OPEN SCAN software in place, WESCO realized the following benefits:
- 17% auto post hit rate increase
- The reduction in bank keying fees was significant, generating an ROIC for the entire OPEN SCAN solution implementation that was less than eight (8) months.
- Because of the improvements in efficiency and effectiveness, cash application staffing was reduced by 50% through attrition.
- Acquisition of four new operating companies without adding A/R head count
- Customer service improvement
- Faster, more accurate collections data
“The implementation of LEAN Methodologies has brought a wide range of efficiencies to the company. OPEN SCAN’s software enabled us to achieve best practice capabilities in the Accounts Receivables department as well as improving interactions with our customers and the quality of our employees’ day-to-day activities,” said Minnick.
About OPEN SCAN
For more than a decade, Open Scan Technologies Inc. has revolutionized enterprise financial workflows with industry-defining product innovations in payment capture, remittance processing, cash application, payables, and deduction management. Corporations, financial institutions, and government agencies realize unrivaled performance and efficiency as well as measurable savings and increased accuracy of data.