Centralisation: The Key to Managing Global Growth

California-based Ingram Micro might not be among the most recognised corporate names, but the technology and supply chain solutions specialist has more than 200,000 customers in 170 countries worldwide, annual revenues of US$42bn and distributes the products of over 1,700 suppliers.

Erik Smolders, its vice president and treasurer, joined Ingram Micro as its European treasurer in 1995. He told EuroFinance delegates that Ingram Micro’s basic treasury organisation remained fairly standard until its US$650m acquisition of mobile services provider BrightPoint three years ago. A technology distributor only until that point, the deal saw the group add mobile phones to its portfolio.

In North America, Ingram Micro’s treasury operations were mainly managed from the corporate headquarters, with Canada retaining some autonomy. In Europe, in-house banks (IHBs) centralised regional funding, hedging and certain high-value payments. In both Asia and Latin America, all treasury activities were executed locally with oversight from regional offices.

As Ingram Micro expanded, its treasury structure became more complicated and the BrightPoint acquisition accelerated the process, with a sharp increase in the group’s number of legal entities. Several smaller purchases further added to the number of bank accounts to be managed. The focus of the treasury team shifted to support the newly acquired businesses.

“Our chief executive (CEO) decided that the group wasn’t nimble enough anymore, with new structures being built on top of existing structures,” said Smolders.

A Solution

Early this year, Ingram Micro launched the organisational effectiveness initiative to regain its treasury department flexibility. The initiative had three aims:

  • Align and leverage the group’s infrastructure
  • Delayer and simplify
  • Maintain investment in the group’s expertise and capabilities.

As a result, the group’s reporting lines shifted, with treasury becoming a single global structure. The group’s regional head office in Brussels, Belgium was closed. The initiative focused on centralising four activities: cash management, payments on behalf of (POBO), hedging and bank account signatories. “In large parts of the organisation, the segregation of duties was proving a problem,” explained Smolders.

The resulting global cash management structure has established a cross-border, cross-currency cash pool, providing liquidity for local entities short of cash while enabling cash-rich entities to support the pool with their surpluses.

“The global cash manager provides daily liquidity to the pool, using whatever debt facilities are at his disposal,” said Smolders. “This means choosing the cheapest and most flexible forms of funding first, irrespective of geography. The use of [SWIFT messaging system] MT940 allows for the monitoring of cash build-up in our operational bank accounts.”

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