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Masco Builder Cabinet Group

Masco Builder Cabinet Group. December 11, 2006. Kickoff – Jay Potter Accounting – Doug Bennett Customer Financial Services – Jim Ramsey Cost Management – David Lahie Financial Planning & Analysis – Bob Turco Compliance – Mike McCullough. Agenda.

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Masco Builder Cabinet Group

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  1. Masco Builder Cabinet Group December 11, 2006

  2. Kickoff – Jay Potter Accounting – Doug Bennett Customer Financial Services – Jim Ramsey Cost Management – David Lahie Financial Planning & Analysis – Bob Turco Compliance – Mike McCullough Agenda

  3. Finance will be an integral part of the decision making processes and will be viewed as a value added contributor to its customers with a passionate focus on teamwork, proactive decision support, continuous improvement and having a positive impact on our company. From To Drive business results and financial Measure and Report thinking Effective control processes Control processes that eliminate waste Financial analysis which provides Financial information & justification insight into opportunities, options, risk and uncertainty Accurate and actionable information, Accurate data available upon request accessible on demand Talented, trained and highly motivated Fully engaged team of leaders team Technology challenged Technology enabled Strategic Pillars People Processes Performance - Cohesive team - Continuous improvement - Insightful thinking - Individual and team leadership - Scalable, streamlined, world class processes - Actionable information - Continuous learning and development - Transparent financial reporting and insight - Proactive analytics - Business team partnership - Zero control deficiencies Finance Vision & Strategy

  4. Finance Title Standardization Sr. Financial Analyst Sr. Pricing Analyst Financial Analyst Pricing Analyst Accountant- Cost Accountant- G/L Accountant- Sr. Accounting Clerk Accounting Specialist Plant Controller Analyst Sr. Analyst Accountant Clerk Specialist Regional Controller Plant Controller Simplified position titles to enable effective career pathing

  5. Simplifies record keeping process Conveys the message that employees have peers in other areas of the finance & accounting disciplines who are the same level Creates a framework for Career Mapping Allows employees to manage their own careers Finance Title Standardization: Benefits

  6. Degreed Professional: Career Path Sr. Acct. Regional Controller Acct. (Entry) Acct. Mgr Director Sr. Analyst Plant Controller Analyst (Entry) Supervisor Multiple Alternatives for Career Growth and Development

  7. Career Mapping: Customer Care, Builder Sales, Customer Financial Services Minimum Time for Each Position 6 Months Each 12 Months Each 2 Years 5 Years CCC Builder BSC 7 Years Team Leader Manager Director CCC Dist. CFS Sales Associate’s (Non-mgr Track) Master’s Bachelor’s (Mgmt Track) Minimum Educational Requirements

  8. Accounting Team December 11, 2006

  9. Masco Builder Cabinet Group - Director of Accounting Joined the BCG in May of 2004 Heavily involved in integration activities and responsible for Accounting functions Building world-class finance organization with a great group of Finance Leaders Elbit Systems of America (EFW) - VP of Finance and Contracts Developed Finance organization through time of dramatic growth Led forensic effort to uncover years of significant financial misstatement Engaged in implementation of BaaN ERP Slim-Fast - Master Planner / Materials Manager Greenfield manufacturing environment Led project to redeploy business systems (BPCS) Led team to design standardized product roll-out strategy / project plans The Dannon Company – Site Controller Major turn-around project Key drivers of success were Pay for Performance and training and development (funded through state grants) TCBY / Americana Foods – Cost and Materials Accounting Supervisor Developed within the company during a major growth cycle followed by sharp decline – increased focus on contract manufacturing Financial support for retail product line introduction Education MBA – LeTourneau University Bachelors of Science in Management – LeTourneau University Introduction – Doug Bennett

  10. Organization Chart

  11. Organization Profile

  12. Organization Work Profile

  13. Accounts Payable Consolidation Strategy

  14. Current Situation Mixed organizational model Merillat – decentralized processing with small corporate group doing centralized payments and scanning Quality – central AP group in Duncanville processing all Quality AP, payments, and scanning Implemented JDE AP across BCG Results of Hackett Benchmark BCG Cash disbursements processes are high cost compared to world class Processes are highly manual Opportunity of $720K annually between performance and world class $1.2B * (.11%-.05%) = $720K Execute an Accounts Payable Consolidation Strategy

  15. Hackett Best Practices for Procure to Pay Implemented / In process Purchasing cards with online management and approval, interface to GL, and centralized receipts file Use low cost electronic methods to settle payments Automate recurring payments Centrally maintain enterprise wide supplier master Imaging technology for document storage and retrieval AP/AR netting processes for intra-company activity (opportunities to expand) Planned Clear and simple policies governing accounts payable Automate electronic workflow of invoices for approval and managing discrepancies Utilize OCR /ICR technology to capture paper invoice data and transmit to AP application Payables processing is largely centralized or in shared services Execute an Accounts Payable Consolidation Strategy

  16. Quality Plants AP Merillat Merillat Plants Merillat Branches Quality Branches AP - Quality Execute an Accounts Payable Consolidation Strategy Current State Future State BCG Plants AP BCG BCG Branches Legend From vendor Manual Approval Internal move Electronic Approval Payments Vendor invoice Match PO / Invoice

  17. Complete functional and technical specs for automation Select software partner and build solutions Consolidate all AP processing Implement automation solutions Q4 2006 Q1 2007 Q2 2007 Q3 2007 Execute an Accounts Payable Consolidation Strategy • Future State Process Description • Invoices received from vendors and scanned into Optical Character Recognition (OCR) Tool • If match can occur automatically invoice will be processed automatically • Matching discrepancies will be placed in queue for resolution • Invoices for approval will be routed through workflow to appropriate individual • Benefits • Reduced headcount • Reduced paper-flow • Reduced errors • Increased visibility and compliance • Risks to manage • Technology must translate to new ERP • Must have clear policies and business rules to avoid automating chaos • Timeline

  18. Accounts Payable still being performed differently between the two brands ERP systems for material management are different All AP is processed in JD Edwards Centralized in Quality brand De-centralized in Merillat brand Audit challenges with processes and timeliness for expense accrual Plan to implement workflow system in 2007 and centralize function Billing processes are very different between brands Frontier ERP for Quality with no “progress bill” JD Edwards ERP for Merillat Integrating service system to invoicing – evaluating consolidation Sales and Use Tax processes are highly manual Developing integrated solutions Staffing challenges due to turnover on both ends Integration Progress / Challenges May need to wait for ERP?

  19. Focus on development and retention of our employees (especially in the GL function) Improve our compliance Address with improved processes and systems where possible Reduce Cost and Increase Efficiency Increase automation Centralize functions Respond to market conditions Support long-term solutions and strategies ERP One in Two 2007 Key Initiatives

  20. Customer Financial Services (CFS) December 11, 2006

  21. Jim Ramsey - Director, Customer Financial Services Education: BBA – Marketing Management, University of Toledo Experience: MASCO: Director, Customer Financial Services since 1/7/2002 Non-MASCO experience: Owens Corning, 32 years Manager, Customer Financial Services – Toledo, OH Cost Control Manager, Resins/Coatings Division – Toledo, OH Plant Cost/Administrative Supervisor, Resins/Coatings Division – Anderson, SC Plant Cost Analyst, insulation & chemical plants – Newark, OH Administrative Services – Toledo, OH CFS Bio

  22. CFS Organization Chart

  23. CFS Organization Profile 25 Employees (Includes 5 temps - 4 Quality, 1 Merillat) Education 2 bachelors degrees (2 - Marketing Management) 3 associates degrees (1 – four courses remaining to earn bachelor’s degree in business) Work Experience Average BCG experience 6.2 yrs. Longest BCG Service – 20 yrs.

  24. CFS Organization Work Profile Management Workload • Credit Assessment for New Accounts - 20% • Financial Analysis and Review of Existing Accounts - 15% • Customer Consulting – 5% • key ratio, industry comparisons, cash flow analysis, financial projections, issues & opportunities • Collection of Past due Amounts including problem resolution - 30% • Standards Updates/maintenance - 10% • Twice monthly A/R reviews – 10% • CFS & field sales teams participate • Monthly Reporting - 6% • Other SOX - 2% • Other Admin - 2%

  25. CFS Team Workload Quality Cash Application - 60% Collections & problem resolution - 30% Other Admin - 10% Merillat Collections, cash application & problem resolution - 60% Other Cash Activities - 20% Other Admin - 10% Monthly Reporting - 5% Annual File Reviews/maintenance - 5% Customer Master Set-ups Merillat, Quality, DCD, Parrish, Quality Doors CFS Organization Work Profile

  26. Quality and Merillat have different Accounts Receivable systems and procedures. Merillat – JDE; Quality – Friedman/Frontier Example: Cash application Merillat – auto cash application Quality – manual cash application Cash Application & Collection procedures are different due to availability / timing of data and significant differences in how the systems process cash transactions Prior account administration caused significant aging issues, which now require extensive forensic accounting to resolve. CFS Integration Challenges

  27. Address procedural differences and employ Merillat best practices where possible. Implement auto cash for Quality/Frontier system to increase efficiency and allow additional time for research of unpaid balances. Begin implementation of MASCO initiative to go paperless for Merillat cash management. Accomplished by implementing new payments terms and utilization of M2OE for electronic ordering and payments. Implement D&B “Decision Express” risk assessment/credit scoring tool Implement new distributor terms for electronic ordering & payment Eliminate paper credit files Electronic files on secured public drive Western Contact Center CFS - 2007 Key Initiatives

  28. Cost Management December 11, 2006

  29. Organization Chart

  30. Organization Profile 9 Employees Education 10 bachelors degrees (7 accounting) 3 MBA’s - - 2 more in process 2 Masters degrees (non-MBA) 4 CPA’s Work Experience Average Years 17 Average Years BCG 6 (3 with less than 2 and 2 with more than 10)

  31. Organization Work Profile Primary Customers Operations (plant management, capital evaluation) Marketing (product costing, new product) Masco Workload (excluding Plant Finance Managers) Monthly close 20% Monthly Reporting 20% Standards Updates/maintenance 20% Budget 15% Inventory 6% Other (incl. SOX) 4% Decision Support 15%

  32. Quality and Merillat have different costing systems and methodologies (configuration/ non-configuration) Accounting close methods are different due to availability / timing of data and number of business units supported Inventory methods are different (cycle counting vs physical) Integration Challenges

  33. Address internal control weaknesses; primarily inventory related cycle count - Scanning at Quality - Tightening cycle count process at Merillat plants Commonize and improve Merillat/Quality plant performance tracking and forecasting Support development of a common ERP system 2007 Key Initiatives

  34. Financial Planning & Analysis and Pricing December 11, 2006

  35. Bob Turco, Director FP&A and Pricing Education: MBA – Finance, University of Toledo; Bachelor of Arts – Finance and Accounting, Rutgers University. Experience: Masco: Director, FP&A and Pricing, one-year. Non-Masco experience: Owens Corning, 26 years. Business Unit Controller: Roofing Solutions, HOMExperts. Manufacturing Controller – Insulation North America. Financial Manager - Composites Global Sales. Pricing: Residential Roofing, Composite Reinforcements, Roofing Solutions. Plant Controller: Newark, OH – Insulation; Kansas City, KS – Insulation; Huntington, PA – Composite Textiles & Reinforcements. FP&A Personnel Summary

  36. Organization Chart

  37. Six FP&A employees and one intern Education 6 Bachelor degrees 5 MBA’s 1 recommended to the next Masco MBA Program session Finance-related work experience Average Years = 14 Average Years with MBCG = 2 (four employees with less than 2 years, two employees with more than 2 years) Organization Profile

  38. Business performance reporting and analysis Demand forecasting Financial forecasting Regional & business segment financial leadership Internal control (SOX) and SOP compliance Actionable information and analysis Decision support Business team partnership Business planning and budgeting Month-end activities Rebates and branch accounting Branch, market, business segment financial statements FP&A Key Responsibilities

  39. Internal Control and SOP Compliance Ensure actions are in place to drive 100% certified & compliant locations Financial Reporting Supply accurate, timely and actionable information Provide insightful and forward thinking analysis of results Deliver in a user-friendly and efficient manner Business Forecasting Collaborative and drives actions Business Partnership Finance is a fully participating & contributing member of the business team Finance provides input and financial thinking to business decisions Decision Support Provides tools, improves processes, drives out waste and complexity Teaches and trains financial and non-financial personnel Focus on helping Branch Managers become more financially adept at managing their business Contributes to recruiting, staffing, succession planning and retention Recruiting and mentoring junior members of the finance team Regional Controller Accountabilities

  40. People Regional Controller structure implementation Finance 101 training for non-financial (expand S/E Region work) Process Reduce reliance on “Excel on Steroids” and leverage data warehouse “foundation” created in 2006 Metreo “Vision” implementation: pricing tools including customer, channel and regional profitability Forecasting tools Budgeting tools and reduction in process complexity DWH governance (data accuracy, training, expansion) ERP implementation support Drive Pricing-Finance synergies – bid profitability, pricing analytics that identify opportunities in the market Performance Implement improved market and branch reporting - much more actionable and proactive Leverage the new Regional Controller structure to drive results Develop tight partnership with business teams – fully participating members Proactively drive results and an acceptable internal control environment 2007 Priorities

  41. Metreo Pricing Vision Overview

  42. Sample RPM Platform Customers and Solutions Global Commodity Management Actuarial Modeling Shopper Insights Continuous Sales & Operations Planning Publishing Forecasting Basel II Asset Management Assortment Management SKU Optimization Product Quality Management Price Management Metreo Overview Despite the diversity of customers, verticals, functions, solutions and provider, there is not a single line of code or scripting that is different across all of these implementations

  43. Metreo Performance Management Suite: Product View Metreo Decision Management Suite Vision InLine InSight Predict BPM • Enterprise • Pricing • Sales & Marketing • Product • Operations • Finance • Deal Desk Workbench • Sales Force Workbench • Guideline Workbench • Win / Loss • Price Indexing • Elasticity • Product Mix+ • New Product+ • Price Structure+ • Demand Forecast • Contribution Margin Forecast • Demand Mgt. • Margin Mgt. • Price Mgt. • Product Mix Mgt. • FS&OP Metreo Decision Management Platform Metreo Smart Pricing Suite Target (Setting) Target (Management) Response Segmentation Study Metreo Data Management Layer

  44. Metreo Analytics Pricing Intelligence – Sample Waterfall A Price Waterfall analysis helps you identify the true cost of price concessions. It starts with the list price, and deducts from that visually all adjustments (i.e. discounts, rebates, freight costs) that leak margin until reaching the true pocket price and the margin.

  45. Compliance & Risk Management December 11, 2006

  46. 28 years with the BCG All in the Finance Department B.A. degree in Accounting Six Sigma Green Belt Personal Bio

  47. Risk Management – Organization Chart Contract Organization to Support BCG and MCS

  48. All BCG agreements – eliminate killer clauses, mitigating the risk for BCG/Masco Builder subcontracts Distributor/Dealer agreements Vendor agreements Leases Insurance certificates, licensing, fleet Lawsuits Conflict of interest questionnaire Contract Review Center - BCG

  49. All MCS builder agreements All 300 branches send their builder subcontracts through the Contract Review Center The CRC eliminates killer clauses, mitigating the risk for MCS/Masco The CRC handles the negotiation of contract changes The CRC enters the agreements into MCAT then forwards them to Michael Wade’s team for accounting review Contract Review Center - MCS

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