Photo of Lay Perk Toh, Kulicke & Soffa Pte Ltd and Christine Zhang, J.P. Morgan.
In actively embracing technology and deploying an innovative web-based solution to digitise its export documentary trade processes in its global shared services centre, K&S has improved productivity, reaping many immediate benefits. Its treasury has also taken a holistic approach, streamlining its operations and automating processes where possible to further eliminate inefficiencies.
Lay Perk Toh
Group Treasurer
Singapore
Founded in 1951 and headquartered in Singapore since 2010, Kulicke & Soffa (K&S) is a leading provider of semiconductor packaging and electronic assembly solutions (EAS) supporting the global automotive, consumer, communications, computing, and industrial segments. Listed on NASDAQ, K&S reported a net income of US$112m on revenues of US$809m in 2017.
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How digitising export documentary trade processes has enabled Kulicke & Soffa to massively improve productivity
The challenge
Kulicke & Soffa (K&S) runs a global shared services centre (SSC) in Malaysia which also supports the firm’s treasury and trade operations. The firm’s export trade operations were highly manual and paper-based. With close to 20% of its global sales settled through documentary credit, the SSC manually collated documents and couriered the original copies to its bank in Singapore for processing. Discrepancies and errors are spotted in the export LCs from time to time, which meant the transactions could not be processed and documents are returned to the Malaysia SSC for amendments before they were couriered back to the bank in Singapore. Longer turnaround times meant greater costs, increased risks, and slower collection of trade proceeds, which translated into higher days sales outstanding (DSO) and inefficient management of working capital.
With over US$150m in export trade transactions handled through LCs annually which could increase as K&S expands, the firm needed an automated solution to streamline its LC collection process and improve operational efficiencies.
The solution
K&S partnered with J.P. Morgan, implementing an end-to-end trade solution leveraging the bank’s electronic trade channel platform (Trade Channel). The solution enables the SSC to send digital copies of export trade documents and allows the bank to securely advise and process LCs in electronic formats. The system means errors and discrepancies in LCs can now be easily rectified, reducing the risk of paper documents and speeding up processing by eliminating back-and-forth courier transits. Since the implementation of Trade Channel, K&S is now able to rectify documents and process LCs within three to four hours – a process that traditionally might take up to one month using manual couriers.
The web-based Trade Channel platform allows K&S to initiate transactions and make inquiries into transaction status 24/7. At the same time, Trade Channel is equipped with reporting capabilities, enabling K&S to generate automated, customised reports on its LC status to better manage its trade and collection processes. The reports are configurable to meet the firm’s requirements, minimising error-prone and time-consuming manual intervention. Real-time email notifications are also delivered to K&S upon receipt of proceeds, enabling the firm to gain visibility into the end-to-end trade and collection process.
Best practice and innovation
The firm has successfully leveraged J.P. Morgan’s innovative web-based solution to digitise its export documentary trade processes. Through Trade Channel, K&S’s SSC in Malaysia can make use of a single platform to initiate, manage and monitor the firm’s global trade transactions and send documents electronically to its bank for immediate processing.
By digitising and redesigning existing processes, the automated solution has enabled K&S to shorten its DSO cycles for LC collections by up to 5%, freeing up significant working capital. K&S has been able to further optimise liquidity by investing additional cash flows.
The solution has automated K&S’s end-to-end trade processes, allowing the firm to save on costs and significantly speed up transaction processing to improve working capital management. It now has visibility of all trade reports, reducing avoidable discrepancies in LCs, facilitating improved cash forecasting and better managed transaction costs.
Key benefits
- Enhanced working capital management.
- Ability to rectify and process LCs with discrepancies within three to four hours.
- Generating up to US$200,000 in additional interest income annually.
- Eliminated unnecessary courier and administrative costs.
- Eliminated risks associated with misplaced or lost export documents.
- Automated reporting reduces processing errors and quicker reconciliations.
- Enabled on-demand status enquiries for transactions.
- Account receivables better managed as a result of better visibility of trade flows.
- Custom reports improve overall visibility and control of trade transactions.
