Photo of Junichi Ono, Keryn Lee, Kristin Loh and Toshiaki Ichida, Ocean Network Express Pte Ltd and Swee Sun Tay, HSBC.

Following the merger of three companies that formed Ocean Network Express in 2017, the organisation badly needed a solution to bring the individual treasuries into one structure that would ensure operational efficiency, centralise payments to vendors and optimise turnaround time for receivables. With the help of technology, the merged company achieved that goal and, moreover, did so in just one year.

Technology helps ONE to fast-forward integration following triple merger

The challenge

Ocean Network Express (ONE) was formed in 2017 and is the result of a merger between the three largest Japanese shipping lines: K-Line, Mitsui O.S.K. Lines (MOL) and Nippon Yusen Kaisha (NYK).

At the time of the merger, all three had different systems, bank accounts, workflows, cultures and operating models. They knew, however, that to be successful they would need to transform their individual treasuries into one structure that would:

• Ensure operational efficiency.
• Centralise payment to vendors.
• Optimise turnaround time for receivables.

The challenge, then, was to action a programme that would deliver a new structure that would help integrate the differing workflows, operating models and cultures of the previously three separate entities.

The solution

The decision was made that the right solution to deliver the objectives would require best in class technology together with a robust and unified banking network. This would include a host-to-host enabled enterprise resource planning (ERP) system linked to an SAP HANA (an in-memory, column-oriented relational database management system).

Working with their banking partner, HSBC, ONE’s finance department implemented an ERP that integrated directly with SAP HANA, which supports 226 accounts in 44 countries.

Best practice and innovation

From the outset it was easy to see that disparate processes were leading to gaps in visibility and control at the corporate treasury level. By consolidating the original three treasuries into a single work flow through one bank would:

• Minimise manual handling of payments and collections.
• Ensure operational efficiency with automated processes.
• Easier to recognise cash balance/transactions through single bank platform and ERP.

In turn this would provide more control over receivables by minimising their reliance on local agents. Most shipping companies have used agents in the past for local sales and marketing as well as to receive payment from customers and reimburse vendors on their behalf. There are inherent risks associated with this more traditional model, including no control over when agents push money to them or the potential for discrepancies between expected collections and what’s received.

The approach used by the project team allowed the creation of a centralised account and treasury structure that merged three distinct, highly decentralised treasuries into just one across regulated and deregulated markets; payments jurisdictions and restricted and non-restricted currency types.

Key benefits

By tailoring a solution to the new company’s corporate mission, the organisation was able to:

• Minimise the time and resources needed to create multiple journal entries, sort out bank reconciliation, manage AP and AR processes and develop files – all of which helped treasury to quickly automate both domestic and cross-border payments and collections as well as concentrate cash to the headquarters’ central account by utilising HSBC’s auto-sweep function.
• Issue client invoices in their own name (where local regulations allow), so reducing reliance on agents, and gain direct access to vendors and visibility into companywide cash management.
• Use the latest technology to centralise the treasury operations has helped the company speed up the integration and adoption of a single corporate process and culture. A merger of the kind undertaken by the three companies in 2017 might normally take a few years or longer to result in full integration of the businesses and treasuries but ONE was able to complete the project in less than a year.
• Benefit from its forward -thinking approach by relaunching its treasury with a leaner team.
• Continue developing its cash management with a focus on “cross-border” auto-sweep.

Key learning point

Single and simple work flow is the key to success although it is sometimes difficult to unify the system and bank relationship due to the existing relationship with other companies.