eaton global financial services & systems going global!

© 2018 Eaton. All Rights Reserved..

Cathy Flynn – Global Process Owner Record to Report

May 23, 2019

Eaton Global Financial Services & Systems – Going Global!

2© 2019 Eaton. All rights reserved..

Agenda

• Eaton – overview

• Eaton – GFSS strategy

• E2E global model

• Time to execute

• Change management impact

• Oracle & SAP financials

• Lease accounting – Q1 2019

• Q&A

© 2018 Eaton. All Rights Reserved.. 3

Our business overall

Sales of $20.1B

Earnings per Share of $4.65

• Headquarters: Dublin, Ireland

• Chairman & CEO – Craig Arnold

• 750 locations world-wide

• Key locations in Cleveland, United

States; Shanghai, China; Morges,

Switzerland; São Paulo, Brazil

• Customers in more than 175 countries

• Approximately 95,000 employees

© 2018 Eaton. All Rights Reserved.. 4

Rail Renewables Residential Utilities Vehicles Water/wastewater

Machine building Marine

Mining, metals

and minerals

Mobile machinery

and equipment Oil and gas Pharmaceuticals

Aerospace Buildings Data centers Food and beverage Government Healthcare

We solve industry’s toughest power management

challenges in markets around the world:

5© 2019 Eaton. All rights reserved.

Eaton’s Vision, Aspirational Goals and Leadership Model are shared in

Manager/Employee workshops – focus is on what they mean to each individual

6© 2018 Eaton. All Rights Reserved..

Strategic Growth Initiatives – Develop technology leadership (safe,

reliable, efficient, connected, and intelligent), convert on our channel

and service strength, deliver superior value

Expand Margins – Accelerate our operational excellence,

implement multi-year productivity plans, focus on outliers (fix the tail,

grow the head)

Disciplined Capital Allocation – Invest to win, consistently return

cash to shareholders (dividends, share buybacks), criteria-based

product and business evaluation

Eaton -- corporate strategy is working

© 2019 Eaton. All Rights Reserved.

May 22, 2019

How we contribute to Eaton’s vision

GFSS Overview & Strategy

8© 2018 Eaton. All rights reserved.. 8© 2018 Eaton. All rights reserved..

Eaton is investing in our Global Financial Services and Systems to:

• Optimize our cost of finance by leveraging GFSS

• Promote process improvement and standardization through

concentrated GFSS focus

• Improve compliance in an increasingly complex world

• Enable operational finance to focus on growth and business

performance


More than two decades of continuous improvement

1995 – 2000 2001 – 2005 2006 – 2010 2011 – 2015 2016 – 2017 2018 +

Glasgow

Center

established

NA Center

established

Suzhou

Center

established

SA Center

established

GFSS global

strategy

deployment

GFSS

Organization

created

Budapest

Center

established

Pune Center

established

End to End

Suzhou

Project

kicked off

R12

Financial

System

Launch

In-Source

SAP work

from

Accenture

GFSS formation & strategy


We have continued to evolve and improve our financial support model

Lift & Shift Transactions

Regional Standardization

End-to-End GlobalFinancial Services

Integrated Cross Functional Services

Global Standardization

Each evolution creates incremental value for Eaton


GFSS Work-Streams

• Record to Report

• General Ledger, Project Accounting/Fixed Assets/Software Accounting –

Oracle and SAP

• Advanced Global Intercompany System -- functionality used to process

intercompany invoices for corporate charges

• Global Compliance & Account Reconciliation

• Lease Accounting and system owner of Lease Accelerator

• GFSS Controllership function


GFSS Work-Streams -- continued

• Purchase to Pay – Oracle and SAP

• Transaction processing for invoice processing and payments

• Travel & Expense and P-Card system ownership; support and maintenance

• Markview (invoice imaging) system ownership; support and maintenance

• Order to Cash – Oracle and SAP

• Transaction processing for invoice processing, cash receipts and cash

application

• Owns or supports credit analysis and cash collections, depending on region or

business


GFSS Functional Support Areas

• Governance & Compliance

• Leads compliance and monitoring of Oracle and SAP system access and

provisioning

• Leads Change Control Board Process – Oracle and SAP

• Operational Excellence and Project Support – Oracle and SAP

• GFSS North America Regional and Global Customer Satisfaction Leadership

• Production support; maintenance and customer service for NA Payroll and Mexico Regional SSC

• Production support/maintenance of global GFSS customer service tools, websites and communications


We have a strong footprint in GFSS

Cleveland

Queretaro

Valinhos

Budapest

Pune

Suzhou

Current GFSS Footprint:

Approx.

Location FTEs

N. America 165

Europe 80

India 460

China 175

S. America 60

Total 940

Glasgow

We still have a lot of opportunity!


We continue to bring in new talent

Cleveland

Queretaro

Valinhos

Budapest

Pune

Suzhou

Glasgow

North America

26 new employees

Europe

25 new employees

Asia

117 new employees

South America

17 new employees


GFSS Leadership Structure

Global Process

Leaders

Dan Hopgood –

SVP GFSS

Functional Global

SupportRegional

Centers and

SupportCathy Flynn –

Record to Report

Troy Huth –

Purchase to Pay

Chris Partin –

Order to Cash

Tom Doyle –

OPEX/Proj Mgmt

Manuel Prieto –

N. America

Regional Support

Lead

Tracy Evans N.

AMER & Global

Cust. Experience

Leader

Jill Donais Global

Support – Gov. &

Compliance

Marianne Buchko

– NA Payroll

Nidia Navarro –

Mexico Services

Fernanda

Delben –

GFSS Brazil

Istvan Mateka –

EMEA LeaderSachit Nayak

– GFSS

Center -

Pune

Lily Pan –

GFSS Center

- Suzhou

and

Suppo

rt

and

Suppo

rt

Regional

Centers and

Support


2019 GFSS Focus Areas

GFSS Operating

Model

Drive our financial

performance

Expand and optimize service levels

Develop our employees and expand capabilities

Operational excellence

• Meet our profit plan

commitments

• Deliver operational

metrics & improve

business performance

• E2E execution &

delivery

• Improved reporting &

compliance through

Program Optimus

• Deploy standard tools

& processes

• Career development

• Organizational

capabilities

• Diversity & inclusion

• Managerial

effectiveness

• YOY improvements in

efficiency &

effectiveness through

• Automation

• Waste elimination

• Quality control


Goals of GFSS end-to-end strategy

Increase leverage to generate $50M improvement in global finance cost

Reduce errors and improve responsiveness

Reduce audit compliance cost

Cost

Quality

Compliance


Why end-to-end finance? Because it’s no different than the factory floor

Assembly

Assembly

Assembly

Assembly

Before After

Centralizing full process support optimizes the entire workflow and drives

increased efficiency, quality, accountability and lower cost


Our approach allows our sites’ finance teams to focus on growth and performance

Transaction &

Accounting

Support

Repetitive

Analytics &

Reporting

Decision Support

& Ad Hoc Analysis

Forecasting,

Planning &

Commentary

GFSS end-to-end focus Site level focus

Rep

ort

ing

& A

na

lys

isA

cc

ou

nti

ng

Co

mp

lia

nc

e

• Standard reporting (daily, weekly, monthly) &

analysis

• Non-standard production reporting, analysis &

management support

• Business planning, analysis and commentary

• Bill of material standard costing & analysis

• Full accounting manager responsibility for ~85% of

the balance sheet

• Full end-to-end transaction support (order to cash,

purchase to pay, record to report)

• Inventory accounting and control, selected reserves

• Project accounting & analysis (if applicable)

• Support compliance-related activities (audit and

statutory support)


Our approach guarantees value for the business

• 20-30% savings locked in for

activities in scope

• Transition cost and start up

funded by GFSS

• Site level metrics and KPIs

ensure quality delivery

• Single point of contact for

ongoing support and trouble

shooting

• Business & org profile

• Service level profile

• Opportunity assessment

Initial Fact Finding

• Process blueprinting & alignment

• Capture current metrics

Scoping• Observation phase

• Guided deployment

• Unguided deployment

Execution

A comprehensive playbook for implementation

• Common org structure and responsibilities

• Standard metrics and performance management

• Customer relationship management aligned to the

operations

Results in a compelling business

case for our operations

=+A standard operating model to sustain


Proven approach - still in early stages of deployment

We’ve started to deploy our approach in all regions But we still have a lot of opportunity in front of us

Over 20 implementations in process or planned for 2019

We’ve realized <10% of a

$50M opportunityto date

Consistently delivering

20% - 30% savings on

targeted work


Mature plants still benefit from this new approach

Site Actions

Process

Results

Cost

Pre-

ETE

Post-

ETE

Kearney NEVehicle

• 3 out of 5 FTEs moved to

GFSS support center

• ~70% of balance sheet

covered by GFSS

• Process level metrics

established for in-scope activity

• Improved almost all process

metrics vs. baseline

• 100% on time delivery

$471k $295k

Lincoln ILElectrical

• 2 out of 7 FTEs moved to

GFSS support center

• ~90% of balance sheet

covered by GFSS

• Process level metrics

established for in-scope activity

• Improved almost all process

metrics vs. baseline

• 100% on time delivery

$724k $602k

Some recent examples

37%

17%


But it’s not just about cost

It’s about process efficiency

• Centralized audit support removes burden

from plant

• Improved overall balance sheet compliance

Pre-RPA Post-RPA

And it’s about compliance

14 FTEs doing

cash application

and debit memo

processing

Annual cost $280K

6 bots

Annual cost $60K

It’s about working capital

~80%

Reduction

0%

5%

10%

15%

2016 Pre-E2E

2018 Post-E2E

15%

9%

Percentage of Receivables past due – Greater China Ind. Sector

• 40% reduction in

past due

receivables

• $34M incremental

cash generated for

Eaton

It’s about Quality

Since launching our global strategy in early 2018:

• Open customer disputes reduced 25%

• Vendor invoices on hold down 30%

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwisn-GDlbbdAhVmuVkKHXLQDpgQjRx6BAgBEAU&url=http://www.newsnation.in/science-news/robots-and-artificial-intelligence-may-replace-work-of-250000-public-sector-workers-in-uk-by-2030-article-160507.html&psig=AOvVaw2Yi3kxMFC_qpAvZBl83c8e&ust=1536865689286617


• Continued focus on cost and efficiency

• Process level metrics help drive continuous improvement & automation

• Optimizing our mix of support to better leverage low cost centers

• Additional improvements in working capital performance

• Elevating our customer service & engagement to become better partners to the operations

Continuous improvement – We are never done

GFSS still has many opportunities to improve

our performance


How our operations benefit from GFSS?

We continue to ask our business leaders -- are you

signed up to take advantage of GFSS benefits?

Encourage operations finance teams to embrace this end-to-end strategy

Establish a timetable to implement end-to-end for all divisions or sites

Challenge operations teams to leverage new reporting tools to generate efficiencies

Set targets and hold the organization accountable to achieving

27 27

HOW DO WE GET THIS DONE?GFSS End-to-End Strategy Deployment


It all starts with a consistent strategy

Optimizing our delivery model for

global financial services

Defining and delivering a technology roadmap to support our

strategy

Evolving our scope of services

to increase leverage and

improve performance

Upgrading our capabilities to

meet current and future needs of the organization

Delivery Technology Scope Capabilities

Utilizing Eaton Business System tools to drive transformation, deliver results and manage change


Optimizing our delivery model

for global financial services

We have established a common operational approach to managing our financial services

Assess current and future footprint for

service delivery

Standardize global operating

model and realign regions

and centers

Establish common metrics

and targets to measure progress

Execute on process

improvements and monitor

results

Assess Current

State

Organize for

Success

Measure Results

Monitor and

Improve

Our goal is to optimize our delivery model for Global Financial Services

Delivery


Technology Roadmap

Dual platform supporting SAP and Oracle applications

Consistent deployment of boundary systems and

interfaces

Ongoing harmonization of base ERPs while supporting

business requirements

Prioritized investments in new technologies

• Base architecture and reporting solutions

• Global process technologies to support GFSS strategies

(including RPA)

Technology


strategy

Key Tenants Of Our Strategy

Goal: Support evolution of our base architecture and deploy technologies to

support our business improvement goals


Pursuing RPA as a part of our technology strategy

Standardize Activity

Consolidate to Scale

Streamline to Improve

Automate to Optimize

Optimizing our delivery model

for global financial services


strategy

Evolving our scope of

services to increase

leverage and improve

performance

Upgrading our capabilities to meet current and future

needs of the organization

• Standardize activities for

consistency and efficiency

• Consolidate operations to

achieve economies of scale

• Streamline processes for

continuous improvement

• Leverage Automation for

optimal performance

Robotic

Process

Automation:

RPA

Delivery Technology Scope Capabilities

https://www.google.com/url?sa=i&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwi-qbCLjP7aAhVHhuAKHcr0CNIQjRx6BAgBEAU&url=https://pixabay.com/en/arrow-red-up-symbol-icon-156792/&psig=AOvVaw10AKyh6Rqgl5qcQWeLA-Hq&ust=1526142108600177


Evolving our scope of services to increase

leverage and improve performance

We have defined our targeted scope and deployment plan

What is our current state?

What is the right target scope for GFSS?

What is the opportunity if we deploy our target

scope globally?

Agree on initial pilots

sites by region to

prove concept

Global deployment

Asses Current

State

Target Scope

Assess Opportunity

PilotGlobal

Deployment

Evolving our scope of services to increase leverage and improve performance

Scope


Scope

Evolving our

scope of

services to

increase,

leverage and

improve

performance

• Become the “accounting manager” for the corporation

• End-to-end support model to be deployed consistently across

our operations—replicating model deployment in Suzhou

• Full accountability for process metrics and balance sheet

accounts

• Deliver 20% efficiencies to operations by leveraging scale and

improving mix of support

• Pilot approach successfully deployed in 2018 with full

deployment within 5 years

Key Tenants Of Our Strategy

Goal: Fully leverage the scale and capabilities of our global support centers

Scope of Services

34© 2017 Eaton. All Rights Reserved.

We defined our key objectives and targeted results

Move from transaction based to integrated financial support covering

end to end processes

Optimize the mix of global resources and drive improved leverage of

global service centers

Improve compliance and accountability for financial processes

Improved process quality and efficiency

Key Objectives Targeted Results

• 20% reduction in global financial costs

• Increase mix of GFSS support to ~40% of global headcount

• Balance sheet reconciliation compliance

• SOX compliance & efficiency

• Improved audit support

• Deliver improvements in key process metrics for OTC, PTP and RTR

Deliver world class end to end financial services by building a stronger

business partnership




We need to prepare the organization

What are the key capabilities we need to be successful?

How do we assess our

current organization against these requirements?

Tailor development

and hiring plans to address key gaps and depth

Reassess and adjust as needed

Define Assess Develop Reassess

Upgrading our capabilities to meet current and future needs of the organization

Capabilities


What are some of the key capabilities needed to drive success?

• Global Mindset • Shift from regionally focused teams to one global team

• Leverage the full team

• Increased Technical Acumen• Maximize system capabilities

• Ownership and Problem Solving Focus• Take responsibility and solve the root causes

• Customer engagement for business partnering• Be the Sites’ Accounting Manager / CRM – not just a service provider

Enhancing our skills to become a true business partner



Capabilities


However… we need to implement more quickly

• Current approach is Site by Site deployment

• Consistent deployment process that spans 4 months for each Site

• Strategy will take > 5 years to execute

• Multiple teams conducting simultaneous deployments but experiencing resource constraints to execute

• Looking at more headquarter or division deployments which could go more quickly as many already centralized

• Change management is also slowing us down

• Need more “top down” push which we are starting to get

• Prior centralization efforts did not always lead to improved quality or lower cost

• Considering an implementation partner to facilitate more speed once we have a solid pipeline to execute

• Thoughts from this group???


Today’s takeaway:

Eaton is investing in our Global Financial Services and Systems to:

• Optimize our cost of finance

• Promote process improvement and standardization

• Improve compliance

• Focus on growth and business performance


Impact of having Oracle and SAP Financial Systems


Comparison of Dual vs Single GL Structures Dual Stack General Ledger Structure

Overview - How It Works

• Oracle and SAP general ledgers are maintained.

Multiple books of record through the company.

• Electrical consolidates into SAP, while Industrial

continues to interface to Oracle Financials.

• Corporate activity remains on Oracle.

• Data extracted from both systems (and underlying

ERPs) to meet global consolidation and reporting

requirements.

• Shared services accommodate both SAP and Oracle.

• Examples: GE, Honeywell, UTC

Advantages Disadvantages

Integration of ERP and GL enables:

• Balancing of GL & sub-ledgers; intercompany transactions

• Simplification of GRNI issues

• FX rate consistency

• Simplified drill down capability for analytics

• Automated inventory movements (in ERP)

• Above assumes all entities are on single SAP instance

Current global Finance processes must change

• LES limited, as LE organized around ERP systems

• New interfaces developed and maintained for SAP instance

• Duplicate / Manual process for corporate charges

• Process / Policy governance more complex across systems

• Problematic for US tax filings and audit defense

• Processes in state of flux for duration of SAP migration

Elimination of GL/ERP Interfaces

• Current interfaces are labor intensive for Finance and IT.

• Daily interfaces checked and corrected

• Require additional headcount in Cooper to reconcile.

Migration path requires several workarounds

• TradeCo structure needed for single-face-to-customer

• GetPaid extended to OF to centralize Credit Mgt.


Challenges with two financial systems

RTR

• Redundant intercompany invoicing and settlement

• Redundant GL accounting (e.g. entries in SAP and Oracle required for full LE reporting)

• Additional system configurations/customizations

• Legal entities split across two systems

OTC

• Cash transfers via netting increase considerably

• More bank accounts

• Requires consolidated collections team but working in two systems

PTP

• Impact on suppliers to separate invoices by applicable system

• New supplier sites to be created

IT

• Different support teams

• Different governance processes


Solutions underway or being investigated

Tools being implemented or leveraged to improve the requirements for transacting and

reporting across both systems

• Program Optimus

• Implementation of Oracle Financial Close & Consolidation Cloud Services (FCCS)

• Implementation of Oracle Account Reconciliation Cloud Services (ARCS)

• Ultimately look to implement Oracle’s Planning – Enterprise Planning & Budgeting

Cloud Service (EPBCS)

• Excel4Apps – limited deployment in small RTR Reporting Center of Excellence – thanks

Jon!

• Oracle Power BI

• Building dual capability in GPO organizations


Implementing Lease Accounting Standard ASC 842 – Fun!


Lease Accounting Implementation

• Implemented Lease Accelerator

• Previously used within Eaton by SCM for a portion of lease management

• Expanded the use for ASC 842 lease accounting and working on increased use for lease management

• Did not use an implementation partner – this was a mistake

• Did not understand the complexity of the pronouncement and interpretation that would be required for much of our lease portfolio

• Fully de-centralized lease portfolio led to over 2 years of data gathering – don’t underestimate this effort if have a large portfolio

• Currently operating with a centralized Lease Accounting Team so access to LAS is limited. Change in position from where we started.

• We survived Q1 but it was a challenge

• Significant issues with LAS system due to newness of software

• Ongoing data issues with our portfolio and complexity of leases – especially Real Estate

• Lack of support or understanding of processes within our Plant community


Summary

• We have a significant opportunity to optimize and improve our GFSS organization and have a strategy to deliver

• Our approach is endorsed by Eaton leadership and delivers:

o Significant savings to the corporation through:

o Standardized approach and ability to leverage global best practices

o Improved utilization of global and regional support centers

o Improved compliance and controls and centralized coordination of audit and compliance activities

o Increased accountability and improved customer experience

o Increased operational focus by centralizing transactional responsibility and accountability

• We continue to focus on opportunities to better align our Oracle and SAP environments to ensure global standards

and processes are maintained – key challenge for GFSS going forward

• Lease accounting implementation is behind us and now the focus is on improving knowledge of accounting

requirements; tools for reconciliation; better ways to handle lease management; and continuing to look at process

improvements or efficiencies in processes.


Questions

eaton global financial services & systems going global!

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