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As part of an Operational Excellence initiative one of our clients requested Voorne Partners to revise their existing way of operating through a variety of legal entities and develop a new business model.

At the start of the project the client had 13 legal entities in 6 European countries. Each legal entity operated as a fully operational company, with accountability for profit, including both sales and production activities and handling inter-company transactions through re-invoicing based on transfer prices.

Theoretically this situation is well suited for implementation of a Single Business Entity, in which all transactions and ownership of commercial goods and value is handled by one European legal entity, with all others acting as sales agents or toll manufacturers. Consultation with the client made it clear however that for a number of reasons such a Pan European approach would be several steps to far for them. Particularly corporate identity, sales organisation and practises and the remuneration system would require too much of a change at once for our client to handle within acceptable risk limits.

Voorne Partners therefore defined and developed a trading model for the clients' operations by country, based on the principle that there should only be one legal entity platform by country, a Country Business Entity (CBE). These CBE's were accountable for all commercial and financial business activities and initiatives. The existing manufacturing sites within the legal entities in the different countries became toll-manufacturers on behalf of a CBE.

In addition to the CBE trading model, Voorne Partners:

Designed and developed the structure - from a business perspective - along which the client steers and controls its operations (the steering model);
Designed and developed the features for financial reporting and control (the financial control model), needed to support the new business model;
Identified the impact of the CBE's on the organisation (the organisation model); and
Assigned accountability for all elements of the management reporting to the functions with the Client's organisation (the performance control model).

The CBE model enabled the client to manage the business in each CBE country as a single operation and make step changes in brand and product development, cross border sales, supply chain and cash flow optimisation and harmonisation and optimisation of business and support processes. The new structure separated sales and production results for instance, making it possible to allocate parts and subassembly manufacturing to the plants best suited, without creating a conflict of interest for the local managers. Similarly sales results were no longer optimised by legal entity enabling a much more logical product and customer segmentation, thus increasing brand positioning and margins.