MIT Sloan Management Review

Financial Management, International Business

 

The Evolution of a Global Cash Management System

By Christopher P. Holland, Geoff Lockett, Jean-Michel Richard and Ian Blackman

October 15, 1994

SOME COMPANIES ARE IMPLEMENTING INTERORGANIZATIONAL INFORMATION SYSTEMS (IOSS) WITH TRADING PARTNERS THAT ALLOW THEM TO SHARE DATA AND software across organizational boundaries. The authors explore the effect of IOSs on cash management from a managerial perspective and present a case study of Motorola and Citibank. Motorola’s strategy has evolved from an internal cost saving initiative to a supply chain focus yielding significant strategic benefits. Cooperation between Motorola, its suppliers, and Citibank has brought cash flows in line with product flows. Motorola and Citibank have effectively meshed parts of their organizations and information systems together to provide a mechanism for the seamless collection and disbursement of cash payments between Motorola companies and their suppliers. The key results are just-in-time money and the integration of financial processes throughout the cash supply chain. Finally, the authors compare the results with existing management/information systems theories on globalization and competition.

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Global competition is a general trend, and new types of organizations are emerging to service international markets.1 Companies are coordinating manufacturing, distribution, and marketing strategies on a global scale. Information systems are a key part of these globalization strategies because computer networks move large volumes of data across great distances almost instantaneously, thereby negating the importance of geographic location.2 Therefore managers on different continents can share data and applications easily and quickly. European manufacturing and sales data can be easily collated with data from Japan. Similarly, a manager using a terminal in Europe can access a mainframe computer in the United States. These trends present new opportunities for managers to redesign their organizations and also their relationships with trading partners.

In this paper, we trace the changing role of treasury management at Motorola over a period of sixteen years. We present the organizational, strategic, and information technology shifts. In the context of manufacturing and marketing trends such as increased integration between organizations and just-in-time product flows, cash management is an important business process because of the potential benefits and inevitable outcome of cash flows moving to align with product flows.3 Our research methodology is based on Eisenhardt’s framework and focuses on the importance of theory development from case research.4 This case study of... To read the complete article, login or sign-up using the form below.

 
 

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