by Alison Weiss
Cyber Monday may have its place—but when it comes to kicking off the holiday shopping season in the United States, Black Friday is still king.
Shoppers’ excitement to fill the malls on the day after Thanksgiving reflects overall attitudes toward the bricks-and-mortar shopping experience. According to the US Department of Commerce, online shopping accounted for only 5.2 percent of total retail sales in 2012, despite continued year-over-year growth—leaving the lion’s share of the remaining economy to the shopping center.
Location: Sydney, Australia; Los Angeles, California (US headquarters)
Industry: Property development and shopping center management
Revenue: AU$4.05 billion in 2011
Oracle products: JD Edwards EnterpriseOne, Oracle Hyperion Financial Data Quality Management
Vice President of Shared Services
Length of tenure: Three years
Education: BS in accounting, University of Illinois at Urbana-Champaign
Given the mall’s importance to the retail ecosystem, it should come as no surprise that a shopping center’s design and management are finely tuned and closely managed. It’s no coincidence that your favorite shoe store is located next to your favorite clothing boutique and that services—such as dry cleaners and optometrists—are located right inside the front doors, easily accessible from the parking lot. Indeed, store location is essential to a mall’s success, offering superior shopping experiences with the goal of keeping vacancy rates low to maximize rental revenues.
“Retailer mix, design, and service are the key components of shopping centers,” says Keitha Mills, director of lease abstract and billing at Westfield Group, a global shopping mall construction and management company that operates more than 100 malls around the world. “But if you don’t have a system set up with standards and processes, you won’t be able to accurately and efficiently identify what stores are generating the highest sales or rental revenues.”
In the United States alone, Westfield’s 47 domestic properties account for 400 million shopper visits each year. To keep those shopping centers running at maximum efficiency, Westfield executives must continuously collect rent from thousands of tenants based on specific terms of each rental agreement. But they must also track maintenance costs and shared common area fees and address complicated issues related to regulatory and tax compliance that differ from country to country—all while taking strategic steps to reduce vacancy rates across the portfolio.
In 2006, Westfield implemented Oracle’s JD Edwards EnterpriseOne 8.11 to manage accounting and finances, upgrading to Release 9.1 in 2013. Westfield employees use several modules to automate key aspects of the business and build a shared services culture that has transformed operations.Lease Abstraction
Managing leases for thousands of global mall vendors is no small task. For example, some of Westfield’s tenants have leases for shops in multiple malls, while others have temporary leases in a single location. Some may be occupying traditional store spaces, while still others may be leasing kiosks or carts. These diverse details are contained in paper legal documents that are quite lengthy and not necessarily written for daily business use, despite the fact that many employees rely on data in the leases to do their everyday jobs.
So property managers depend on a lease abstract, a summary of the key financial, business, and legal information in a commercial lease—rent amount, termination dates, and tenant allowances. Property managers need this information to ensure that tenants are billed correctly and rents are collected on a timely basis. “If we don’t get the lease abstract right, we don’t get the billings right, and if we don’t get that right, we can’t collect our cash,” says Mills.
Software is just the tool to implement business functions. And if you don’t think through the business function and get an IT partner . . . the chances of designing a perfect tool to meet the process are virtually nil.”–David Balasa, Vice President of Shared Services, Westfield Group
Personnel in Mills’ Lease Abstract and Billing department take master lease documents saved in a record retention application and then input key pieces of data from the leases into JD Edwards EnterpriseOne, including tenant addresses, rent, and recurring billing information. Having ready access to this data facilitates billing and collections and provides a clearer picture of revenues. Of particular importance are the legal covenants, such as tenant allowances, options, and landlord and tenant rights. Once the information is in the system, property managers at individual centers run reports by covenant detail type to do comparisons to sales or to determine which tenants are due for maintenance or remodeling. In addition, property managers access legal covenants every day, running reports to see if a tenant has limits on what products can be sold at a particular location or if there are restrictions on the placement of a nearby kiosk.
“The goal is to be able to pull covenant information from a report rather than having to go back through every single lease each time information is needed,” says Mills. “This is not an effective use of our time, especially with the technologies available to us.”
The JD EnterpriseOne system also manages all the accounting processes such as fixed assets, general ledger, and accounts payable. Users can easily do gross lease area calculations to see what areas are available for rent, or calculations to determine prorated rent amounts for tenants. But because they draw on lease abstraction data to do these calculations, it is imperative that the information be input as accurately as possible from the start.Central Planning
In 2010, Westfield’s CFO decided to start a shared services center to centralize revenue collection functions managed at individual malls and to optimize interrelated billing and accounting processes. David Balasa, vice president of shared services at Westfield Group, came aboard to head up the new operation, which encompasses lease abstract and billing, the accounting department, and a variety of other operations. His goal was to enable shared services to become the one-stop shop for financial support for the centers. And Balasa had very clear ideas of how to improve Westfield’s organizational culture and streamline manual and automated processes: it would all start with strategic thinking and collaborating with IT.
IT is not just a technology department—it’s a partner with business. You cannot effectively drive business value if you do not understand the business goals and processes.”–Jae Kim, Vice President, Enterprise Applications, Westfield Group
“Software is just the tool to implement business functions,” he observes. “And if you don’t think through the business function and get an IT partner to sit with you and go through all the aspects of that process, the chances of designing a perfect tool to meet the process are virtually nil.”
One of Balasa’s first decisions was to bring in accounts receivable under the umbrella of shared services. In the past, accountants at each mall who were responsible for reviewing lease abstracts and collecting rents from tenants used spreadsheets and Post-it notes. Centralizing accounts receivable required IT personnel to turn on the collections functionality in JD Edwards EnterpriseOne to give users an overall view of accounts across all the malls and an accurate record of exactly what was owed. It also allowed users to put notes in the system to capture knowledge from the field about the accounts, which hadn’t been possible before. Balasa was pleased with the progress, but he knew that more could be accomplished with continued cooperation between IT and the business.
Jae Kim, vice president, enterprise applications at Westfield Group, joined the company around the same time, and he immediately embraced Balasa’s cooperative strategy. In fact, he took time to learn about Westfield’s core business operations because without that knowledge, he knew it would be impossible to effectively leverage technology to support the business. “IT is not just a technology department—it’s a partner with business. You cannot effectively drive business value if you do not understand the business goals and processes,” he says.
With many years of experience working with JD Edwards EnterpriseOne, Kim recognized that Westfield back-office personnel could definitely optimize the enterprise resource planning (ERP) system to get a clearer view of revenues. The question he posed was whether to upgrade to JD Edwards EnterpriseOne 9.1 immediately or improve the existing implementation first.
“We decided to target improvements so that the business would get the maximum benefit from those areas right away and then do the upgrade,” says Kim. “I knew that if my team and I did the improvements correctly, during the upgrade they would port right over.”
As a guiding principle, Kim and his IT staff strive to create a clear, concise, and simple applications environment, so he wanted to partner with business personnel to help them establish a similar operating model for business processes. “When you combine business acumen with bone-deep system knowledge, both functional and technical, and focus on end-to-end process re-engineering, you can create simple and elegant solutions that really drive value. If you are missing any one of those components, you run the risk of needless complexity,” he says.
For Mills, this collaboration with IT personnel was key. She knew that there were many business processes in her department that were less than adequate. For example, when it came time to do the billing, she and her team used to have to check and review the same billings and lease abstracts two or three times—and even then they weren’t achieving the high accuracy levels they wanted.
Number of shopper visits at Westfield Group’s 47 malls in the United States in 2012 (Source: Westfield Group)
“We didn’t use the JD Edwards EnterpriseOne system as well as we could have, and ended up with a lot of manual processes, overworked people, and frustration,” she says. “But when we went through the billing modules with IT personnel to help us really understand them, we found that the system is very capable.”
Mills and her staff also worked in tandem with IT personnel to analyze how reports using new filters available in JD Edwards EnterpriseOne 9.1 would affect not only her department but all the other areas of the business that make use of the data her department generates.
“We needed to keep in mind where our data goes, who uses it, how they use it, and what else they need to glean from it,” she says.Clear, Concise Upgrading
When Kim was comfortable that business processes were streamlined and concise, it was time to focus on the technical layer to make any improvements to help the ERP system provide better support for business users. Once again, a collaborative culture was beneficial.
“We have a number of people on both our fantastic IT and finance teams who can bridge the gap between the functional and the technical,” observes Balasa. “This is what made the difference for a successful IT project.”
Starting in November 2012, the IT staff did a full analysis to look at every customized object in JD Edwards EnterpriseOne 8.11 to determine if it had been deployed into production. Next, they looked at every report with the idea of eliminating any that had been run fewer than five times in the previous year. Then the team painstakingly made sure everything would work well in JD Edwards EnterpriseOne 9.1. The end result: a clean and concise system.
When it was time to upgrade just five months later, the team of in-house developers and two contract developers managed the whole process with few glitches. Not only did all the improved customized objects and reports port over without any issues, but even the countless integrations that existed between JD Edwards EnterpriseOne and other systems such as Oracle Hyperion worked properly in the upgraded version.
“We run a hub-and-spoke model, so most of our integrations run through the data warehouse,” explains Kim. “When there are changes to the ERP system, the data warehouse can act as a buffer so third-party applications are not affected. Overall, this was one of the smoothest upgrade projects I’ve ever been part of.”
Kim has had happy reports from business users that the new upgraded system saves time and is much more user-friendly. Users also like having more power to build queries up front and save them. So, if someone works on leases pertaining to a particular geographic area, when she comes into a particular screen, the default query can automatically filter and bring up data for that specific area she needs to work with.
Mills appreciates that it’s much easier now for her staff to enter accurate lease abstraction data and retrieve data out of the system for different types of lease analysis. It’s also much simpler to provide property managers with reports that show the rates per square foot being charged at their centers and where the revenues are heading.
In the near future, Balasa hopes to take advantage of the enhanced functionality in JD Edwards EnterpriseOne 9.1 to automate calculations in leases associated with allocating costs for expenses shared by tenants, such as common area charges and property taxes. Today, the calculations are done manually several times a year, so automation will save an enormous amount of time.
Balasa expects that the process improvement projects to enhance mall management at Westfield will continue to flourish because of the cross-functional teamwork of business and IT personnel—and effective systems.
“In the end, it’s all about the accuracy of our billings and the customer service we provide to our tenants,” he says.
Photography by Shutterstock