Historically grown and complex Intercompany structures often include non-value adding flows, cause inefficiencies, considerable costs, and block scalability. Only a holistic approach to intercompany optimization enables efficiency.
As global product supply chains and service delivery models evolve, intercompany transactions are exploding in volume and complexity. For some of our clients, intercompany transactions exceed external revenue by a factor of 5–10x. Nevertheless, many companies still treat intercompany transactions as a “necessary evil”, underestimating their business value and impact.
Intercompany refers to the movement of goods, services, and values between legal entities within the same corporate group. These flows often involve cross-border shipments, internal supply and multi-tier distribution setups, making them operationally critical. If not consciously structured, they end up in a complex setup.
Although internal, these transactions must meet the same standards of accuracy, traceability, and compliance as third-party transactions. Different departments within a company are under increasing pressure by the burden of managing Intercompany flows and processes.
The challenges of Intercompany
Intercompany requires a tight alignment between Sales, Supply Chain, Finance, Tax, and the IT function. However, this is difficult to achieve since Intercompany processes are rarely owned end-to-end, and responsibilities are split. Additionally, there is often a lack of global standards and governance, which for example causes inconsistent guardrails and transparency about the evolving intercompany processes.
A key reason for this is the absence of a clearly defined intercompany model that is consistently maintained over time. Instead of evolving the model in a structured way, organizations tend to add exceptions to outdated structures, further weakening consistency and increasing complexity.
On the technology side, legacy systems and decentralized ERP landscapes are hindering efficient process integration and transparency. In the worst case, manual workarounds such as Excel spreadsheets, email threads, and offline intercompany reconciliations are widely used, creating inefficiencies, compliance risks, and limited audit proof.
A holistic approach to Intercompany Optimization
Due to the complex cross-functional nature of intercompany flows, a holistic approach is needed to make a meaningful change. We recommend focusing on four dimensions.
Governance & Organization
The goal: Establish intercompany Governance & Organization that is fit-for-future.
It is necessary to define global governance structures with clear responsibilities, harmonized policies, and ideally standardized master data. Implementing Process Performance Indicatory (PPIs) and a framework for tracking those ensures efficient execution and supports compliance across all entities.
Material & Value Flows
The goal: Establish end-to-end transparency of material and value flows to identify opportunities for simplification, increased efficiency, and streamlined operations.
Material and Value flows represent the overarching E2E perspective of how goods and financial value move through a corporate group. Mapping material and value flows across legal entities provides insights into pain points, inefficiencies, bottlenecks, and regulatory risks. By gaining transparency, redundant, obsolete or unwanted material and value flows are uncovered which can then be dissolved.
Intercompany Processes
The Goal: Standardize and automate intercompany processes to reduce manual effort and increase efficiency. Define a clear target picture for sustainable optimization.
Intercompany processes reflect the operational execution of material and value flows within a company’s system landscape. End-to-end process mapping covering finance, supply chain, and IT helps identify gaps and inefficiencies. Aligning process execution with global regulatory requirements and defining a future-state “target picture” based on best practices enables structured planning for the optimization.
System Architecture
The goal: Assess whether processes and data are optimally distributed across the current system landscape, or if potential adjustments could enable a more effective setup.
A thorough analysis of the current system landscape informs the feasibility of enabling seamless data exchange and processes. A target solution architecture has to be developed that connects finance and supply chain systems for a single truth for all intercompany transactions. A structured roadmap then outlines the way to go for sustainable intercompany improvements.
A clear target picture, derived from the four assessed dimensions, serves as the basis for an optimization roadmap. To ensure a seamless transition, this roadmap defines an implementation strategy, structures work packages, and defines a project governance framework. The entire process is supported by a robust business case, helping to capture cost savings, efficiency gains, and risk mitigation. A benefit case to justify the optimization and subsequent tracking of the optimization ensures buy-in and support from the relevant stakeholders.
Benefits of Intercompany Optimization
- Organizations that adopt a holistic optimization model typically realize:
- Increased efficiency through the reduction of non-value-adding material and value flows, leading to faster and streamlined intercompany transactions
- Enhanced process resilience and compliance through harmonized workflows aligned with regulatory and strategic requirements.
- Improved cross-entity collaboration and transparency, enabling better decision-making and operational agility.
- Scalable, future-ready system architecture and governance designed to support sustainable growth, adapt to organizational changes, and enable faster onboarding of new entities into the intercompany network.
Conclusion
Intercompany should not be viewed as a back-office burden, but rather as a business capability that enables operational excellence, agility and compliance. As transaction volumes grow, the frequency of unexpected events increases and regulatory expectations rise. Organizations that take a proactive, structured approach to intercompany optimization position themselves for long-term success.
