05 girish the_need_for_currency

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05 girish the_need_for_currency

  1. 1. Currency Management &Optimization (CMO)Manage your Cash Logistics efficientlyGirish Nehete,Business DevelopmentGlobal Line of Business Banking, APJ05th June 2008
  2. 2. CMO OverviewWhy CMOWhat is CMOThe Solution OfferingValue Proposition
  3. 3. SAP CMO enables banks to handle their cashlogistics more efficient Key Priority: Key Priority: 1.To reduce the cost of cash handling 1.To reduce the cost of cash handling 2.Mitigate business and transportation risk 2.Mitigate business and transportation risk 3.Integrate new business models to raise customer satisfaction. 3.Integrate new business models to raise customer satisfaction. Central Central Bank Bank Cash Points: Cash Points: Cash Center Branches Branches Cash Center ATMs ATMs
  4. 4. Manifestation: Pain for a banks planningdepartment Result: High levels of dormant cash and high cost of cash logistics Heads of planning have no transparency into the processes of cash logistics and havePain difficulties to predict the right amount of cash in the right place. To reduce the cost of cash a bank needs to have precise information on customers cash demand in the future. Central Central Bank Bank To reduce dormant cash in ATM’s and vaults Cash Center Cash Center Cash Points: Cash Points: Branches Branches of a bank, currency has to be transferred ATMs ATMs timely and in the right amount.Magnitude To avoid expensive emergency cash replenishment timely and adequate cash supply is required
  5. 5. SAP CMO enables banks to handle their cash logistics more efficient SAP enables a bank to meet one of their key priorities: To reduce the cost of cash and to mitigate business and transportation risk, while integrating new business models to raise customer satisfaction. . Save 5 – 30% of the total cost of Deliver complete transparency into all Reduction in number of armored cars financial operations cash movements reduces the overall business risks Banco Itaù Brazil largest Bank 3,000 branches and 21,000 ATMs all over BrazilKey benefits recognized Significant reduction in dormant cash in ATMs and vaults Save 15% of of the total cost of financial operations Transparent processes allow to take strategic decision regarding cash logistics Reduction of overall business risk Direct impact on a banks bottom line
  6. 6. AgendaWhy CMOWhat is CMOThe Solution OfferingValue Proposition
  7. 7. The Cost of Transportation Is Sometimes High
  8. 8. What is Currency Management & Optimization? SAP Currency Management & Optimization supports the currency supply chain for banks – SAP Currency Management & Optimization supports the currency supply chain for banks – including: including: Forecasting cash requirements Forecasting cash requirements Cash transportation order processing Cash transportation order processing Cash order automation and invoice Cash order automation and invoice Cash transportation optimization Cash transportation optimization matching matching Central Central Bank Bank Cash Points: Cash Points: Cash Center Branches Branches Cash Center ATMs ATMs
  9. 9. Issue #1: Dormant cash Banks treat currency as a commodity Excess amount of cash held to satisfy customers demand No forecast of currency demand Banks are not aware of their cost of holding currency No visibility of supply network Control of cash replenishments sometimes with third parties Banks have not yet centralized the process of currency management A simple fact: Current surveys estimate dormant cash level in ATMs to be between 30 and 60%
  10. 10. Issue #2: Inefficient service providermanagementSupplier Negotiation Banks have no global visibility on their transportation needs Weak negotiation position with service providersOrder execution and management Cash transports not optimized by third party providers Banks match manually service orders with invoices / no integration A simple fact: 26% of cost in cash logistics is related to cash handling
  11. 11. Issue #3: How to mitigate risk Risk associated with the handling of currency Embezzlement losses Threat of robberies Business risk Threat of out of cash situations A simple fact: From 2000 to 2007 there was an increase of 25,1% in bank robberies in the US*
  12. 12. AgendaWhy CMOWhat is CMOThe Solution OfferingValue Proposition
  13. 13. Conceptual structureof the cash supply chain & solution scope SAP Banking solution $ Central bank Account Bank Cash Management & Optimization solution $ $/# CMO $/# System WTU Cash Point #
  14. 14. Process of Currency Management andOptimization Model of currency Monitoring and managing supply chain exceptions 5 1 Executetransportation orders 4 2 Forecast of demand 5 1 3 4 2 Create global currency 3 distribution plan
  15. 15. Build a Model of the Currency Supply Chain Flexible data model W32 W33 W34 W35 W36 W37 W38 W39 W40 W41 August September Multiple dimensions in time, Time Series rio d Pe locations and notes Describing transportation Location routes, capacities and other restrictions Integrates basic business Bills logic ATMs and Agencies Bills 5 1 4 2 3
  16. 16. Forecast of DemandVersatile planning methods A U Constant Causal Analysis T Combining different forecasting methods O is improving forecast accuracy. M A Trend T Best Pick functionality makes sure the E suited forecast method is chosen. D Season (without trend) P Adding a casual analysis of factors like I “day of week” and holidays will further C K Trend - Season enhance accuracy. Composite Forecast B E S Others T 5 1 4 2 3
  17. 17. Create Global Currency Distribution Plan Supply Network Planning Demand Planed Adjusted Plan Transports Calculate amounts to be delivered to the Monday 65,000 200,000 200,000 locations Tuesday 75,000 - - Dynamic and multi stage safety stock calculation based on target service level Wednesday 88,000 - - Simulation and comprehensive tactical Thursday 95,000 200,000 250,000 planning of sourcing decisions Friday 90,000 - - Optimization of transport loads by Saturday 91,000 150,000 125,000 considering constraints and penalties to Sunday 50,000 - - plan cash flow along the supply chain Optimizes total process cost 5 1 4 2 3
  18. 18. Execute Transportation Orders Integration into back end 5 1 Automated order generation Electronic Data Interchange with suppliers Automated matching orders to invoices 4 2 3 Delivery is Delivery of scheduled money is requested Headquarter Money Money Local Local Received Received ATM Carrier BranchCentral- Vault loaded Money Money bank pickup Money on Money on pickup Route Route Execution & Monitoring
  19. 19. AgendaWhy CMOWhat is CMOThe Solution OfferingValue Proposition
  20. 20. CMO Solution Components Planning SAP Advanced Planning and Optimization Execution SAP ERP Tracking SAP Event Management Monitoring SAP Business Intelligence Integrating SAP NetWeaver
  21. 21. SAP Offering vs. “ATM Providers” Only SAP is offering highly structured, traceable, standardized and fully integrated Only SAP is offering highly structured, traceable, standardized and fully integrated processes of cash logistics processes of cash logistics ATM Providers SAP Offering Inventory management Sophisticated demand planning - Order processing Order automation ( ) ATM monitoring ( ) Integration into back office - Three-way order matching - ( ) Process is not executed in real time
  22. 22. AgendaWhy CMOWhat is CMOThe Solution OfferingValue Proposition
  23. 23. CMO – Value Generation Increase Increased cash availability Revenue Increased service level Increase Profitability Reduce transportation expenses Reduce risk costs Reduce Costs Reduce operational costs Reduced contracting costs Create Value Reduce use of Circulating Reduce cash inventory Capital Increase ROA Optimize Optimize use of fixed assets Use of Fixes (ATMs, Vehicles, etc..) Assets CMO is all about value generation
  24. 24. SAP Value Proposition Currency ManagementOptimization for BankingKey capabilities Value impact Planning Superior Demand Planning through sophisticated forecast methods 1 Reduction of dormant cash up to 25%* Optimized inventory management Role based planning processes leveraging local knowledge Reduction of currency logistic spend up Execution 2 to 15-30% per year* Transparent service provider management Automated Procurement and Order Processing Workflow based Invoice settlement Raise customer satisfaction through 3 Logistics route planning increase in service level Integration Full integration with ERP Open infrastructure through SAP NetWeaver 4 Mitigation of overall business risk Full regulatory compliance (e.g. SOX, IAS, BII) Flexibility to adapt new business models 5 e.g. outsourcing / shared service center *) Expert Estimation
  25. 25. CMO Customer Reference – Banco Itau
  26. 26. Banco Itau www.itau.com.br
  27. 27. CMO Customer Reference – CESKASPORITELNA
  28. 28. Summary SAP CMO enables a bank to meet one of their key priorities: To reduce the cost of cash and to mitigate business and transportation risk, while integrating new business models to raise customer satisfaction. CMO is based on the best-in-class SCM application proven with 350+ customers in all industries CMO has unique and highly sophisticated planning features like multi linear regression. CMO is a global integrated solution combining the power of SAP SCM for the planning side and the robust execution side provided by SAP ERP for order management, transport execution and invoice control. CMO is fully enabled by SAP NetWeaver™ and takes all the benefits of the Enterprise Service Architecture.
  29. 29. Thank you!© SAP Summit 08 / Page 29
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