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Currency Management &
Optimization (CMO)

Manage your Cash Logistics efficiently




Girish Nehete,
Business Development
Global Line of Business Banking, APJ
05th June 2008
CMO Overview




Why CMO
What is CMO
The Solution Offering
Value Proposition
SAP CMO enables banks to handle their cash
logistics 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
Manifestation: Pain for a banks planning
department
            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 have
Pain




            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
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 Brazil


Key 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
Agenda




Why CMO
What is CMO
The Solution Offering
Value Proposition
The Cost of Transportation Is Sometimes High
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
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%
Issue #2: Inefficient service provider
management


Supplier Negotiation
 Banks have no global visibility on their transportation needs
 Weak negotiation position with service providers

Order 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
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*
Agenda




Why CMO
What is CMO
The Solution Offering
Value Proposition
Conceptual structure
of the cash supply chain & solution scope
                               SAP Banking solution




                                             $        Central bank
                                                      Account

                                 Bank

     Cash Management
     & Optimization solution        $
                      $/#       CMO        $/#
                                System

                                                         WTU
       Cash Point

                                #
Process of Currency Management and
Optimization

                                                                  Model of currency
   Monitoring and managing                                          supply chain
          exceptions
                             5                            1




      Execute
transportation orders   4                                     2      Forecast of demand



                                                                                5       1


                                          3                                 4               2

                                 Create global currency                             3
                                    distribution plan
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
Forecast of Demand



Versatile 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
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
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                   Branch
Central-              Vault                                                                loaded
                     Money
                     Money
 bank                pickup                   Money on
                                              Money on
                     pickup
                                               Route
                                               Route


                                 Execution & Monitoring
Agenda




Why CMO
What is CMO
The Solution Offering
Value Proposition
CMO Solution Components




                          Planning
                           SAP Advanced Planning and
                           Optimization

                          Execution
                           SAP ERP




                          Tracking
                           SAP Event Management



                          Monitoring
                           SAP Business Intelligence

                          Integrating
                           SAP NetWeaver
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
Agenda




Why CMO
What is CMO
The Solution Offering
Value Proposition
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
SAP Value Proposition Currency Management
Optimization for Banking

Key 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
CMO Customer Reference – Banco Itau
Banco Itau




       www.itau.com.br
CMO Customer Reference – CESKA
SPORITELNA
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.
Thank you!




© SAP Summit 08 / Page 29
Copyright 2008 SAP AG
  All rights reserved

  No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed
  without prior notice.
  Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors.
  SAP, R/3, xApps, xApp, SAP NetWeaver, Duet, SAP Business ByDesign, ByDesign, PartnerEdge and other SAP products and services mentioned herein as well as their respective logos are
  trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned and associated logos displayed
  are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary.
  The information in this document is proprietary to SAP. This document is a preliminary version and not subject to your license agreement or any other agreement with SAP. This document
  contains only intended strategies, developments, and functionalities of the SAP® product and is not intended to be binding upon SAP to any particular course of business, product strategy,
  and/or development. SAP assumes no responsibility for errors or omissions in this document. SAP does not warrant the accuracy or completeness of the information, text, graphics, links, or
  other items contained within this material. This document is provided without a warranty of any kind, either express or implied, including but not limited to the implied warranties of
  merchantability, fitness for a particular purpose, or non-infringement.
  SAP shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials. This limitation
  shall not apply in cases of intent or gross negligence.
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  materials and does not endorse your use of third-party Web pages nor provide any warranty whatsoever relating to third-party Web pages



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  SAP AG nicht gestattet. In dieser Publikation enthaltene Informationen können ohne vorherige Ankündigung geändert werden.
  Einige von der SAP AG und deren Vertriebspartnern vertriebene Softwareprodukte können Softwarekomponenten umfassen, die Eigentum anderer Softwarehersteller sind.
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05 girish the_need_for_currency

  • 1. Currency Management & Optimization (CMO) Manage your Cash Logistics efficiently Girish Nehete, Business Development Global Line of Business Banking, APJ 05th June 2008
  • 2. CMO Overview Why CMO What is CMO The Solution Offering Value Proposition
  • 3. SAP CMO enables banks to handle their cash logistics 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. Manifestation: Pain for a banks planning department 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 have Pain 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. 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 Brazil Key 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. Agenda Why CMO What is CMO The Solution Offering Value Proposition
  • 7. The Cost of Transportation Is Sometimes High
  • 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. 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. Issue #2: Inefficient service provider management Supplier Negotiation Banks have no global visibility on their transportation needs Weak negotiation position with service providers Order 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. 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. Agenda Why CMO What is CMO The Solution Offering Value Proposition
  • 13. Conceptual structure of the cash supply chain & solution scope SAP Banking solution $ Central bank Account Bank Cash Management & Optimization solution $ $/# CMO $/# System WTU Cash Point #
  • 14. Process of Currency Management and Optimization Model of currency Monitoring and managing supply chain exceptions 5 1 Execute transportation orders 4 2 Forecast of demand 5 1 3 4 2 Create global currency 3 distribution plan
  • 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. Forecast of Demand Versatile 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. 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. 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 Branch Central- Vault loaded Money Money bank pickup Money on Money on pickup Route Route Execution & Monitoring
  • 19. Agenda Why CMO What is CMO The Solution Offering Value Proposition
  • 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. 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. Agenda Why CMO What is CMO The Solution Offering Value Proposition
  • 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. SAP Value Proposition Currency Management Optimization for Banking Key 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. CMO Customer Reference – Banco Itau
  • 26. Banco Itau www.itau.com.br
  • 27. CMO Customer Reference – CESKA SPORITELNA
  • 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. Thank you! © SAP Summit 08 / Page 29
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