1. Currency Management &
Optimization (CMO)
Manage your Cash Logistics efficiently
Girish Nehete,
Business Development
Global Line of Business Banking, APJ
05th June 2008
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
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*
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
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
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
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.