05 girish the_need_for_currency

Currency Management &Optimization (CMO)

Manage your Cash Logistics efficiently

Girish Nehete,Business DevelopmentGlobal Line of Business Banking, APJ05th June 2008

Why CMOWhat is CMOThe Solution OfferingValue Proposition

CMO Overview

Cash Points:BranchesATMs


CentralBankCentralBank

Cash CenterCash Center

SAP CMO enables banks to handle their cashlogistics more efficient

Key Priority:

1.To reduce the cost of cash handling2.Mitigate business and transportation risk3.Integrate new business models to raise customer satisfaction.

Key Priority:

1.To reduce the cost of cash handling2.Mitigate business and transportation risk3.Integrate new business models to raise customer satisfaction.

To reduce the cost of cash a bank needs tohave precise information on customers cashdemand in the future.To reduce dormant cash in ATM’s and vaultsof a bank, currency has to be transferredtimely and in the right amount.To avoid expensive emergency cashreplenishment timely and adequate cashsupply is required

Heads of planning have no transparency into the processes of cash logistics and havedifficulties to predict the right amount of cash in the right place.

Mag

nitu

deP

ain

Result: High levels of dormant cash and high cost of cash logistics

Cash Points:Branches

ATMs


ATMs

CentralBank

CentralBank

Cash CenterCash CenterCash Points:

BranchesATMs


ATMs

CentralBank


CentralBank


Manifestation: Pain for a banks planningdepartment

Save 5 – 30% of the total cost offinancial operations

Deliver complete transparency into allcash movements

Reduction in number of armored carsreduces the overall business risks

SAP enables a bank to meet one of theirkey priorities: To reduce the cost of cash and to mitigate

business and transportation risk, while integrating new business modelsto raise customer satisfaction.

.

Banco ItaùBrazil largest Bank

3,000 branches and 21,000 ATMs all over Brazil

Key benefits recognizedSignificant reduction in dormant cash in ATMs and vaultsSave 15% of of the total cost of financial operationsTransparent processes allow to take strategic decision regarding cash logisticsReduction of overall business riskDirect impact on a banks bottom line

SAP CMO enables banks to handle their cashlogistics more efficient

http://www.itau.com.br/index.html

http://www.sap.com/company/investor/reports/annualreport/2005/en/stories/banco.html


Agenda

The Cost of Transportation Is Sometimes High





What is Currency Management & Optimization?

SAP Currency Management & Optimization supports the currency supply chain for banks –including:SAP Currency Management & Optimization supports the currency supply chain for banks –including:

Forecasting cash requirementsForecasting cash requirements

Cash transportation optimizationCash transportation optimization

Cash transportation order processingCash transportation order processing

Cash order automation and invoicematchingCash order automation and invoicematching

Banks treat currency as a commodityExcess amount of cash held to satisfy customers demandNo forecast of currency demand

Banks are not aware of their cost of holding currencyNo visibility of supply networkControl 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 ATMsto be between 30 and 60%

Issue #1: Dormant cash

A simple fact:

26% of cost in cash logistics is related to cash handling

Supplier NegotiationBanks have no global visibility on their transportation needsWeak negotiation position with service providers

Order execution and managementCash transports not optimized by third party providersBanks match manually service orders with invoices / no integration

Issue #2: Inefficient service providermanagement

Risk associated with the handling of currencyEmbezzlement lossesThreat of robberies

Business riskThreat 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*

Issue #3: How to mitigate risk


Agenda

CMOSystem

WTU

Bank

Central bankAccount

Cash Point

Cash Management& Optimization solution

SAP Banking solution

$

$/# $/#$

#

Conceptual structureof the cash supply chain & solution scope

Process of Currency Management andOptimization

1

Model of currencysupply chain

4Executetransportation orders

5Monitoring and managing

exceptions

2 Forecast of demand

3Create global currency

distribution plan

5 1

2

3

4

Build a Model of the Currency Supply Chain

Time SeriesAugust September

W32 W33 W34 W35 W36 W37 W38 W39 W40 W41

Time SeriesAugust September

W32 W33 W34 W35 W36 W37 W38 W39 W40 W41W32 W33 W34 W35 W36 W37 W38 W39 W40 W41

Bills

Loca

tion

Period

Bills

Loca

tion

Period

BillsBills

ATMs and AgenciesATMs and Agencies

5 1

2

3

4

Flexible data modelMultiple dimensions in time,locations and notesDescribing transportationroutes, capacities and otherrestrictionsIntegrates basic businesslogic

Forecast of Demand

5 1

2

3

4

AUTOMATED

PICK

BEST

Constant

Trend

Season(without trend)

Trend - Season

Others

Causal Analysis

Composite Forecast

Versatile planning methodsCombining different forecasting methodsis improving forecast accuracy.Best Pick functionality makes sure thesuited forecast method is chosen.Adding a casual analysis of factors like“day of week” and holidays will furtherenhance accuracy.

Create Global Currency Distribution Plan

5 1

2

3

4

--50,000Sunday

125,000150,00091,000Saturday

--90,000Friday

250,000200,00095,000Thursday

--88,000Wednesday

--75,000Tuesday

200,000200,00065,000Monday

Adjusted PlanPlanedTransportsDemand

--50,000Sunday

125,000150,00091,000Saturday

--90,000Friday

250,000200,00095,000Thursday

--88,000Wednesday

--75,000Tuesday

200,000200,00065,000Monday

Adjusted PlanPlanedTransportsDemandSupply Network Planning

Calculate amounts to be delivered to thelocationsDynamic and multi stage safety stockcalculation based on target service levelSimulation and comprehensive tacticalplanning of sourcing decisionsOptimization of transport loads byconsidering constraints and penalties toplan cash flow along the supply chainOptimizes total process cost

Execute Transportation Orders

Integration into back endAutomated order generationElectronic Data Interchange with suppliersAutomated matching orders to invoices

5 1

2

3

4

LocalBranchCentral-

bankVault

Headquarter

MoneypickupMoneypickup

Carrier

Money onRoute

Money onRoute

Delivery isscheduled

MoneyReceivedMoney

Received

Delivery ofmoney isrequested

LocalATM

loaded

Execution & Monitoring


Agenda

CMO Solution Components

PlanningSAP Advanced Planning andOptimization

ExecutionSAP ERP

TrackingSAP Event Management

MonitoringSAP Business Intelligence

IntegratingSAP NetWeaver

SAP Offering vs. “ATM Providers”

( ) Process is not executed in real time

-Three-way order matching

-

( )

-

ATM Providers

( )ATM monitoring

Integration into back office

Order automation

Order processing

Sophisticated demand planning

Inventory management

SAP Offering

-Three-way order matching

-

( )

-

ATM Providers

( )ATM monitoring

Integration into back office

Order automation

Order processing

Sophisticated demand planning

Inventory management

SAP Offering

Only SAP is offering highly structured, traceable, standardized and fully integratedprocesses of cash logisticsOnly SAP is offering highly structured, traceable, standardized and fully integratedprocesses of cash logistics


Agenda

CMO – Value Generation

Create Value

IncreaseProfitability

IncreaseROA

IncreaseRevenue

Reduce Costs

Reduce useof Circulating

Capital

OptimizeUse of Fixes

Assets

Increased cash availabilityIncreased service level

Reduce transportation expensesReduce risk costsReduce operational costsReduced contracting costs

Reduce cash inventory

Optimize use of fixed assets(ATMs, Vehicles, etc..)

CMO is all about value generation

Key capabilitiesPlanning

Superior Demand Planning through sophisticatedforecast methodsOptimized inventory managementRole based planning processes leveraging localknowledge

ExecutionTransparent service provider managementAutomated Procurement and Order ProcessingWorkflow based Invoice settlementLogistics route planning

IntegrationFull integration with ERPOpen infrastructure through SAP NetWeaverFull regulatory compliance (e.g. SOX, IAS, BII)

Reduction of currency logistic spend upto 15-30% per year*

Raise customer satisfaction throughincrease in service level

Mitigation of overall business risk

Reduction of dormant cash up to25%*

1

Flexibility to adapt new business modelse.g. outsourcing / shared service center

2

3

4

5

SAP Value Proposition Currency ManagementOptimization for Banking

Value impact

*) Expert Estimation

CMO Customer Reference – Banco Itau

Banco Itau

www.itau.com.br

CMO Customer Reference – CESKASPORITELNA

Summary

SAP CMO enables a bank to meet one of their key priorities: To reduce the costof cash and to mitigate business and transportation risk, while integrating newbusiness 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 linearregression.

CMO is a global integrated solution combining the power of SAP SCM for theplanning side and the robust execution side provided by SAP ERP for ordermanagement, transport execution and invoice control.

CMO is fully enabled by SAP NetWeaver™ and takes all the benefits of theEnterprise Service Architecture.

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