Photo of Damjan Stukelj, adidas Group and Richard Parkinson.

This solution forms part of the adidas Group’s Driving Route 2015 campaign which it launched in 2010. The motto of this campaign is ‘simplify to the max’. See how adidas has re-engineered its processes and why several of its peers are now contacting them for benchmarking purposes.

The issues the adidas Group’s treasury department set out to address when the company launched its Route 2015 strategic business plan were:

• Inefficient application of excess liquidity.
• Lack of transparency of bank accounts.
• No standardised and timely liquidity position forecasts.
• Over 1,000 bank accounts with high idle balances and multiple accounts in the same currencies for the same legal entities.
• Inefficient cash management processes managed by multiple people, with too much manual intervention.
• Rising and irreconcilable bank charges.
• Plethora of local bank documentation for multiple subsidiaries.
• Multiple bank-specific payment and information channels/e-banking systems, payment formats and payment processes.

As Damjan Stukelj, Director Treasury explains, “in 2010, the adidas Group launched its Route 2015 strategic business plan with a strong focus on ‘simplifying to the max’. Our main goals are to reach €17 billion in annual sales and an operating margin of 11% by 2015. After three years of process re-engineering the net benefits are materialising for an amount up to €4.9m per year.”

Their objectives from 2010 onwards were clear:

• Transparency. Create real-time visibility of daily global cash position.
• Centralisation. Ensure that any excess cash position at a subsidiary is promptly and effectively applied via automated global cash pools, while delivering significant interest savings of over €2m p.a. as funding requirements are reduced.
• Optimisation of transaction banking relationships – dealing with three to five master banks with global standardised documentation and a single point of contact for service and implementation.
• Standardisation/integration of all cash management and payment processes and delivering process cost savings in excess of €1m p.a.
• Automation of in-house bank settlement processes.
• Reduce bank charges by at least €700k p.a.

“In order to centralise and standardise our global cash management processes, we opted for an integrated solution with our ERP environment, SAP’s cash management application. This application allows us to have full and timely visibility of all bank account balances, due dates of AP/AR and treasury-initiated transactions. As a result, this integrated solution provides us with a reliable short-term liquidity position forecast.”

In addition, to reduce the complexity and cost of adidas’ transaction banking network, treasury consolidated the majority of its cash management activities with three global master banks. It entered into zero balancing cash pools for all major currencies. The cash pool account structure allowed treasury to simplify its bank account structure and enabled it to consolidate its global cash positions. During the account opening and cash pool set-up phase, they required global standardised documentation and close communication from their master banks, with a single point of contact.

To provide cash management visibility, electronic account statements (MT940) are centrally collected and monitored via a bank statement monitor in SAP’s Bank Communication Management application. The SAP In-House Cash application enables automated inter-company settlements and supports the payment-on-behalf-of process.

As Stukelj concludes, “it is essential to have a clear vision and mission statement in order to manage goals and expectations. Not only is a strong project team required, it also needs to be supported with an appropriately selected Steering Committee that is in a position to escalate/resolve critical issues. Our Cash Factory Project has met or exceeded expectations in terms of deliverables. The cash management process improvements have been widely recognised and valued in our organisation. Several industry peers have contacted us for benchmarking purposes and we are taking these opportunities to join forces for better banking solutions.”