Photo of Bradley Gains, Parv Gill, Lucy Rideout, UPS, Steve Hall, J.P. Morgan, Edward Hebblethwaite, Standard Chartered, Michiel Radder, BNP Paribas and Hollie Starkey, Reval.
UPS has become an innovator in harnessing data to drive critical decisions and improve complex processes. The solution showcased here has put future-proof processes in place too.
Regional Treasury Director
United Parcel Service, Inc. (UPS) was founded in 1907 as a private messenger and delivery service in Seattle, Washington. Today, it is the world’s largest package delivery company, a leader in the US less-than-truckload industry and the premier provider of global supply chain management solutions. It delivers packages each business day for 1.6m shipping customers to 8.7m receivers (“consignees”) in over 220 countries and territories. In 2016, it delivered an average of 19.1m pieces per day, or a total of 4.9bn packages. Total revenue in 2016 was US$60.9bn. UPS serves the global market for logistics services, which include transportation, distribution, contract logistics, ground freight, ocean freight, air freight, customs brokerage, insurance and financing.
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In-house bank and state-of-the-art TMS delivers for UPS
In order to manage the enormous logistical challenges of this global business, UPS has become an innovator in harnessing data to drive critical decisions and improve complex processes. So, it was only logical that the company’s treasury team decided to rely on a TMS to organise and consolidate key data and utilise SWIFT to execute payment processing more efficiently, ultimately to enable the successful move to a new cash pooling structure.
The physical cash pooling is overlaid by a single entity, multi-currency notional pooling structure in the name of the IHB entity.
One of the critical objectives of the in-house bank and revised pooling structure was to implement a robust, long-term solution that would allow UPS to maximise investment decisions and be in line with the various regional impacts from Basel III regulation.
Treasury turned to Reval, a global provider of cloud treasury software, to implement an innovative treasury management system linked to the multi-currency physical pooling structure. As part of the TMS, UPS utilised SWIFT to automate the execution of payments more efficiently and to consolidate both MT940 and MT942 reporting into a single location.
UPS also uses Reval virtual accounts to track the short-term intercompany loans created between the in-house bank and the entity from physical pooling. The physical pooling structure is also unique in that it offers complete rate transparency to its entities at a true ‘arm’s length’ basis. The interest methodology is based on UPS’ internal entity credit rating model as well as bank deposit rates by currency and all rates are based entirely on market-derived benchmarks.
UPS uses Reval to calculate the interest earned/owed by the physical pool participants to the IHB and automates the capitalisation of interest on a monthly basis.
In addition, the rates for the single entity notional pools are based on market-derived benchmarks and are mapped into the TMS, allowing the treasury team to gain a more accurate benchmark on the company’s liquidity and a better understanding of its position at the end of the day in order to improve investment returns. UPS has also incorporated the interest calculation for the notional pools in order to reconcile interest on a monthly basis with the interest posted to the bank statements in a completely automated way.