Photo of Duncan Cole, Citi and Kiera Agnew, Kellogg’s.

Kiera Agnew

Assistant Corporate Treasurer

The Kellogg Company, better known as Kellogg’s, is a multinational food manufacturing company headquartered in Battle Creek, Michigan, United States. Kellogg’s produces cereal, snacks and convenience foods manufactured and marketed in over 180 countries.

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Efficiency, accuracy and insight: Kellogg’s cash forecasting transformation

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The challenge

Kellogg’s sought to transform its cash forecasting processes, introducing more efficiency, accuracy, and the ability to draw valuable insights across its global operations. It also sought to use FX transaction data at invoice level to develop a daily currency hedging position, with the long-term goal of creating an 18-month rolling hedge programme.

The solution

To gain working capital insights, Kellogg’s selected Cashforce and worked with Citi as its global banking partner. Together, they set out to transform Kellogg’s order-to-cash and procure-to-pay processes and take its cash visibility to the next level.

To improve forecasting, Kellogg’s captured and classified forecast data from its various ERPs, bank statements and general ledger bookings, loading the information into Cashforce (which is compatible with Kellogg’s FIS TMS) to create detailed and accurate short-term, medium-term and long-term forecasts. Crucially, Kellogg’s can roll data up into groupings as well as drilling down to transaction level. These consolidated and granular views deliver valuable insights, revealing for example that a single supplier had contracts with a variety of payment terms, impacting cash flow and days payable outstanding.

Analysis also made the fee and staff costs associated with using cheques in the US transparent for the first time. Similarly, custom level analysis of receivables, overdues, billings and credit note usage – which had previously only been possible at country level – facilitated improvements to the invoicing process by the receivables team.

In addition, the insights gained from improved forecasting and visibility across order-to-cash and procure-to-pay enable Kellogg’s to understand its FX exposure not just on a consolidated basis but at invoice level. Consequently, Kellogg’s has been able to begin work to establish daily currency hedging positions that can be fed from Cashforce to Citi’s platform for execution. In time, Kellogg’s will move to an 18-month rolling hedge programme.

Best practice and innovation

The FX hedging initiative was the outcome of a push by Kellogg’s to understand its FX use and enable customers and suppliers to pay or be paid in the currencies they ordinarily use. Kellogg’s already followed best practise with just four ERPs; by using Cashforce as an overlay to extract commercially-valuable insights, Kellogg’s sets a new benchmark for large global companies.

Kellogg’s is taking an iterative approach to automation and its use of AI and ML. As it gains confidence, Kellogg’s will progressively automate more tasks, such as automatically approving payments below a certain threshold, for example. Historically, Kellogg’s (and all large companies) have focused primarily on descriptive analytics; this solution lays the foundations for prescriptive analytics and the eventual creation of a ‘no touch’ treasury by Kellogg’s.

The transformation has already delivered a US$6m cash flow benefit from aligning European supplier DPOs and US$4m in the US (where analysis has just begun). Kellogg’s now makes better use of cash, which will ultimately enhance its credit rating. The solution has also revealed smaller, but important, FX exposures never previously analysed; these can now be aggregated and hedged where necessary, reducing risk. By making more effective use of cash, Kellogg’s has reduced its transaction costs including bank charges.

Key benefits

• Cost savings.
• Headcount savings.
• Process efficiencies.
• Increased automation.
• Risk mitigated.
• Improved visibility.
• Errors reduced.
• Manual intervention reduced.
• Increased system connectivity.
• Future proof solution.