Building for the Future

Treasury Technology at A. Schulman Inc.

by Kurt Loeffler, Treasury Manager, A. Schulman Inc.

A. Schulman is a leading international supplier of high-performance plastic compounds and resins, which are used as raw materials in a variety of markets. The company’s principal product lines consist of proprietary and custom-formulated engineered plastic compounds, colour concentrates and additives that improve the appearance and performance of plastics in a number of specialised applications. Headquartered in Akron, Ohio, A. Schulman employs approximately 2,200 employees and has 16 manufacturing facilities in North America, Europe, Mexico and the Asia-Pacific region. A. Schulman stock is quoted through the Nasdaq National Market System (Symbol: SHLM).

Technology Need at A. Schulman

Visibility and Control

A. Schulman’s treasury function is a small, highly focused team with two people at the corporate headquarters in Ohio, two in Belgium, managing the European treasury and cash management requirements, and two people in Mexico, responsible for domestic cash management. Until March 2009, A. Schulman had been using spreadsheets to manage all aspects of its treasury activities globally. However, with an increasing focus on cash visibility across the business, and greater management attention on issues such as liquidity and risk, we recognised that spreadsheets did not provide the level of control which we were seeking over our cash flow, including visibility and auditability.

Banking Requirements

Historically, we have accessed our bank statements on a daily basis by accessing each bank’s proprietary system and downloading the relevant information. While this has not caused any particular issues in the United States, where we have relatively few banking relationships, it is more time-consuming and inefficient in Europe where we work with around 16 banks. To address this, we have been using Isabel, which provides Belgian-based multi-bank ebanking capabilities. However, we needed a new system to integrate with Isabel to allow us to integrate our cash position with our transaction processing.

Internal Connectivity

A. Schulman has a largely decentralised approach to technology and business processes, so data on which treasury relies for forecasting and exposure management is sourced from various places. Trying to combine this information in a consistent way using spreadsheets can pose challenges, so we wanted a new system which could integrate with our ERP applications more easily with less fragmentation of information and scope for error.

Cash Centralisation

We are starting to implement a treasury shared services centre (SSC) in Belgium which includes a cash concentration arrangement with Fortis. This includes setting up an in-house banking operation, requiring more sophisticated transaction management, accounting and internal current account maintenance functionality than a spreadsheet can deliver. In the future, we are intending to extend our cash pooling arrangement to include other countries, particularly as Fortis’ geographic footprint matches those of our European operations such as Central & Eastern Europe and Turkey, so it is important to have the right technology in place to support this.

[[[PAGE]]]

Technology Decision

Based on the issues above which we have been experiencing, we decided to invest in a specialist treasury management system to cover our external transaction processing, including FX, debt and investment, in-house banking, treasury accounting and internal and external connectivity. We issued a detailed Request for Proposal to potential vendors, and shortlisted 4 solutions to review in greater detail. All of the shortlisted vendors provided their solutions on an ASP (Application Service Provider) basis. As a result of this process, we selected IT/2 as our preferred vendor based on the solution’s support of our requirements globally, particularly in Europe where we have the greatest complexity. The solution provided strong visibility, control and automation of transaction processing so it had particular appeal from an internal audit perspective. Furthermore, we were attracted by the vendor’s strong reputation.

Moving Forward

The project started very recently (March 2009) with a view to completing the implementation between August and October 2009. Initially, we had anticipated implementing each treasury centre as separate project phases; however, as we are accelerating our SSC implementation and cash concentration project, we need IT/2 in place to manage these new requirements. In addition to managing treasury and cash management requirements, we will be putting interfaces with our three regional ERP systems, and with Isabel, our multi-banking platform in Europe. As it can be time consuming and expensive to set up interfaces with individual banks, as well as the problems of having to source information from different locations, we are encouraging all of our European banks to channel information through Isabel.

Once the implementation is complete, we will have a best-practice technology infrastructure to support our regional and global treasury and cash management requirements. As we develop our cash management centralisation project further in the future, we are in a position to manage increasingly sophisticated requirements and position our treasury for further growth and expansion of responsibility.