Published: April 18, 2008
TMI talks to Claus Wild, Project Manager Introduction SAP-BCM, Würth, about his company’s implementation of SWIFT as an early adopter of SEPA accompanied by Commerzbank AGUntil we introduced SWIFT we used a heterogeneous set of systems, and we still do so today. A Shared Service Center provides services to the majority of our domestic subsidiaries. Our foreign companies are serviced by Würth Finance International B.V., which runs a Payment Factory. The domestic companies may choose their packages from various service levels.
In the basic version, we provide MT940 account statements, which we either forward to the respective company and/or enter into the corresponding SAP systems for further processing. In addition to account statements, outgoing payments are created before transmitting to a great variety of credit companies. The signatures for these payments are provided using one centralized protocol. Current accounts abroad are, or were, integrated into the existing infrastructure through agreements with our principal banks.
Most of the payments are effected directly from our SAP-system. Urgent payments etc. are entered directly in the bank application.
The middleware between us and the banks is an application that corresponds to the rules of the German ‘Central Credit Committee’, that is, only the domestic formats and/or transmission channels are supported. The subsidiaries are authorized to use their own applications for individual payments in addition to this.
The existing application was near to the end of its product life cycle. The new SEPA requirements and improved compliance needed a new solution for payment transactions. An efficient handling of all processes should also allow for additional growth within the Group. [[[PAGE]]]
[[[PAGE]]]
SAP’s current product ‘SAP Bank Communication Management’ fills the gap between ERP systems and the banks. In conjunction with SWIFT, this is certainly the most attractive solution currently on the market. It allows corporations to connect their main banks worldwide in a relatively simple way. SWIFT’s high system availability and the advantages of a virtual private network strengthen the decision-making process.
In addition to selecting SAP and SWIFT, the choice of the principal bank played also an important role in our plans. We chose Commerzbank AG. We see Commerzbank AG because its high level of technical innovation qualified it to be the right partner for this project. We knew we could rely on our good relationship with the bank and their employees, whom we had known personally for a good many years. This trust and co-operation has been important, especially towards the end of the project, when the first data was exchanged via SWIFT.
The introduction of SEPA and EBICS meant two developments for which our existing e-Banking provided only limited support. As an internal service provider, we are obliged to offer both legal and technical improvements on a timely basis to our subsidiaries. This is why it was clear to us very soon that we had to make the technical move to SEPA fairly quickly, and that we should acquire a product that would provide us with a high security of investment.
The application package of ‘SAP Bank Communication Management’ and SWIFT met our a.m. requirements. A payment solution integrated into SAP together with direct access to the SWIFT network means an investment in the future.
The disadvantages are the high level of initial investment required, which our Group will have to absorb. SWIFT was new territory for us. We had to examine it closely from all angles to see what SWIFT is and how it really works, and to understand the highly complex technology running in the background. In the end, without our local service partner, CSC Germany, we never would have been able to effect the switch-over. That is probably the greatest experience we gained during the course of the project. Both sides had to come closer together and learn how to understand each other, and in the end the switch-over was completely successful.
Because Adolf Würth GmbH & Co. KG is not listed on a stock exchange, we couldn’t gain access to the SCORE model, and so we had to connect to SWIFT using a MA-CUG. With this connection, the question arose as to whether we should build the SWIFT infrastructure ourselves, or if we should use a service bureau for data exchange. All these considerations were evaluated using a cost-benefit analysis. As a result, we decided on in-house operating of SWIFT. We considered it important and necessary not to have all data - incoming and outgoing documents - processed through an additional interface. Until then, we had only used the classic domestic (German) procedure at our company. Implementation was a new challenge for us, and we broke new ground in all areas.
The implementation schedule we established was relatively tight. It was just about four months from the kick-off in the last week of August 2007 to the start of production on January 7, 2008. The core team was made up of four employees of Würth, who received support from the various technical departments as necessary.
During this time, in addition to building up the SWIFT infrastructure (servers, network, etc.), the complete process in accounts payable had to be revamped. Among other things, new methods of payment were established, and signature regulations in the German Group were redefined. Two milestones were defined for the project: One milestone was the necessity of installing the SAP Enhancement Package 2 at short notice. It was not until this was installed that we were able, through SAP, to make the necessary connection to SWIFT through ‘SAP Bank Communication Management’ and the SWIFT Integration Package. The second milestone was the integration of the actual SWIFT software into our network.
The focused and professional work of the project team at Würth and at the partners enabled the defined objectives to be met without delays. [[[PAGE]]]
For the foreseeable future, we’ll continue to use FileAct for bulk payment transactions. Through SWIFT MT940 or MT942 we receive account statements, as well as protocol files for payments which Commerzbank makes available to us. In this process, we use the ‘Central Credit Committee’ order types. For sending, we will also continue to use the domestic format DTAUS and DTAZV further on, as well as SEPA Credit Transfer when applicable.
A very clear and simple illustration of the necessary changes is signature authorization. The process used was the dual authorization principle, which did not allow distributed signatures within our system landscape. As a result, signatures for all orders were issued centrally. Through the use of ‘SAP Bank Communication Management’, we delegate responsibility back to the subsidiary, which must now assume final responsibility for the signature on the orders. Central cash management can manage the final release of the available order through a transport signature. So-called ‘escalation users’ ensure that no payments are effected too late to the principal banks. The allocation of user rights in SAP makes it possible to employ users for each company code who are in the position to provide legally binding signatures when necessary.
Because we’ve just started our activities with SWIFT, it’s really too soon to determine what significant effects it’s having on our processes. We currently have a mature system landscape that has been built up in the area of payment transactions over the past 12-14 years. In the next phase, we’d like to connect to additional house banks and further optimize our processes. In addition to improving compliance, we want to speed up the preparation of account statements. In this connection, we plan to have seven-day processing of our documents. We’d also like to reduce employees’ manual intervention. We’re convinced we can reach these objectives with the high system availability and SWIFT’s technical possibilities, thus helping improve the financial supply chain.
Because we’ve begun to use SWIFT, I consider our Group to be well prepared for the future. In connection with ‘SAP Bank Communication Management’, we have optimized our processes and reduced our interfaces, which has enabled us to speed up the incoming and outgoing cash flows. In addition to security of investment, the possibility of connecting to banks worldwide is a major benefit for the future.
By building up skills and knowledge, we’ve succeeded in generating our employees’ enthusiasm for SWIFT. So our staff is contributing significantly to the continuous expansion of the use of SWIFT services in our Group.
How Thought Leadership Can Reduce the Cost of Sales by Patrik Havander, Havander & Partners A focused attention on the costs incurred by the global sales and marketing processes is becoming increasingly important for corporate banks and their transaction banking departments. While the client/bank relationship remains vital, research has shown that in fact relationship selling […]
