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How treasury can meet the Working Capital Management challenge

The standout presentation by Andreas van Koeverden, Director Working Capital Management, TNT Nederland at the Eurofinance ICM Conference in Barcelona in October 2013 showed what can be achieved by integrating corporate treasury with corporate processes. Andreas described TNT’s global WCM journey from 2008 to end 2013: how they embedded WCM into their day-to-day business processes so that that they now have a Total WCM solution across the whole group wherever they operate. 

WCM project 
The TNT WCM project was started in 2008 with a Steering Committee drawn from key stakeholders - CFO, finance directors, financial and business controllers - plus a consultant partner. The project team, which was drawn from across the group, reported to the steering committee. The aim of the project was to achieve a best in class and well balanced TWCAP position by aligning the DSO and DPO performance in line with TNT’s business and growth strategy. 

The key WCM objectives were to:

  • achieve industry 1st quartile WCAP of around 1% by 2015
  • achieve the working capital target by aligning DSO and DPO
  • deploy consistent standards / benchmarks in an end-to-end process organisation
  • establish a consistent monitoring progress and initiate improvements
  • apply a robust KPI target setting and KPI management
  • develop and deploy WCM best practices.
  • manage WCM enabling key projects, e.g. FSCM, e-Invoicing, SRM.

TNT adopted a phased approach rolling out the new programme in three phases to release significant amount of locked working capital. 

The key reasons why the project was so successful were that they had full board sponsorship with a cross-functional team made up of central and local people. Another important factor was that they incorporated the new cross-functional measures into the bonus and incentive schemes across the group combined with internal benchmarking. Plus they embedded WCM  monitoring & review approach into day to day practices. And they provided WCM training to stakeholders.

Andreas listed the key lessons learnt in the WCM project:

  • get the definitions right
  • use weighted average terms and measures down to invoice level
  • start with a small number of big-ticket items
  • increase the geographical scope step by step
  • accept specific payment methods in different countries, e.g. post dated cheques, RIBA, BOE etc.
  • use the project as training opportunity for Sales & Procurement
  • integrate measures and reports into ERP package instead of doing this in Excel.

Process scope of TNT Express’s WCM project 
The scope of the TNT’s WCM project was right across all facets of the invoice to cash cycle and the purchase to pay cycle. The level of detailed analysis that is required to achieve improvements in the WCM in the Invoice-to-Cash (I2C) cycle, and in the Purchase-to-Pay (P2P) cycle was shown by two impressively detailed Assessment Checklists.  

The ‘Glocal’ WCM organisation 
Andreas described how TNT have defined in great detail who is responsible for the WCM programme at Central Head Office, in the business units and in the countries. They call this their ‘Glocal’ way of working which they:

  • have defined their global objectives
  • use Global Blueprint for projects and local versions of global objectives
  • have built a central team of experts with local expertise
  • focus on inspiring a best practice sharing culture
  • gather business needs locally and search for input from selected representatives from all regions
  • have consolidated yet segmented the strategy
  • defined a structured Change Management Approach
  • adopted cluster implementation with cross-functional project teams, and
  • have a cross-functional steering committee to drive the programme.

Wrap up

TNT have improved their cash conversion cycle by 14 days between 2009 and 2012. 

Andreas believes that WCM programmes create value in two very different ways:

  • direct savings from operational cost reduction, financing cost reduction and improved cash flow
  • indirect savings from improved: customer satisfaction and supplier relationships, quality and control, and employee engagement.

CTMfile take: The objectives and ‘glocal’ approach used in the TNT global WCM improvement programme are outstanding. The improvement in the cash conversion cycle is impressive. The TNT approach provides a model for all large MNCs, as it shows how vital it is to embed WCM best practices into all day-to-day business processes wherever the group operates. This is one of the key drivers in corporate treasury today. Corporate treasury is no longer just about ensuring that there is adequate liquidity available for the group when and where it is needed.

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