Innovation In Action
Citi's unique payment and liquidity solution for Western Europe generates improved efficiency
Michelin is the world's number-one tire producer, manufacturing 177 million tires - along with 16 million of its now-famous maps and guides - in 2008.
In 2005, Michelin selected a single bank to manage mass payments and liquidity management for 14 western European countries. It covered 22 entities, over 90 accounts, and 1.2 million transactions a year.
The company wanted full centralization of its subsidiaries' cash, with a goal of zero-balancing for perfect optimization of cash. As part of this goal, Michelin needed to:
- Give its central treasury complete visibility of its positions, via strong forecasting tools and processes at the country level
- Automate and secure subsidiaries' payment processes by rationalizing payments, formats, delivery channels and authorization workflows
- Improve shared service center's efficiency
Michelin harmonized its Oracle ERP application across the region to ensure a clean, updated beneficiaries database and mapping tools for fully automated integration and reconciliation of its bank statements.
Citi proposed a single, central, secured delivery channel and file format for all western European mass payments, including suppliers, payroll and tax.
A pan-European cash pool structure - combining domestic zero balancing accounts and cross-border zero-balancing accounts in major currencies - was established in London. These accounts are fed to the ultimate header account at the end of each day. A global electronic banking platform gives each subsidiary treasurer local control and visibility of payments.
The innovative solution also included payroll monitoring and a payment calendar for other types of payments. A central customer service point of contact was established, with local language support where appropriate.
Michelin has achieved substantial cost efficiencies by reducing its payment costs, using its shared service center effectively, and optimizing its cash utilization. Working capital was improved by increasing the control and visibility of the company's payments and liquidity. The project increased centralization but it has also extended the responsibilities of local treasurers, whose support enabled successful implementation.