Cadbury Schweppes - http://www.cadburyschweppes.com/

The Treasury operation at Cadbury Schweppes covers a worldwide business with the key objectives of obtaining both global visibility and control through the application of new technology. This article explains how we achieved those objectives.

The Company
Cadbury Schweppes is the world's largest confectionery company and has a strong regional presence in beverages in the Americas and Australia. With origins stretching back over 200 years, today our products - which include brands such as Cadbury, Schweppes, Halls, Trident, Dr. Pepper, Snapple, Trebor, Dentyne, Bubblicious and Bassett - are enjoyed in almost every country around the world. We employ around 60,000 people.

Our heritage dates back to 1783 when Jacob Schweppe perfected his process for manufacturing carbonated mineral water in Geneva, Switzerland; in 1824 John Cadbury started a business in Birmingham selling cocoa and chocolate. These two great household names merged in 1969 to form Cadbury Schweppes plc and since then we have expanded our business throughout the world by a programme of organic and acquisition led growth.

The Treasury Operation
The Group Treasury centre is located at the Group's head quarters in central London and handles all strategic and operational issues. The 110 worldwide business units are divided into four regions: Asia Pacific; Europe, Middle East and Africa; Americas Beverages and Americas Confectionery and three Regional Treasurers (Americas are combined) based locally provide treasury advisory services to their respective regions. The Regional Treasurers partner with the businesses providing input on treasury related issues affecting domestic business decisions, for example the identification of risk and local funding requirements. The businesses are responsible for their own foreign exchange risk management but carry out their currency transactions with Group Treasury. Treasury therefore acts very much as a value-added service centre for the group and not as a profit centre.

Review of Treasury Technology
We need to look at some recent history to fully understand why we committed our time and resources to a major project to specify and select a new treasury management system (TMS). A decision had been taken in 2000 to replace our existing outdated TMS by implementing CFM, the treasury module of the SAP enterprise resource planning (ERP) solution that was already being implemented across the Group. Our goal was to achieve a fully automated central view of the Group's global cash positions and treasury risk profile. However, we encountered a number of problems. Although SAP was being rolled out across the Group, there were effectively three separate installations, one in each of the geographic regions making centralised visibility of data a challenge. Then in 2003, Cadbury Schweppes acquired the Adams business from Pfizer; Adams was using an alternate ERP solution across their global businesses. So the project to achieve global treasury visibility from London within one system was becoming daunting indeed.

The original plan to extend the ERP route into treasury was not working for the organisation and, although it is a respected treasury solution and highly appropriate for some businesses, serious doubts had arisen as to the suitability of SAP CFM for the specific circumstances of the group. The situation was fully evaluated and discussed in-house and it was decided that a review of treasury technology should take place with a fresh examination of what would be best suited to meet group treasury's needs. A requirements definition document was written and agreed with all members of the project team and out of which four key needs emerged:

• Global visibility remained the critical requirement;
• The system should provide electronic communication between the centre and the business units to allow for the efficient collection of cash position and forecast information and to provide a route to group treasury for the business units for reporting purposes and for treasury transactions;
• The user interface should be simple and easy to use;
• The system should possess a flexible reporting capability providing the ability for user-defined reporting that is both efficient and secure.

The Selection Process
Cadbury Schweppes and its Group Treasury had been through significant changes, not least resulting from the acquisition of Adams; we also had a new Director of Treasury in place and a relatively new CFO. It was therefore an ideal time to review our treasury technology from a totally fresh standpoint.

Although there was a lot of catching up to be done with our Treasury software, it was vital that we followed a rigorous process for selecting any new TMS and we therefore employed a specialist treasury consultancy, ARC Solutions, to ensure that we did just that and did not overlook any of the options open to us. We also involved out Group IT and Audit/Compliance teams from the outset.

The first step following the initial decision to explore replacement of the TMS was to identify the level of complexity we would require from any solution. We needed to decide whether we required a relatively complex but scaleable solution that we could customise to meet our specific needs or a smaller but flexible "off the shelf" solution suiting a best-practice treasury operation. In either case, it was of primary importance that the chosen solution should be able to cope with the continual change of a dynamic business.

We were seeking a supplier who would be able to form an ongoing partnership to meet these needs and who could demonstrate an understanding of our business culture and strategy. An initial shortlist of six treasury management systems was compiled to and included those solutions that would most closely meet the business' needs as stated in our requirements definition document. SAP was included in the initial shortlist in order to fully evaluate our existing supplier against our re-defined requirements and to provide SAP with the opportunity to re-assess the current implementation of CFM.

Other key considerations for us were the time and complexity of the implementation (we did not want to be running a complicated implementation during a year end), the internal resource that would be required and the total ownership cost of the system.

After the first round of system demonstrations we elected to park the option of a high-end solution. Our treasury operation did not warrant the intricacy of some of the alternatives and it became clear that the investment required in the implementation process and the subsequent costs of ownership were excessive for our needs. It also became apparent that the flexibility and speed to implementation of the smaller solutions was not gained at the expense of their power and so we moved forward with 2 potential suppliers to more detailed workshop sessions.

As part of the workshops we used process flowcharts ensure that the systems were able to reflect our work streams. A carefully structured score sheet was built to evaluate the systems against our defined requirements incorporating weightings to emphasise our key requirements. We made telephone reference calls to three or four existing users of the system get feedback on how other corporate users had found the systems in question. We particularly wanted to canvas opinions on the levels and effectiveness of the support provided during the implementation process, whether the supplier delivered what they had promised and on time, whether the software did the job as originally described and the quality of on-going support post implementation. Our IT people were also able to speak to their opposite numbers at these sites.

Upon completion of the evaluation process we selected City Financials and their eTC TMS. We were confident that the software could meet our needs and were particularly impressed with the system's flexible and secure reporting capability. We were also comfortable with their team and felt confident that they understood both our requirements and our corporate philosophy and that they would deliver the solution as promised and on time.

Implementation
Although we selected City Financials as our TMS partner at the end of 2005, we delayed the start of the implementation project until February of the following year to allow completion of year-end work without unnecessary complication.

An experienced project manager was appointed from IT and the first phase of the project was to implement sufficient eTC functionality to replicate the existing treasury processes on CFM as quickly as possible, to complete parallel running and to go live. This approach would enable the users to see the benefits and get results from the new software as early as possible in the process. We felt that it was extremely important that the new users of eTC should carry out the implementation work, as they needed to acquire the knowledge and gain "ownership" of the system. Implementation of the more advanced functionality would wait for the second phase.

Although we were expecting to have to manage our resources carefully through the project, we found it necessary to back-fill treasury roles to ensure that the work was done on our side within the project plan. One of the biggest challenges was to upload static data (counterparty details, SSIs, etc.) from the existing system into eTC. Transferring existing deal data did not create such a problem because we were able to employ automated uploads for most of the transactions and only had to manually re-key the more complex deals. We were satisfied with the support we received from the City Financials implementation team and their ability to understand the various issues that we had, particularly important due to our own resource constraints.

The interfaces that we required included market information uploads from Bloomberg, downloading of accounting information (P&L etc) into Hyperion and automatic confirmation matching through the Misys Treasury Plus confirmation matching system. Interfaces were also built into our bank treasury systems, Lloyds TSB's LloydsLink and Bank of America's web-based BADirect, in order to apply automated payment runs straight from eTC and to collect balance and statement information into the TMS for daily cash positioning. All of these were delivered through the development of flat files between eTC and the other systems.

We ran eTC in parallel with the existing TMS for two months to thoroughly test month-end procedures and data flows before switching off the old software at the end of October 2006. The implementation ran on time and almost to budget.

Next Stages
With the first phase of the project successfully completed we are currently working on phase two of the implementation in which we are concentrating on using eTC as the centre of our cash and currency forecasting and are rolling out the benefits of the technology to the business units.

Currency flows generate foreign exchange risk and the resulting foreign exchange deals are placed with Group Treasury where either consolidated or individual positions are covered in the market. We will be implementing eTC to provide a web-based in-house dealing facility in which the business units will enter their foreign exchange deal requirements directly into the system for immediate pricing and confirmation. Additionally, we employ a solution from Geneva based Coprocess for our monthly group multi-lateral netting which will generate foreign exchange transactions from the netting cycle as well as intercompany loans and deposits. An integral part of phase two is to work with City Financials to bring together these systems and provide a fully integrated treasury solution as outlined in the diagram.

Initially we will pilot the remote use of eTC to two businesses in each of the regions and as the system is intuitive we would not expect much training to be necessary.

We are also leveraging the benefits offered to us by eTC in the centre to streamline and automate processes (e.g. by developing interfaces with FXAll) and enable the Treasury team to focus on adding value to the business.

We also plan to use the commodities management functionality of eTC for our commodity trading activity in Birmingham. This will replace the current spreadsheet application and will be a major step towards our goal of having global visibility of risk as well as cash.

Summary and Some Conclusions
The first phase of the project was completed successfully and without too many scares. The main challenge that we faced related to our own lack of available project resource which was an ongoing challenge but overcome by great teamwork and the determination of the whole treasury team to successfully implement a new TMS.

The challenges in phase two are more conceptual and also involve engaging the business units and securing their involvement. Not only will the technology provide us with visibility over our forecast cash movements but it will also provide the business units with dealing and analytical tools to help in the management of their own businesses. We will gain enormously as a Group from having a regularly updated consolidated group cash flow forecast by currency that is complete and timely.

City Financials has partnered us well in this project and their consultants have provided consistent support throughout.

The project has been a great learning process for us all and a few tips to those following would be:

• Set yourself realistic objectives that match the key drivers for your project;
• Follow the principle of right-sizing; make sure the solution fits the need and do not be tempted by functionality that is not relevant and may only add complications to your life;
• Find the right partner - a company that has a similar approach to yours and is proactive will make the long term relationship more rewarding;
• Never underestimate the amount of resource that the project will demand from your treasury team and back-fill positions if necessary. Remember that the knowledge of the system gained during implementation and training needs to remain with your team and not with temporary staff or with third party consultants.

Return to Latest News