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Industrials Collaborate Innovate

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Presentation Slides

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2) Collaborate Innovate Industrials Casebook Global Transaction Services

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4) “This Casebook is a testimony to the innovative and creative spirit of our clients. It demonstrates how we work in collaboration with our clients to deliver new solutions to challenges they may not have faced before.” Michael Guralnick Global Head, Client Sales Management Treasury and Trade Solutions Global Transaction Services, Citi

5) welcome

6) It is my pleasure to present our world-class professionals who Citi Global Transaction Services staff our offices across more Industrials Casebook. This book of than 104 countries. client case studies is a compilation of the innovative solutions that we have designed, in partnership with our clients, to help them achieve excellence in meeting their key working capital goals. This Casebook is a testimony to the innovative and creative spirit of our clients. It demonstrates how we work in collaboration with our clients to deliver new solutions to challenges they may not have Against a backdrop of unrelenting economic challenges and a continued global best practices, and to help move towards globalization, our Michael Guralnick Global Head Client Sales Management Treasury and Trade Solutions Global Transaction Services, Citi faced before. It is designed to share our clients accelerate the realization clients are focused on achieving of their transaction services goals. operational efficiencies across their businesses and their increasingly complex supply chains. In this global business environment, our clients are also looking to mitigate a wide range of risks, such as operational risk, settlement risk, and transaction risk. At Citi, we are committed to helping our clients in the industrials sector respond effectively to these challenging times. We are delighted to share with you the insights we have gained from working with businesses like yours. I look forward Citi’s Global Transaction Services to hearing from you and welcome business provides a global platform the opportunity to continue and of innovative solutions that fully expand our successful partnership. utilizes the creative leverage of the

7) foreword

8) Welcome to the global Industrials achieve greater control and visibility Casebook. I am delighted to present over their cash, while driving you with this first collection of cases efficiencies and reducing cost. that demonstrate the added value that Citi seeks to bring to our clients in the industrials sector as a whole, and in the transportation sector in particular. The transportation sector encompasses shipping, rail, trucking, aviation and third party logistics providers. This casebook begins with an in-depth look at some of the trends that we have observed through our daily engagement with clients across the world. We outline some of the challenges that our clients have been facing, and how transaction banking solutions can help equip companies As with other industrials Brent Flynn Global Transportation Sector Head Global Transaction Services, Citi to navigate a challenging market and companies, businesses within the mitigate risk. The cases that follow transportation sector have been give real and practical examples of under extreme pressure for an how transportation, and other extended period, largely affected industrials companies, have been by the global recession, volatile working with us to optimize working fuel costs, and unexpected events capital, streamline processes and such the Icelandic volcano eruption. drive performance. The headwinds these companies have had to face have demanded that they look for more efficient ways to conduct business. We at Citi Global Transaction Services have been working closely with our clients in the transportation sector to develop solutions to help them I hope you are inspired by the cases in this book, and I look forward to exploring further opportunities to collaborate with you.

9) contents

10) driving growth in the industrials sector controlling cash 06 16 Norbulk Shipping EMEA Payment solution frees up company to focus on adding value 18 Bamburi Cement Limited EMEA Supplier finance program safeguards supply chain and optimizes working capital 22 Cargo Network Services (CNS) NA A web-based e-billing and payments solution 26 achieving visibility 30 Panalpina APAC Optimizing working capital management 32 Turkish Airlines EMEA Target-balancing structure launches visibility and cost benefits 36 driving efficiency 40 Air New Zealand APAC Integrating ERP with offshore payments 42 Bombardier Recreational Products (BRP) NA Revving up purchase incentives with a prepaid card solution 46 Michelin North America, Inc. NA Consumer incentives drive performance 50 Toyota Motor Sales USA NA Driving sales with paperless incentives 54

11) driving growth in the industrials sector

12) The huge breadth of the industrials sector — it covers automotives, aviation and aerospace, shipping, logistics, paper and packaging, heavy machinery, cement, power technology and construction — means that at first glance the companies covered by it appear to have little in common. However, for CFOs and treasurers of companies from all the sectors contained within industrials, three themes stand out: the need for control, visibility, and efficiency of the systems they use to manage cash. Indeed, the experience of the China, Brazil and the Middle East, markets such as Asia, Latin America, financial crisis and tighter liquidity information has become ever more the Middle East and Africa are means that this back to basics important. These markets are often greater than in developed markets approach on cash and how it is highly regulated and it is crucial with mature banking sectors. managed is now a board level to understand the implications Moreover, it is important to concern: not only CFOs and of that in terms of moving cash. understand that these markets treasurers, but also CEOs, want to know where their company’s cash is at any given time, who the company’s counterparties are, how their cash is collected, and the risks inherent in the company’s processes. There is a huge appetite for information and knowledge that can be used to improve liquidity. Notwithstanding regulatory barriers and exchange controls, developments in technology mean there is now the potential to deliver control and visibility of cash positions located almost anywhere in the are very different — not only from more developed markets where companies have operated centralized cash management structures for decades — but from one another. large multinationals still do not have New thinking for new markets world. However, surprisingly many structures in place — outside the Working out what treasury model is Clear, accessible information — developed banking markets of North most advantageous for a company delivered in a timely way using a America and Western Europe — to can be a significant challenge. Often consistent format — is essential to enable them to oversee and manage industrial companies are be able to make informed decisions. their cash globally. decentralized and have complex As the world moves out of recession and into a new global growth environment dominated by emerging markets such as India, Necessarily the challenges associated with gaining control and visibility of cash in rapidly growing corporate structures. For example, in the auto sector, there may be multiple entities in a single country that are involved in manufacturing,

13) sales, re-selling, franchising and finance. In addition, there may 8 regulatory and tax issues, but ultimately must be driven by the also be scores of companies potential economic benefits to operating as part of the the company. manufacturing supply chain. With companies now more global than at any time in the past, many are asking whether they still need people on the ground to manage local regulatory and compliance issues. In emerging markets the answer is invariably yes. Local treasury hubs are essential for many large industrials companies because of time zone concerns and issues associated with trapped cash and the regulatory environment. Corporates in all industrial sectors need to assess the extent of their business in these new markets in order to understand the scale and growth potential of their operations. They then need to consider whether it is worth investing to gain control of their cash and liquidity in these countries and regions. This process must take into account the potential “With companies now more global than at any time in the past, many are asking whether they still need people on the ground to manage local regulatory and compliance issues. In emerging markets the answer is invariably yes.” Companies in industrials sectors are increasingly finding that the scale of their operations in China, for example, warrant the creation of a treasury hub in-country separate to the rest of Asia.

14) Similarly, depending on the scale of homogenous in terms of rules, technology and automotive their operations in Brazil, some requirements and operating companies struggled to find companies are realising that it makes conditions (in Europe, this process alternative ways to get components sense to separate it from the rest of has been driven by integration to their factories in order to meet Latin America or that it is appropriate of the EU economy). In contrast, just-in-time manufacturing schedules. to set up a hub in Dubai covering the Asia is far from homogenous. Middle East rather than try to manage it from Europe. Essentially, the decision comes down to the importance of visibility in that particular market to the overall group. The transportation sector inevitably While it is important to consider goes where its customers need it to the diversity of countries in which operate. Consequently, in recent years, a company operates and develop customers’ supply chains have become treasury structures accordingly, that ever more complex and disparate, so should not be at the expense of the operations of transport companies This new thinking does not affect visibility and control. While day-to- have had to expand to cover ever- existing treasury hub structures in day treasury management might be larger swathes of the world on a more Western Europe and North America, conducted in China, for example, routine basis. Trade routes have been which have developed over many because it is becoming a core part opened that only a decade ago would years and are effectively set in of the company’s global revenues, it have seemed unlikely, if not impossible. stone. However, it does run contrary is essential to be able to aggregate to common practice over the past the information from China with decade, which has relentlessly operations elsewhere in the world. emphasized the importance of centralization through shared service centres and common ERP Transportation The challenges faced by transport companies are therefore the same as those faced by their clients. As global trade expands, new facilities (such as ports) will be required and they will The transportation sector, which need capital expenditure. Raising includes passenger travel, freight finance for such expansion can be What has changed is the focus of and logistics by air, sea or land, is complex and challenging and may many businesses. Strategies focused central to the globalized economy. involve credit export agencies, which on centralization were developed to Indeed, its importance was have become increasingly important address developed markets in North highlighted by the volcanic ash in the wake of the financial crisis, debt America and Western Europe. Both cloud over much of Europe, which finance from banks or capital markets, of these regions are essentially grounded flights for weeks. Many or use of internally generated cash. systems, for example.

15) From a treasury perspective, transport companies also face similar 10 Automotive The complex nature of automotive challenges as their clients. As they construction makes it the archetypal expand into new markets, they need industrials sector in terms of to consider how they will manage new highlighting broader trends. For cash flows from operations. Will a example, a leading global automotive team be required to manage them manufacturer has announced plans in-country? If so, will they be local to open a new plant in China in hires or will international expertise response to a phenomenal growth in be necessary? To what extent will it sales: the company expects sales to be possible to take cash out of the quadruple over a one year period. country, and if it can be taken out, Facilitating that growth — and the how will it benefit the group? construction of a new plant — is One logistics company that effectively inevitably a major challenge. addressed the challenges it faced in Automotive companies expanding its invoicing and billing process in their manufacturing capabilities order to improve efficiency is Cargo into China in order to significantly Network Services, a subsidiary of increase capacity, are likely to require the International Air Transportation funding for capital expenditure and Association. It introduced an careful consideration of treasury electronic billing and payments requirements as their businesses solution that transformed the grow. Given strict regulations on cash company’s air-freight bill-payment management in China, corporations process. The solution shortened will need to assess how cash can days sales outstanding by at least best be used in-country, and how 10 days and reduced air carriers they can continue to benefit their invoice presentment and collection groups should the funds be required costs by 18%. to remain there.

16) Automotive companies expanding on More generally, automotive Similarly, in the US, infrastructure such a scale should also effectively manufacturers are under pressure as spending is a core element of the manage their supply chains. For they expand overseas to continually economic stimulation package example, they must be flexible in their innovate, especially in relation to designed to re-start the economy approach to sourcing materials. environmental performance. Given following the financial crisis. The Initially, sourcing components for the financial constraints that many American Recovery and Reinvestment production may be done both locally companies in the sector face, such Act is thought to be worth $787 billion (for instance, in China) and from a responsibility can be onerous. and covers roads, bridges, public Europe, but as the scale of production Freeing up cash for new investment transport and dams, as well as the in China increases, it may become in plant and model design through electricity grid and investment in financially efficient to source a greater more efficient management — and alternative power generation: the proportion of parts domestically. ensuring a cost effective supply package is the largest since the However, an expanding company chain — is therefore crucial. 1950s when the inter-state highway system was created. needs to be aware of the potential implications of such a decision in terms of quality control and consistency. Similarly, companies will need to Engineering, manufacturing and construction What is dramatic about this wave of infrastructure spending is the nature of the companies that will be Many of the world’s largest involved in it: six out of the world’s with new suppliers: an assessment of engineering firms are already among top 10 infrastructure companies are the robustness and quality of the most global of all companies now Spanish. Consequentially, some suppliers must extend beyond the — often operating in more than 100 of those companies currently bidding parts they will produce for their cars. markets. Nevertheless, the pace of for toll road contracts in Texas will be Auto manufacturers must also make their expansion internationally operating in the US for the first time, decisions about costs. Will it aim to continues to accelerate. In particular, and should they be successful in source parts at a lower cost to those infrastructure spending in the Middle their bid, could see familiar issues sourced in other regions? What East — not least associated with the of how capital will be raised and payment terms will it set for reconstruction of Iraq — and Asia is how they will manage cash. suppliers in China and how do they booming as countries struggle to keep differ from common market practice? pace with rapid economic growth. In such circumstances, it can be consider the credit risks associated essential to work with a bank that

17) not only understands the home market of the company expanding 12 This new era of globalization has resulted in a reassessment of how but is an integral part of the market companies need to operate and it is expanding into. Similarly, manage their cash. Globalization expansion overseas — especially was once perceived to mean that in the areas of engineering, operating conditions would manufacturing and construction eventually be effectively the same in — may require a joint venture. all countries. In a world where China Understanding and managing the has overtaken the US as the world’s counterparty risk of joint ventures largest automotive market, that is — and ensuring confidence in the clearly no longer the case. Instead, associated cash flows — often globalization is about accessing requires the involvement of a markets and making decisions based trusted third party, such as a bank. on local circumstances. A new globalization The only constant across all markets in which a company operates must The financial and economic crisis has be information. While cash may not undoubtedly opened a new chapter be easily transferable from some in the world’s economic growth. emerging markets, timely and The relatively strong growth of major accurate data is. Consolidation of emerging markets such as India, that data is the key to success in the China and Brazil compared to weak new global economy. Without that growth in the US, and especially aggregated information, companies in Europe, is rapidly changing the cannot make effective and informed dynamics of world trade. There is decisions and therefore cannot a realization among companies in continue to prosper in what is an the industrials sector that emerging ever-more competitive environment. markets are going to drive global growth for the foreseeable future.

18) For CFOs and treasurers of industrials companies, three themes stand out: the need for control, visibility, and efficiency of the systems they use to manage cash.

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20) Corporates in all industrial sectors need to assess the extent of their business in new markets in order to understand the scale and growth potential of their operations.

21) 16 controlling cash

22) Notwithstanding regulatory barriers and exchange controls, developments in technology mean there is now the potential to deliver control and visibility of cash positions located almost anywhere in the world.

23) 18 Norbulk Shipping Payment solution frees up company to focus on adding value Norbulk Shipping is a global leader in ship management and the provision of vessel services.

24) The challenge its franchise network and its ability header account for each ship owner Norbulk Shipping makes payments to to provide a transparent audit trail. to enable bulk payments. In addition, suppliers globally in various currencies In addition, the bank’s solution also each ship got a separate euro or on behalf of the ships that it manages. offered a significant cost advantage dollar account and WorldLink branch Its invoices were paper-based, for the company due to its fixed-cost linked to the ship’s account. Foreign processed manually, error-prone, structure, which made forecasting currency payments would be processed costly, and time consuming for Norbulk easier for Norbulk. Most importantly, automatically using favorable WorldLink and its suppliers. The company was Citi’s technology, including its proven Online bulk rates with an agreed spread. eager to use technology to improve WorldLink Payment Services, meant efficiency. Moreover, it wanted to the bank could offer a complete global eliminate the need for multiple transaction solution that interfaced currency accounts. An additional seamlessly with Norbulk’s ERP system. challenge for the company was that ® The result Following the completion of the initial paperwork, the implementation of the Citi’s technology, including its proven WorldLink® Payment Services, meant the bank could offer a complete global transaction solution that interfaced seamlessly with Norbulk’s ERP system. payment solution was straightforward. Norbulk appointed Citi in 1991 on “Citi was — and remains — ahead of the immediately,” explains Victoria Burns the basis of its flexible payment competition for online payments and at Norbulk. Citi’s success in meeting offerings, including CitiDirect® Online banking,” says Ian Davidson, Finance Norbulk’s needs is reflected by its Banking for immediate payments, Director at Norbulk. Citi opened a 17-year relationship with the bank. ship owners wanted expenses, such as crew salaries and docking fees, to be differentiated for each ship Norbulk managed. However, the ship owners wanted to make only one consolidated transfer of funds each month to minimize costs and complexity. Meeting these two objectives using a traditional paper-based payments system was difficult. The solution As Norbulk gains new clients, it has proven easy to integrate them into its payment system. Norbulk has experienced substantial productivity gains from using Citi’s solution. “Our ship accountants can now handle a larger workload and focus on offering value-added services,” says Mr Davidson. Norbulk’s suppliers have also benefited. “Citi’s system allows us to trace payments quickly and send PDF copies to suppliers

25) “Citi was — and remains — ahead of the competition for online payments and banking.” Norbulk Shipping

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27) 22 Bamburi Cement Limited Supplier finance program safeguards supply chain and optimizes working capital Bamburi is part of the French building materials giant Lafarge, and is the largest cement manufacturing company in East and Central Africa.

28) The challenge operations with borrowing at high Citi committed to providing timely The objective of the program was costs, given their relatively small and efficient service to ensure the to assure continuous supplies to size and limited collateral. As a success of the program. Payment Bamburi by providing working capital result they faced financial distress instructions received before 12 p.m. support to Bamburi’s key suppliers. and high costs. are processed on a same-day basis; In addition, the program also aimed to optimize Bamburi’s working capital cycle (i.e. stretch the payment period for some suppliers from 15 days to 30 days) without increasing costs Ultimately, the suppliers’ additional cost of borrowing (due to increased Bamburi has a tightly controlled supply chain designed to reduce borrowing costs. It continued to pay its suppliers and logistics partners on invoice due date, and tried to match payments to logistics partners and suppliers with receipts from customers in an effort on a next-day basis. days outstanding) led to repricing By supporting its suppliers, Bamburi their services to Bamburi. was able to demand better payment terms and improve the efficiency to the supply chain, and to improve relationships with its suppliers. payment instructions received after, The solution Citi proposed a supplier finance solution — the first of its kind in East Africa. Under the program, it paid Bamburi’s suppliers on the due date of their invoices by drawing on Bamburi’s credit of its working capital. Bamburi also benefited from improved cash flow; its days payables were effectively increased because the final liquidation of the supplier finance loans were an average 30 days after the due date of invoices. facilities. However, the interest The benefit of the increased days cost was passed onto suppliers. payables allowed Bamburi to to optimize working capital and The financing cost for suppliers reduce borrowing costs. As a result, was lower due to the substitution payment to suppliers would only be of the suppliers’ credit risk for made on due date and on occasion, that of Bamburi’s. The solution would get delayed. Consequently, therefore enhanced suppliers’ suppliers had to finance their loyalty to Bamburi. extend enhanced credit terms to its distributors, giving it a competitive advantage.

29) The result Citi began a pilot implementation 24 of the supplier finance solution with one supplier in August 2008, after working extensively with the company to identify and eliminate potential implementation problems. Following due diligence, a further 14 suppliers were added to Bamburi’s supplier finance program. Bamburi estimates it will make opportunity cost savings of over USD200,000 a year and it is considering expanding the program to its subsidiary in Uganda.

30) By supporting its suppliers, Bamburi was able to demand better payment terms and improve the efficiency of its working capital. Bamburi also benefited from improved cash flow.

31) 26 Cargo Network Services (CNS) A web-based e-billing and payments solution The logistical “gatekeeper” for the US air cargo industry.

32) The challenge freight from the US, and to take remittance information to the e-billing CNS was incorporated in 1985 advantage of the growing market platform and creates payment following the deregulation of demand for a paperless service, files. Finally, files are disbursed the US aviation industry. This CNS wanted to provide these electronically to the airlines’ banks subsidiary of the International Air customers with an Internet-based along with remittance details. Transportation Association (IATA) is invoicing and payments service. dedicated to the entire air logistics chain and provides a unique set of business solutions that meet the requirements of the air cargo industry in the US. CNS serves as a key gatekeeper by requiring air cargo agents and forwarders The solution are delivered instantly instead of having to spend several days in solution that significantly enhanced transit. The increased visibility of CNS’s existing service, CASS-USA. approved and paid invoices has set of financial, operational, and transmit their waybills via electronic compliance standards. file delivery to CNS’s data center. and billing process was a critical pain point. Carriers were looking for ways to further utilize the technology inherent in the air cargo solution. To cement its close collaboration with airlines, air cargo agents, and freight forwarders who export for CNS. For airlines, invoices electronic billing and payments With the new solution, the airlines airlines revealed that the invoicing e-billing and payments solution CNS and Citi developed an (or intermediaries) to meet a Discussions with CNS and the There are many benefits of Citi’s CNS then consolidates the invoices and sends them to the airlines’ customers: cargo agents and other companies consigning goods by air. These companies approve the invoices, with adjustments if necessary, and authorize their banks improved the predictability of cash flows. In addition, the solution’s standardized dispute codes and rebilling capabilities have reduced disputes between airlines and agents. As a result, days sales outstanding (DSO) have been slashed by an average of 10 days, creating dramatic savings for the airlines. to pay. Payments are sent to CNS’s For cargo agents, invoices can be Citi bank account, either manually reviewed and approved electronically. via paper checks processed through Standardized dispute codes and a lockbox or electronically via wire rebilling capabilities have reduced the or ACH transfers. Citi then loads the

33) number of disputes — and accounts payable staff required — saving an 28 The Citi solution was initially deployed in 2003. Since that time, more estimated USD13 million a year. than 1,200 freight forwarders and 95 airlines have used the system The result Citi’s invoicing and payments solution for CNS has transformed the company’s air-freight billpayment process. The solution has shortened DSO by at least 10 days and reduced air carriers invoice presentment and collection costs by 18%. It has also streamlined freight forwarders’ invoice review and approval process. And it has reduced dispute rates by 45%, creating more transparency and trust in the billing process among airlines and forwarders. to connect, interface, and settle payments. Over 15 million air waybills/ invoices have been settled using this system (over 2.8 million in 2008 alone). And more than USD18 billion in payments have been processed and settled through the system (more than USD5 billion in 2008).

34) CNS and Citi developed an e-billing and payments solution that significantly enhanced CNS’s existing service.

35) 30 achieving visibility

36) While it is important to consider the diversity of countries in which a company operates and develop treasury structures accordingly, that should not be at the expense of visibility and control.

37) 32 Panalpina Optimizing working capital management Panalpina is one of the world’s leading forwarding and logistics services providers with 500 branches in over 80 countries. With the emergence of China as a major manufacturing center, Panalpina’s substantial business in the Asia Pacific region has been growing at double-digit rates.

38) The challenge US through separate public tenders. file delivery backbone of its cash Working capital made up the In each region, Citi proposed a payments network and CitiDirect® biggest component of Panalpina’s single bank solution that would Online Banking for information. balance sheet. Any improvement allow Panalpina to centralize its Transactions were handled by to the management of liquidity and treasury management through the Citi’s back-end international Mass integrating payments would provide concentration of surplus cash, the Payments System. the largest potential to deliver gains streamlining and automation of in- for Panalpina. house processes, and the provision of an Internet-based e-banking platform Panalpina’s Group Treasurer, Marcel Kellerhals, notes: “Citi is a to support its payment factory. global bank that has always been subsidiary surpluses to offset local With implementation in Europe The IT part of its solution was deficits on a region-by-region basis and Asia Pacific complete, some 16 very competitive. It gave us the and concentrate surplus cash in local Panalpina entities in Europe possibility to do a lot of things two currency pools: euros and US now maintain euro and US dollar without having a completely new dollars. It also sought to streamline accounts with Citi that are zero set-up everywhere in the world. in-house processes by introducing balanced at the end of each day, Citi keeps investing money and automated processing and moving and surpluses are swept into the upgrading its software. We could away from check-based to electronic two cash concentration accounts. not have done what we did without payments. Panalpina also wanted Surplus dollar balances from Asia such a partner.” to leverage its volumes for better Pacific are also swept into the same pricing from a reduced number of dollar account. “We deal with Citi through a parent The accounts payable/account in Zurich. Citi assisted us in our receivable process was streamlined project with clear planning and The solution to accommodate electronic funds weekly conference calls. We had the Panalpina chose Citi as its cash transfer, automated data upload right methodology and maintained management provider in Europe, and auto-matching. Panalpina momentum — which can easily be Asia Pacific, Latin America and the chose Citi File Xchange to be the lost in a large project like this.” Panalpina wanted to optimize internal funding by allowing local banking partners. ® committed to cash management. account relationship manager

39) The result Panalpina succeeded in migrating 34 the majority of its payments in Asia Pacific and elsewhere to full automation. Panalpina achieved considerable annual savings with Asia Pacific accounting for a significant portion of this. The company managed to leverage its relationship with Citi on a global basis. “Citi is our main supplier in terms of bank services. We have a mutual interest in having the relationship working in the proper way. Citi can help us with risk management, trade finance, and capital markets. Just as our customers see Panalpina as a ‘one-stop shop’ for logistics solutions, so we see Citi as a ‘onestop shop’ for banking solutions. Citi is well positioned to be a partner for Panalpina in the long-term,” says Mr Kellerhals.

40) Citi helped Panalpina centralize cash management, concentrate surplus cash, streamline receivables and payables, and develop an Asia Pacific payments factory.

41) 36 Turkish Airlines Target-balancing structure launches visibility and cost benefits Turkish Airlines flies 20 million passengers annually to 138 cities in 69 countries.

42) The challenge global and regional capabilities and transaction flow analysis tool, Following a period of ongoing expertise. To improve the efficiency TreasuryVision®, which provided business growth, cash flow visibility of Turkish Airlines’ cash flows, real-time balance information at Turkish Airlines’ head-office Citi began a phased implementation on accounts across the world in treasury department was severely of a regional cross-border target- customized formats. At the client’s restricted. Turkish Airlines held balancing structure that would specific request, the new structure 250 bank accounts with 91 banks sweep the vast majority of the was supported on a 24/7 basis by in 69 countries and commonly firm’s balances into Citi London. a customer service team based in used manual processes to transfer cash between its 107 offices. Cash reporting relied heavily on phone communication and faxed spreadsheets. But following its stock listing, Turkish Airlines conducted a company-wide cost- Because most of Turkish Airlines’ sales were euro-denominated, these were centralized in phase Istanbul in coordination with staff across Citi’s global branch network. one, with euro balances swept The result automatically from Citi or third- Turkish Airlines has benefited from party accounts. a streamlined account structure and reduced banking costs, an control drive that led the company In phase two, selected additional to issue a tender for its global elimination of manual payment currencies, including US dollars, cash management business processes, and significantly were introduced to the structure. enhanced visibility and control aimed at improving payment process efficiency, increasing Phase three saw the rationalization visibility through real-time of currency balances that could electronic reporting, and reducing not participate for legal or other transaction charges. practical reasons. In addition to implementing CitiDirect® Online The solution Banking, Citi’s electronic baking system, to eliminate manual Citi was awarded the tender on the payment initiation, Turkish basis of its matching geographic Airlines also became the first footprint and its combination of Turkish customer to install Citi’s over its cash flows. Though many of the benefits accrued from being the first Turkish multinational to implement a regional, cross-border target balancing structure, balances in currencies that remained outside the structure have also achieved improved investment rates.

43) Turkish Airlines has benefited from a streamlined account structure and reduced banking costs, an elimination of manual payment processes, and significantly enhanced visibility and control over its cash flows. Turkish Airlines Case Study

44)

45) 40 driving efficiency

46) Corporates in all industrial sectors need to assess the extent of their business in these new markets in order to understand the scale and growth potential of their operations.

47) 42 Air New Zealand Integrating ERP with offshore payments Air New Zealand is New Zealand’s national airline and a member of StarAlliance. It has a fleet size of 100 aircraft and flies to 52 destinations in Australasia and the Pacific, Europe, Asia and North America.

48) The challenge into the local clearing system in payments could still be made via With business spanning the globe, almost every country in which Air other means included in the same Air New Zealand makes thousands New Zealand operated. The solution payment file. Through CFX and of payments annually to its involved a combination of Citi® File CitiDirect, Air New Zealand was international suppliers. Payments Xchange (CFX), GXS Enrichment, able to investigate the progress vary in size from USD10 million to CitiDirect Online Banking, and details of payments. Moreover, below USD10. ® WorldLink ACH, WorldLink Wires, CitiDirect provided Air New Zealand WorldLink® Remote Check and, with comprehensive reporting and Air New Zealand was keen to look in Asia, PayLink . Wires and reconciliation ability at country and for new payables solutions that remote checks are required in head office level. could help it reduce costs and countries where an automated increase efficiencies in its offshore clearing house (ACH) infrastructure payment processes. is not available and for more exotic ® The crux of the issue was obvious: ® SM payments requiring the use of Many aspects of this groundbreaking solution had to be negotiated from scratch, where intermediary banks. Citi customized the solution for its payment process by integrating The solution had many attractive Treasurer of Air New Zealand, Air New Zealand could streamline Air New Zealand. Paul Kelway, its ERP system (PeopleSoft ) with features. A single file format for notes: “The whole process has a global payments supplier. In all payment types would allow a been a huge success. Once we doing so, Air New Zealand would one-time interface with Air New had done the hard yards — setting obtain access to a straight-through Zealand’s PeopleSoft platform. up the unified file format — it payment capacity that would enable High-volume payments in USD, AUD, became relatively easy to bring it to make payments to its many CAD, GBP, EUR and HKD would be on new currencies. Citi had the offshore suppliers at a lower cost. handled at low cost through an ACH. technical ability and the coverage For time-sensitive payments, Citi of currencies and countries. They provided a gateway that enabled offered low-cost per transaction Air New Zealand to achieve same- and capacity to handle strong day payments. For countries that growth in volumes.” ® The solution Citi’s team provided a low-cost solution, using a single file format to deliver payment transactions did not support ACH infrastructure,

49) The result By working with Citi, Air New 44 Zealand has achieved savings in reconciliation and processing costs. Mr Kelway says: “It took around three months to get the new system up and running. We have gotten to the point now where virtually all payments, i.e. 99.9% by value, are paid electronically. We know precisely what our cashflows are from the payables side. Recs are done almost in a flash. The benefits are significant.” Air New Zealand was very impressed with the solution that had been designed and implemented for it. The airline has implemented the solution for its Engineering Division — a separate organization with similar requirements that uses SAP as its ERP.

50) By working with Citi, Air New Zealand has achieved savings in reconciliation and processing costs.

51) 46 Bombardier Recreational Products (BRP) Revving up purchase incentives with a prepaid card solution A world leader in motorized recreational vehicles and powersports equipment, with brands like Sea-Doo, Ski-Doo and Can-Am ATV, BRP provides recreational products to several dealers and distributors in over 70 countries.

52) The challenge The solution The result Bombardier Recreational Products Citi Prepaid Services enables a With Citi’s prepaid electronic payment (BRP) found it challenging to design paperless, electronic payment to solution, the complexity, bureaucracy, consumer payment promotions owing deliver consumer incentives. BRP and time delay associated with cutting to complex and often slow payment adopted this program to eliminate checks was eliminated, easing the issuance processes. Lacking direct the traditional paper check from its distribution process and removing the channels to its consumers, BRP had processes and replace the check burden on BRP’s operation. Its custom the choice of either relying on its with a Visa® prepaid card. The fully Fuel Card incentive was delivered over North American network of over 2,500 customized program, which included 10 times faster than the traditional dealers to deliver incentive payments a branded Fuel Card, marketing paper check (check: nine weeks vs. card: or issuing incentive payments by paper collateral, and customer service six days), which was significantly more checks directly to the retail consumer. support, eliminated BRP’s reliance effective in motivating consumers. on checks by establishing a payment Additionally, the 24/7 /365 toll-free channel directly with the consumer. customer service support made it Although using checks was the more acceptable choice, it required ® easier for consumers to access their burdensome levels of approvals, Using the Citi Prepaid Services starting with a qualifier process at solution, upon purchase of a BRP dealer level and often elevating to product, the dealer enters the management level in finance. This consumer’s information into BRP’s process delayed productivity across electronic system. That information is the organization and required lengthy automatically uploaded to a database, The Citi Prepaid solution not only timeframes to complete, with the bypassing traditional approval steps streamlined BRP’s incentive payment average incentive payment taking and procedures. Within days, the process, but dramatically increased eight weeks to reach the hands of consumer receives a personalized Visa consumer satisfaction, winning “rave the retail consumer. Faced with this prepaid card, loaded with the incentive reviews” according to the BRP team. challenge, BRP needed to find a payment, allowing immediate access faster, more efficient way of delivering to funds. The Fuel Card incentive not incentive payments directly to the only motivates consumer purchases, consumer to enhance user experience but aligns extremely well with BRP’s and ultimately, boost sales. products, like Sea-Doo Watercraft. account information from anywhere, further relieving BRP and dealers of having to provide incentive payment and balance updates on request.

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54) Citi® Prepaid Services enables a paperless, electronic payment to deliver consumer incentives. Bombardier Recreational Products Case Study

55) 50 Michelin North America, Inc. Consumer incentives drive performance For over a century, Michelin has utilized its technological leadership, capacity for innovation, high-quality products and services, and powerful brands to enhance the mobility of its customers. As a global leader in the car and light truck tire market, Michelin produces over 150 million tires annually.

56) The challenge funds with online and point-of-sale The result Michelin was in need of an innovative purchasing capabilities, fund security consumer incentive payment solution with continuous fraud monitoring, incentive solution eliminated the that was user-friendly and easy “Zero Liability” and FDIC fund need for paper rebate checks, to understand for its consumer protection for consumers and overall replacing them with immediate population. Michelin also wanted the performance with rapid delivery, electronic payments delivered directly program to mirror the quality of its comprehensive 24/7 multilingual to personalized Michelin Prepaid tires in terms of technology, safety, cardholder support, and unique brand Visa® Cards. This solution allowed and performance. This solution was extension for Michelin. The solution funds to be instantly accessed by needed to provide payments for also provided streamlined payment the cardholder and gave Michelin consumer incentives that would delivery operations, with a dedicated a unique opportunity to extend its drive purchases of Michelin tires. Citi Prepaid support team overseeing brand in providing true “wallet share” Initially suggested by its Purchasing the file processing and financial by placing the “Michelin Man” directly Department, Michelin’s Marketing operations of the program. in cardholders’ wallets, reminding Group decided to investigate delivering its consumer incentive payments via prepaid cards given the payment speed, flexible fund access, consumer protection and unique brand communications it provides. The solution Citi® Prepaid Services rapidly implemented a fully customized, consumer incentive program for Michelin, which delivered a focus on quality through innovative technology. It allowed its customers immediate access to their incentive This Citi Prepaid Services consumer incentive solution eliminated the need for paper rebate checks, replacing them with immediate electronic payments delivered directly to personalized Michelin Prepaid Visa® Cards. This Citi Prepaid Services consumer them of the Michelin brand every time they use their card. Also, the Citi Prepaid Team provided comprehensive, dedicated marketing, creative, and operational program support for Michelin. According to Mitzi Cooley, Promotions Manager for Michelin: “The prepaid card program Citi Prepaid provides for Michelin continues to improve significantly and meet the payment needs of our organization and customers. I have been pleased.”

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58) “The prepaid card program Citi Prepaid provides for Michelin continues to improve significantly and meet the payment needs of our organization and customers. I have been pleased.” Michelin North America, Inc.

59) 54 Toyota Motor Sales USA Driving sales with paperless incentives Known globally for progressive, efficient products, Toyota’s decision to adopt paperless payments aligned with its efficient, clean solutions that make an environmental impact.

60) The challenge The solution The result With thousands of sales Toyota realized it had to find a Toyota quickly eliminated the need professionals at over 1,400 dealers solution that would free up its to purchase and inventory paper, across the US, Toyota faced a major team, reduce and even eliminate ink, and envelopes. Its hardware challenge on the production and its costs, and get it out of the costs to run the check process distribution of its sales incentive check-writing business. The answer were also eliminated, requiring less payments. For years, paper checks came with a program that quickly space and personnel to manage. seemed like the only legitimate and effectively transitioned every Toyota also saved countless hours payment method on which it could incentive payment from the producing, sorting, packaging, and rely. Yet despite its simplicity in inefficient paper check to seamless, shipping checks, not to mention concept, the use of paper proved to electronic delivery. For the solution, the required post-distribution be incredibly complex, expensive, the company turned to Citi management and research for and inefficient for Toyota. The Prepaid Services, which helped inbound payment questions. The company had to produce the design a fully custom-branded program also gave the company a checks, purchasing large volumes Toyota program that immediately unique and direct communication of paper, ink, and envelopes, and eliminated its burdensome checks. channel to its sales professionals, also had to establish a dedicated At the heart of the program is who were usually employees of the infrastructure of printers, the customized and personalized dealership rather than Toyota. computers, and software; all major Toyota Visa® Prepaid Card, which costs to continually produce every qualified sales professional upwards of around 150,000 checks received. Sales incentives could be annually. Finally, Toyota had to automatically placed directly onto distribute these checks, typically the card, cutting payment delivery batched for priority shipment, time from weeks to days. Within which cost around USD10–12. So, weeks, Toyota launched and was the distribution costs alone topped delivering paperless payments USD180,000 annually. nationwide, at a dramatically faster ® rate and at a fraction of the cost. The program’s impact can be best illustrated with Toyota’s most recent new market entry. When it launched the program, Toyota was entering the US truck market, a challenging segment traditionally dominated by a few select manufacturers. “When we launched our program, we decided

61) to utilize the unique channel it gave us by putting the newly 56 introduced Tacoma truck on the program website and materials, and even on our Toyota Card,” said Warren Keckeisen, Incentives Administration Director, Toyota Motor Sales USA. “Our Citi Prepaid program allowed us to communicate directly with our individual sales professionals to educate them on our new truck line, and it also allowed us to dynamically reallocate our incentive structure and enhance their performance. It was a solution that came at the right time for us.”

62) The program gave the company a unique and direct communication channel to its sales professionals, who were usually employees of the dealership rather than Toyota.

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65) Industrials Casebook 2010 — 2011 Global Transaction Services