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Managing the Money

With CoBaCash, Commerzbank knows just how much cash to have on hand

Early in 2001, a single cash-in-transit (CIT) company took on the responsibility of supplying ATMs and cashiers' offices in the Commerzbank branches with cash. In view of the roughly 840 branches and more than 1,000 ATMs all over Germany, this service constitutes a considerable challenge in terms of organization and logistics. An Intranet-based server application provides the cash-in-transit company with the necessary data for optimum cash management. This corporate IT tool, which Commerzbank made available for companywide use at the beginning of April 2001, is called "CoBaCash." For implementing the application, Commerzbank heavily relied on its IT service provider and SAS Quality Partner InfoWare GmbH.

How Does the Money Get into the Machines?
Every single ATM cash movement is recorded in a log database, which is read into the CoBaCash system on a daily basis to produce forecasting and optimization calculations. For security reasons, the minimum ATM cash holding corresponds to the average daily consumption over the past 100 days. If the limit is reached within the forecasting period, CoBaCash will order the CIT company at the ideal point in time to collect banknotes from the regional central bank and replenish ATM vaults.

Technically, the maximum volume ATMs can hold amounts to approximately d200,000 (US$101,000). However, it would not make sense from an economic point of view to fill up each ATM to the brim just to make sure that the bank's customers always have enough cash at their disposal. After all, the average daily drawing rate per machine varies between d2,500 and d35,000. And, what is more, any cash held in ATMs or the branches' cashier's offices fails to produce any interest and does not form part of the bank's business volume. In addition, every single cash replenishment operation will cost money. This is why Commerzbank negotiated a lump sum with the carrier company.

The forecasting and optimization module forms the centerpiece of the CoBaCash system. This is where the daily cash requirements of branches and ATMs are determined over a period of two to three weeks. The system then determines the optimum cash holding for each machine and branch by calculating transport costs against interest rates and by factoring in demand.

Cash drawings are subject to trends and generally follow weekly, monthly and annual cycles. For example, people tend to draw relatively large sums of cash at the beginning of each month. Just before Christmas, with Christmas allowances rolling in on current accounts, drawing rates soar, whereas in August, during the summer holidays, rates tend to drop considerably. ATMs that are located in shopping centers, for example, are most frequented on Fridays and Saturdays. "The longer we work with CoBaCash, the more exactly we can predict demand," explains Arne Ruban, CoBaCash project manager, staff department organization. Every day, 10 megabytes of data relating to ATM cash drawings and cash payments at the branches flow into the CoBaCash database. The organization is now planning to collect and analyze data covering a period of four years.

Small or Large Bills
The CoBaCash forecasting tool generates an order recommendation for the cashier's office staff in the branches, which they can view on their personal computers. It defaults the next delivery date, the amount of cash to be ordered and, in future, also the denomination of paper money and coins. This order proposal may be modified by the service staff to match requirements. To conclude the operation, the completed order screen can be saved in the CoBaCash system with a simple mouse-click. The CIT company can then access the order directly, confirm its entry and delivery date, and organize the cash delivery route. Working with Windows user interfaces, CoBaCash is definitely a user-friendly application. "This was an important reason for us to develop an Intranet-based server application," says Ruban.

The advantage of this particular type of application is that the IT network is only used whenever a function is executed. Developing a server application using a permanent connection would have been much harder in terms of the network structure required. "One important reason why Commerzbank decided to use the SAS tools was the SAS/ETS forecasting component," recalls Jost Doerken, general manager of InfoWare.

"Statistical applications and data analysis procedures are clearly one of SAS' strengths," says Ruban. Moreover, all other CoBaCash components could also be realized in SAS: SAS/IntrNetsoftware is used for the user front-end and Intranet handling. Introduced in January 2001, Release 8.2 of the SAS System also provided the project team with a powerful optimization tool.

And finally, SAS/CONNECT to ODBC provides access to the CoBaCash database, which contains data in SAS and SQL formats. The bank's central host computers transfer account information about the customers' cash drawing operations, ATM balances and internal bank user and structural data to the CoBaCash system. Part of this host data is already stored in a SAS data warehouse, which means that transfer from the central computer to the CoBaCash system does not involve any further conversion.

Rapid Prototyping: Quick Solutions and a High Quality of Development
Another reason why Commerzbank decided to use the SAS software to implement CoBaCash was the SAS know-how that already existed within the company. "It made customizing so much easier," recalls Ruban. And it may also have influenced the fact that development costs have not exceeded the budget so far and CoBaCash could be developed in the shortest possible time; specifications were adopted at the beginning of September 2000.

As early as October, the basic structure of the user front-end was in place and, one month later, the project team was able to present the prototype version to both selected employees from the bank's branches and CIT decision-makers. Commerzbank was genuinely pleased with the positive feedback of the users-to-be, relating not only to the prototype's functionalities: "Our employees appreciated the fact that we involved them and asked them for their opinions even before the development of the tool was complete," says Ruban.

Branch rollout started in late February 2001 and lasted until the beginning of April. In May 2001, the forecasting component was integrated in CoBaCash. Further proof of the user-friendliness of the new solution is the fact that a brief handout was enough to introduce users to the new tool and no end-user training courses were required. As expected, the rollout itself took place rather quickly and smoothly. Within the bank, five people – among them a valuables logistics specialist – were required to gradually grant the branches access to CoBaCash and to provide user support services via the phone. The system immediately became very popular with the users; shortly after its introduction, between 95 and 99 percent of orders were already placed with the CIT company using CoBaCash. "This is a qualitatively safe order procedure as it precludes the kind of misunderstandings or mistakes that may occur during manual order acceptance," explains Ruban. In a survey conducted amongst users, respondents praised CoBaCash as a real achievement. The CIT staff, too, is happy with order data being transmitted electronically. Before the advent of CoBaCash, they sometimes even had to take night shifts to enter the data in their own system.

The team has now entered a new project phase. First, they must deliver intensive CoBaCash support during the Euro introduction phase. Second, evaluation mechanisms are to be installed in order to assess the quality of forecasting and optimization activities. Commerzbank decision-makers now want to know exactly how much money the organization saves by using CoBaCash, the online cash management system with a capacity to learn. For there is no doubt at all that the CoBaCash operative solution optimally supports logistics processes – practical experience proves it every day.

Copyright © SAS Institute Inc. All Rights Reserved.

Arne Ruban

CoBaCash product manager

Commerzbank

Uitdaging:
Forecast the amount of cash needed each day in Commerzbank's 834 branches and 1,000 ATMs across Germany
Oplossing:
CoBaCash, the bank's SAS-based forecasting and optimization system, provides easy Web access for critical cash-in-transit (CIT) decisions

The longer we work with CoBaCash, the more exactly we can predict demand ... Statistical applications and data analysis procedures are clearly one of SAS' strengths. 

Arne Ruban

CoBaCash product manager

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