Avery Dennison, the global manufacturer of labels, tickets and tags, wanted to introduce a comprehensive approach to risk management that included FX risk management and in-house banking. Kyriba worked on a super-tight schedule to implement a system that has proved its worth during the pandemic.
Avery Dennison wanted to introduce a comprehensive approach to its treasury management that included FX risk management and in-house banking. The group does about 3,000 FX transactions annually. The treasury operation is centralised in the Netherlands and trades with almost all of Avery Dennison’s relationship banks using 360T. Where necessary, it also deals in the name of subsidiaries. With that volume of activity Avery Dennison needed to have a smooth, automated FX risk management process, which Kyriba has provided.
“All these trades now feed straight into Kyriba,” says Ramon Tolk, Senior Director Treasury, Avery Dennison. “For trade confirmation, Finastra takes care of all the matching needs with banks, and there is STP through Kyriba as well, ensuring that the data is 100% accurate and complete.”
“For derivative transactions we get a market data feed from Refinitiv into Kyriba, which values the outstanding derivatives at month-end. To close the loop, we have accounting and reporting, mostly done through Oracle, and Kyriba provides journal entry information for all the outstanding derivatives. So Kyriba sits at the centre of this process, feeding into Oracle, where it is input manually – although we aim to automate that as well next year.”
Sandeep Nene, Senior Manager – Treasury, Avery Dennison explains the challenges faced by the group’s in-house banking operation, problems that the treasury team aimed to solve through the Kyriba project.
“With almost 50 countries involved, our treasury operation in the Netherlands acts as the group’s global liquidity centre, except for the US. They pool with any country where that is allowed e.g. Malaysia, Australia, EMEA (etc). Annually there are about 400 inter-company loans outstanding at any one time, and a value of >$10bn.”
“So we needed a lot of automation, which is where Kyriba came in. We get daily bank statements, directly from Bank of America and Citibank, and in other cases via Fides. Kyriba has created monthly inter-company statements, and quarterly we capitalise all interest to the loan where that is allowed. This process is almost all automated now.”
This was a project where both speed and phasing were essential.
“There were two critical success factors for us going into the project,” says Nene. “We issued the RFP in 2018 but only signed the contract in March 2019. This meant that we had only 12 weeks in which to install the system and go live, or we faced the danger of not having a treasury management system! So we divided the project into four phases: critical modules, important modules, enhancements to the TMS, and further enhancement. Without the agreement to do this there was no way we could have achieved phase 1.”
The move to SaaS was completed in 78% of the time estimated. It resulted in significant financial benefits, including reduced IT support and not having to pay legacy vendors for upgrades.
“The result is that we have a modern system with upgrade releases every six months and free upgrades!” says Nene.
It also meant increased efficiency. Banking connectivity is now centralised; there is full integration with the ERP system; processing is both automated and centralised; and the group has access to a wide range of ready-to-use bank formats.
Working with Kyriba has also created seamless automatic posting of ZBA/pooling activity; allowed the input of tax transfer pricing for intercompany rates/spreads; has made the quarterly interest cap and roll process much more efficient; has automated intercompany loan rebalancing transactions; has made FX derivative valuations more transparent; and has automated the treatment of financial accounting and hedge accounting. The project also resulted in increased control in terms of intercompany audit, streamlining accounting treatment and controlling bank account signatory mandates.
“All in all, a great success!” says Nene. “The key factors were excellent planning, teamwork and mutual respect, a clear escalation path, a precise definition of needs in the blueprinting document, and a positive relationship between all players. That meant we could achieve five host connections within 12 weeks – almost an impossible task! We went live on 31 July 2019.”
The value of the project was quickly proven by Avery Dennison’s experience during the Covid pandemic.
“Operationally we suddenly had to work from home,” says Tolk. “But things went seamlessly for two reasons. The internal systems we use such as Google Meets and Hangouts meant we could keep communicating. And on the treasury side what helped was that our processes were now almost 100% automated, so available irrespective of location. Our pre-existing business continuity plan helped us.”
“It’s a really impressive project and we are so pleased to see these results. It’s been a lot of work on both sides, and a tremendous amount of credit to both of you and your teams,” says Kyriba’s Greg Person, VP Sale and Account Management. “Thank you for your partnership and collaboration the last two years.”
Looking ahead, the Avery Dennison team is now working on the reporting side to create a monthly report based on Kyriba’s graphics.
“We still need to replace some manual processes e.g. with Oracle. Working capital is always an interesting topic, and we are looking to set up a dynamic discounting situation to pay vendors earlier at a discount and so benefit our P&L,” says Tolk.
About Avery Dennison
Avery Dennison is a recognised industry leader in the manufacture of labels, tickets, badges and tags. It has over 30,000 employees and operations in more than 50 countries. It manufactures pressure-sensitive adhesive materials for diverse end-markets, as well as converted products (tickets, tags and labels) for other end markets such as retail apparel.
In 2019 the group had net revenues of $7.1bn. The largest of the three divisions is labels and graphic materials, which accounts for 67% of that total. Retail branding and information solutions accounts for 23%, and healthcare and industrial materials for the remaining 10%.
In terms of both manufacturing and sales, the geographic split is roughly one-third in the America, one-third EMEA and one-third Asia-Pacific, so the group has broad exposure to diverse end markets.