• Cash Management, Flow Case Study

    Connecting cash

21 October 2021

Wieland is a fast-growing German copper and copper alloy specialist. After a series of M&A acquisitions in the US, the treasury team found the successive legacy cash management systems were impeding efficiency. flow’s Desirée Buchholz reports on the turnaround

When Philipp Jakob Wieland laid the foundation stone for Wieland Group in 1820, nobody could have imagined that climate change and sustainability would become megatrends. All Wieland thought about back then was producing bells in Ulm in the south of Germany. Now, more than 200 years later, the resource he needed for his foundry is more important than ever: Copper plays a key role when it comes to electromobility and energy transition. Due to the intended electrification of large parts of the economy, the demand for copper is likely to be permanently boosted. (see Figure 1)

Figure 1: Copper performance following recessions/demand shocks

Figure 1: Copper performance following recessions/demand shocks ('99, '01, '08, '15); recovery phases (trough to peak prices) typically extend for over two years (chart is on a trading days basis)

“Our long-term copper price remains US$8,000/t (2021 real terms), well above marginal cost, as we believe new supply will have to be incentivised in relatively difficult jurisdictions to counter potential deferrals in more established regions”, noted Deutsche Bank Research on 15 September in their report, Supply shocks.1

Wieland, by now a global player with more than 8.000 employees working in 80 locations around the world, benefits from that trend: The copper and copper alloy specialist provides its customers with solutions for automotive, electronics, refrigeration and connectivity. Over the last three years, the revenue of the company has increased from €3.9bn to €5bn in 2021. The main driver for growth was a series of M&A transactions. By far the largest deal was the acquisition of US-based Global Brass and Copper Holdings (GBC) that was closed in July 2019.

Wieland Works Vöhringen

Source: Wieland Group

While the takeover opened new business opportunities for the company, it also created challenges for the treasury department: “Following the merger, cash management in the US was split amongst roughly 10 banks. And none of them was a core bank of the Wieland group,” recalls Fabian Schwarz, Director Treasury & Corporate Finance at Wieland Group. To make it even harder for Schwarz and his team, the different entities acquired were all running on different ERP systems. “We were not able to leverage synergies, we had complex and unharmonised processes,” he explains. “And above all, we had no visibility or transparency into the cash flows and the cash movements in the North American treasury organisation.”

In an industry where prices change quickly – copper is a publicly traded metal – not knowing in which bank accounts the money sits and not having access to the funds, can become critical. Therefore, Wieland decided to fully reshape its cash management landscape in the USA. It was the largest cash management project ever pursued within the Wieland Group so far and Deutsche Bank played an important role in making it a success.

The project goals were clear:

  • consolidate banks to optimize liquidity and release cash;
  • harmonise systems by implementing a global banking platform, which is bank-independent and able to interact with different ERP systems and interfaces;
  • integrate the newly acquired systems of GBC into the legacy Wieland set-up; and
  • improve compliance and transparency.

Concentrating cash

The first step, Schwarz’ and his team took in 2019, was a tender among six banks to consolidate all the cash management products in the US. Wieland decided to work with two banks: Deutsche Bank, which at that point was only responsible for the export business the company does with European clients to the US, won the mandate for the accounts payable side. The accounts receivable business was awarded to PNC Financial Services Group. Deutsche Bank could provide all required banking services as well as all technical interfaces for the Wieland US organisation and the Bank was already an established and reliable cash management provider for other group companies.

Copper coils

In a second step, Wieland introduced a target balancing cash pooling scheme enabling the headquarters in Germany to access funds from the US operations. “More than US$50m have been concentrated on group level thanks to the new structure. Before, this cash was split across multiple bank accounts across 15 US locations,” says Schwarz. Now, these funds are available to reduce debt on a corporate level and thereby reducing interest rate costs. Working with only two banks, Wieland could reduce its bank fee costs.

Fabian Schwarz, Director Treasury & Corporate Finance, Wieland Group“More than US$50m have been concentrated on group level. Before setting up the system, this cash was split across multiple bank accounts across 15 US locations“
Fabian Schwarz, Director Treasury & Corporate Finance, Wieland Group

Harmonising systems

From a technical point of view, the project was quite complex. In the past, Wieland used to manage banking activities manually. By shifting the US cash management business to Deutsche Bank and PNC, the copper specialist also wanted to streamline and harmonise communication. In other words, consolidation was key and getting rid of multiple e-banking tools was one of the key goals associated with the project.

This was not an easy task, but at least the treasury department did not need to start from zero: A few years ago, the group had decided to implement the global banking platform of SAP, the bank communication manager (BCM), and the multi bank connectivity (MBC) service for its European cash management activities. In October 2020, the company began to roll out these tools to the US operations as well.

However, simple copy-paste was not an option, Katrin Steinbach, team leader Global IT Finance & HR at Wieland Group recalls: “In the past, we decided to use EBICS as communication channel. The reason for this was that all relevant banks were located in European countries supporting EBICS.” According to her, this was a “very safe and above all cost effective way of bank communication,” which is why Wieland did not consider connecting via SWIFT at that point.

All of this changed, when Wieland started the cash management project in the US. SWIFT was now the best option to avoid several host-to-host connections which is why the company decided to onboard. “We only had six to eight weeks, because we were already preparing the first format testing, so we needed to apply and join the SWIFT network quickly,” Schwarz recalls. “This was quite tough because we are a German registered company and some legal documents were only available in German.” Yet, SWIFT needs that information in English. During and even before the whole SWIFT onboarding process, Deutsche Bank assisted with advice regarding the final structure and supported the technical side with various feedback concerning file and data structure in a weekly meeting which was held for several weeks.

Using CGI format

This was not the only technical work Wieland had to go through: Given the heterogeneous IT landscape of the newly acquired GBC business, the number of third-party systems that had to be connected to the global banking platform also increased. While some US plants are still running on the enterprise resource planning system SAP R/3, others are already working with the newer S4. Some entities are also using Oracle software. “Connecting all those different systems was a challenge especially in terms of processing different payment types,” says Steinbach. See Figure 2.

Steinbach, Team Leader Global IT Finance & HR at Wieland Group“In our target structure, we are only working with the international CGI payment format”
Katrin Steinbach, Team Leader Global IT Finance & HR at Wieland Group.

A particular pain point was the implementation of a check procedure, as this is still very common in the US. Treasury needed new message types to deal with pay checks and lock boxes. “Furthermore, we had to standardise payment formats because in our target structure, we are only working with the international CGI payment format,” says Steinbach. In addition, this payment format was completely new to all entities involved.

Figure 2: Wieland’s target structure for bank connectivity

Figure 2: Wieland’s target structure for bank connectivity

Lessons learned

During September and October 2021, Wieland has come close to reach this target structure. As of October 2021, the whole North America organisation and large plants in the EU are using the SAP BCM as a global payment platform. “From the Treasury perspective we are very, very happy with the situation right now,” says Schwarz.

  • Simplify the scope to avoid legal complexities: In hindsight, Wieland would not have tried to implement Puerto Rico at the same time as its US subsidiaries. The legal systems are similar, but not similar enough to managing implementation at the same time.
  • Do not underestimate the time needed for KYC onboarding and bank account opening: Wieland chose new banks for its US cash management activities. On the one hand this allowed the treasury team to set up the new structure alongside its day-to-day business, without impacting this ongoing flow. On the other hand, each legal entity in the US had to go through the KYC process due to the connection with the cash pool master at the German parent company as well.
  • Evaluate if physical meetings are possible and necessary: There are major differences between payment processes in Europe and the US. In hindsight, it would have been helpful to travel to the US and have several in-depth discussions and examinations of these processes. Unfortunately, the Covid-19 pandemic made this impossible.
  • Allow plenty of time to train and onboard colleagues: Wieland involved the local colleagues very early on and gave them status updates. The company spend a lot of time in the training making colleagues aware of the system, making sure they understand how it works, and going through the first payments with them.
  • Make sure to have one single point of contact to the bank: The number of people and parties involved in this project was huge (Deutsche Bank, SAP, SWIFT, the Wieland IT team). Therefore, the treasury department found it very helpful to have the key relationship manager at Deutsche Bank to coordinating all these activities within the bank and keep an eye on the bigger picture.

Looking ahead

With the successful go-live Wieland is convinced that the state-of-the-art cash management technology is in place and internal digitisation and process improvement goals have been fulfilled. A large part of the Wieland group is now running on one single cash management system, but harmonisation continues. The treasury team is currently focused on onboarding its Asian activities. “Our Singapore entity is working with Deutsche Bank to set up the new structure as well,” says Schwarz. At the same time, the first Chinese entity is about to get access to the platform via SWIFT as well.

The company also purchased SAP’s In-House Cash (IHC) module to further improve and automate cash pools within the group. “Last but not least, we are also preparing the advanced payment management module to fine-tune the various interfaces we have due to the several ERP systems.”


1 Commodities Outlook: Supply Shocks, 15 September 2021

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