Executive Summary

The purpose of any supply chain is to meet customer needs and grow business prof-its. The cash supply chain is no exception. Banks manage their cash point networks(e.g., ATMs, bank branches, cash centers, retailers) by providing cash withdrawalservices where and when customers need them. To make a profit, banks must man-age these activities efficiently.

Managing cash supply operations is a complex process that involves independentstakeholders including banks, cash in transit companies (CITs), and independentservice operators (ISOs). The process also involves decision-makers at strategic, tac-tical, and operational levels—each performing certain tasks by managing and con-trolling the operations and processes.

Every decision-maker needs timely, quality information. The main question is howto quickly provide decision-makers with the right insights to help them make win-ning decisions.

This white paper explains the best practices in cash supply chain management andoutlines the benefits of the intelligent business operations (IBO) working style.

IBO and Company Performance

IBO is a work style that integrates near-real-time analytic and decision manage-ment technologies into the transaction-executing and bookkeeping operationalactivities that run the business.1

According to Gartner, by 2016 around70 percent of companies reportinghigh performance will be implementingextreme collaboration or real-time pre-dictive analytics to manage their busi-ness processes.

IBO tools (Figure 1) can help improvebusiness processes by providing visibil-ity, situational awareness, and flexibilityfor those who manage cash supply chainoperations and make decisions on adaily basis.

Intelligent BusinessOperationsBest Practices in Cash Supply Chain Management

Why Efficiency Matters

Despite the popularity of credit cards,cash is still the most common paymentmethod. Globally, more than half of pay-ments are made in cash. The increasingdemand for easily accessible cash drivesbanks to expand their cash point net-works. However, as the network grows, itbecomes more difficult to supervise—and operating costs rise.

Effective cash management is a crucialsuccess factor for banks and outsourc-ing companies. It can give banks moreprime retail space in branches and freeup staff to focus on customer-facing ac-tivities. Other benefits include shortercash lead times, better ATM availability,and lower operating costs.

White PaperIntel® Xeon® Processor E5 FamilyData Center EfficiencyFinancial Services

IBO connects internal and external busi-ness information systems into a commonenvironment where data is analyzed andmade available in real time for operationmanagers and strategic decision-makers.

IBO performs a different function than busi-ness intelligence (BI) but is complementary.The goal of BI systems is to gather and ana-lyze the historical data during a certain pe-riod. The IBO platform compares historicaldata with real-time data, determines trendsand links between actions, and makes pro-jections for the future.

Another important IBO function is au-tomating optimal decision-making,where the forecasted demand, existingand planned limitations, and results areused in real-time to automaticallychoose the most cost-efficient combina-tion of cash quantity, denomination, de-livery time, route, etc.

With IBO, decision-makers have full visi-bility to rapidly and flexibly respond toreal-time changes through:

• Graphical presentations of information

• Customization of user interface in accor-dance with the performed functions

• Contingency notifications

• Decision simulation tools

Managers can perform real-time monitor-ing and evaluations of key performance in-dicators (KPI), monitor implementation ofstrategic goals in the company, and stayinformed on the system suggested tacti-cal actions.

Artificial Intelligence-Based Analytics

The IBO platform performs the complexcash demand forecasting and optimiza-tion tasks using its integrated artificialintelligence algorithms, capable of real-time processing of large amounts of in-formation, evaluation of historical data,relations between them, trends, and pro-jection. It chooses the optimum decisionsout of millions of possible combinations—something the human brain and stan-dard analytical tools cannot do.

It is important to mention that withoutunderestimating the human input, theexpert knowledge of staff is especiallyimportant in the process of algorithmtraining. The system does not answerthe question “Why?" Instead, it evaluatescauses based on insights entered by ex-pert staff.

For example, while analyzing the error ofsystem forecasting, an employee noticesit could have been influenced by anevent that took place in the region. The

Contents

Executive Summary . . . . . . . . . . . . . . . .1

Why Efficiency Matters . . . . . . . . . . . . .1

IBO and Company Performance . . . .1

Artificial Intelligence-Based Analytics . . . . . . . . . . . . . . . . . . . . . . . . . .2

Business Benefits of IBO . . . . . . . . . . .3

Intelligent Cash Management . . . . . . .3

Scalability . . . . . . . . . . . . . . . . . . . . . . . . .4

IBO in Action . . . . . . . . . . . . . . . . . . . . . .4

Recommendations . . . . . . . . . . . . . . . . .4

Figure 1. Intelligent businessoperations (IBO) tools

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from having responsibility for thefull cycle vested in a single entity.

Intelligent Cash Management

The FOBISS CM* IBO solution is the firstcomplete and integrated product for deliv-ering cash management services within anytype of cash point networks:

• ATMs (cash in/out, recyclers)

• Bank branches,

• Cash centers

• Retailers

Figure 2. Business benefits ofthe IBO approach

• It is self-learning

• It assumes

• It adapts

• It predicts

• It finds typical and untypicalbehavior of each cash point

• It analyzes and suggests themost valuable decisions forthe user

IBO Platform

• Connects and integrates allkinds of information systems

• Automates processes end-to-end across systems

• Provides visibility into whatis happening real time

• Supports evidence-basedand timely decision-making

• Delivers efficient manage-ment and optimization

algorithm gets this information and re-evaluates the relations, thus learning tomake even more precise projections.This work method eliminates the risk oflosing know-how due to staff changes. Italso eliminates the information gapwhen, for example, a bank employee fillsin for a colleague from a branch in an-other region who is on sick leave.

Studies and pilot projects evaluated theprecision of these complex algorithms.For example, in a network of 6,000 cashpoints, in measuring the efficiency of ac-tivities, revealed that using the IBO plat-form saves:

• 22 percent in logistics costs

• 17 percent of costs related topreparation of money

• 55 percent of costs related to interest

In monetary terms, a bank operating acash point network of such size saves 11million Euros (USD 13.6 million) per year.Risk management takes place simultane-ously and the quality of client service isensured, so profitability grows.

Business Benefits of IBO

IBO benefits financial institutions in anumber of ways (Figure 2). This enablesthem to shorten cash lead times, maxi-mize cash point availability, reduce net-

work operating costs, and maximizeprofitability. Additionally, the technologyenables its users to:

• Be aware of network performanceincluding real-time profitability

• Reduce cash-related operatingcosts by up to 40 percent

• Automatically support set KPIs andservice level agreements (SLAs) forthe entire logistical chain

• Ensure minimization of on-balancesheet cash in the supply chain byusing effective forecasting andstock management tools

• Use latest-generation IBO technol-ogy in cash points to streamlinecash transactions

• Ensure the supply chain isdefined, integrated, and managedas a single entity

• Reduce physical space andresources devoted to the adminis-tration and handling of cash

• Examine the potential for the fullcash cycle to be outsourced withthe benefits of full accountability,ownership, and efficiency that flow

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Intelligent Business Operations

4

Intelligent Business Operations

The FOBISS CM* IBO solution can:

• Save significant time and HR andmoney resources for users of appli-cations by optimizing decisions andprocesses

• Eliminate dormant cash all over thenetwork and maximize efficiency,meeting SLAs with minimumresources

• Provide complete transparency intoprocesses for significant savingsand evidence-based and timelydecision-making

Scalability

Effective cash management requires theability to aggregate and decide uponlarge volumes of data from differentsources such as ATMs, bank branches,or vaults (Figure 3), while organizationsneed fast computation and flexible ac-cess to this data in real-time. Largenumbers of cash storage devices, multi-plied by provided currencies, decisionspaces, and hourly or daily solution de-mands, create huge computationalworkloads that can be managed by theparallel processors of modern servers.

Figure 5 documents the results of a testat a bank with 185 branches, which wasable to decrease its dormant cash levelby 41 percent.

Figure 6 shows the results of testing at abank with 1,100 ATMs. Once FOBISS CMwas deployed, the bank started planningCIT visits more accurately, reducing bothplanned and emergency visits by 16percent and 64 percent, respectively.

Recommendations

The days of limited, unintegrated solutionswith only basic forecasting and optimiza-tion are over. Users in today’s volatile worldexpect high performance and total flexibil-ity and situation awareness to deal withday-to-day cash supply chain management.

When choosing a cash supply chain man-agement solution, it is important to look fortechnologies that are highly responsive andable to increase performance efficiency.Such technologies should include demandmanagement tools, optimization engines,complex event processing tools, role-baseddashboards, decision management tech-nologies, and performance measurementanalytics. Most importantly, they should bebased on near- or real-time data.

FOBISS worked closely with engineersfrom Intel, using the advanced IntelfasterLab environment to undertake anumber of benchmarks of the FOBISSCM product to ensure it can scale out tosignificant volumes and still provide fastand flexible results. The collaborationresulted in improved crucial daily calcu-lation performance of 6,000 cash points(CPs) per hour per standard server.2

Adding more standard server nodes tothe calculation cluster and/or dedicatingmore hours daily calculations allowsFOBISS to meet the exacting demandsof scale and timeliness present in today’sand tomorrow’s banking enterprises.

Built on the Microsoft .NET* platform run-ning on Intel® Xeon® processors, FOBISSCM delivers effective data analysis andcash management with the scalability tomanage tens of thousands cash points.

IBO in Action

FOBISS CM is showing strong results forbanks that have tested it.

Figure 4 shows a case study where FO-BISS CM was tested at a bank with 6,000ATMs. The tests resulted in total annualsavings of 11.5 million Euros.

Independent Service Operators

CIT Companies

CurrencyChests

CentralBank

CommercialBanks

Outsourcing CashManagementCompanies

Figure 3. Effective cash management requires the ability to aggregatelarge volumes of data from different sources

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Intelligent Business Operations

Replenishment Cost (CIT)

Cash Custody

Cash Processing Cost

Cash Interest Rate

724,098 EUR

Figure 4. Testing the platform ina bank with 6,000 ATMs showedtotal annual savings of 11.5 mil-lion Euros.

Replenishment Cost (CIT) Cash Custody Cash Processing Cost

Cash Interest Rate Dormant Cash Level Down 24 Percent Cash Replenishment Down 15 Percent

Total Annual Savings: 11.5 Million Euros

Figure 5. A bank with 185branches decreased its dormantcash level by 41 percent.

Figure 6. After using IBO tech-niques, a bank with 1,100 ATMsreducing both planned andemergency visits by 16 percentand 64 percent, respectively.

Annual CIT Stops

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0Planned Stops Emergency Stops

1 “Hype Cycle for Business Process Management,2014,” Gartner, July 30, 2014 (https://www.gartner.com/doc/2812117/hype-cycle-business-process-management).2 One standard cash point (CP) represents an ATM holding five denominations of a single currency. Daily calculations are performed at night and can take multiple hours for large CP counts. The test config-

uration included a server with two Intel® Xeon® processors E5-2699 v2 (45M cache, 2.30 GHz), 128GB of DDR3 memory at 1800MHz, and Intel® Solid-State Drive Data Center Family P3700.

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Intelligent Business Operations