For DTE Energy, the Detroit-based gas and electric utility holding company, the key to transforming itself from a low-tech shop bogged down with time-consuming manual processing and limited data access was moving everything to a single instance of SAP 5.0, its enterprise resource planning software. For DTE’s treasury, the switch meant use of SAP’s treasury, bank accounting, cash management and in-house bank modules.
Once the $8.9 billion company threw the switch, one thing that popped up was that the more than 9,000 electronic payments DTE makes each month to vendors on behalf of its 130 legal entities were in the wrong format 96% of the time. Moreover, 10% of the transactions could not go through without costly and time-consuming repairs. But a problem recognized is a problem that can be fixed, notes Keith Bardouche, supervisor of cash operations.
About the same time that DTE identified the problem, it was approached by contacts at J.P. Morgan Treasury Services, who had also noticed the glitches. Regulators in Europe, having helped to develop standards for cross-border electronic payments, were starting to put pressure on banks to enforce compliance with the standards, so J.P. Morgan ran an analysis of its clients’ payment files and found a lot of noncompliant payments. DTE was conspicuous, with more than 95% of its payments noncompliant, reports Ernie J. Fiore, the bank’s senior product manager for U.S. dollar clearing.
DTE was eager to fix the problem and avoid the fees that went with noncompliance, and J.P. Morgan had a solution to propose. The formatting error was a mapping problem in file transmissions that could be fixed quickly with a one-time correction. Eliminating the need for repairs required adjustments to data fields and vendor data.
A conference call with a handful of bank experts on one end and treasury and IT experts at DTE on the other end identified the way to fix the formatting problems within DTE’s SAP system, and compliance shot up, Fiore reports. Now DTE has a 99.7% straight-through processing rate that ranks it among J.P. Morgan’s top performers and earned the company an award from the bank last January, Bardouche says.
With those glitches identified and fixed, DTE is riding its technology to much greater efficiency. Moving to one instance of SAP centralized a lot of things. There’s just one set of books, for example, so there’s no information to gather and collate for closing, and DTE can now close its books daily, Bardouche says.
When the company had multiple ERP systems, subsidiaries were operating separately and sometimes using their own bank accounts. With everything centralized in one system, it can use a smaller set of corporate accounts. Before the switch to a single instance of SAP, one person could handle cash management for 30 DTE subsidiaries. Now one person can take care of all 130, and DTE cut the number of its cash management banks from 23 to five, Bardouche says.
To become an all-SAP shop, treasury had to give up its treasury workstation, which meant moving from a treasury-oriented systems design to more generic design, but the transition went fairly well, Bardouche says. “We had a few hiccups at first, but we got through them quickly. We only had to run parallel systems for about a month.” DTE’s SAP is installed software on the company’s servers, rather than cloud-hosted, which means annual upgrade installations, but that experience has become routine and “not too painful,” Bardouche says.