Global Treasury Logistics
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“Our treasury team has a broad range of responsibilities – starting with banking, to processing financial data, but also internal services. We advise and support group companies worldwide, particularly with payments, risk management or netting questions. Much of this is only made possible by strong teamwork, notably with the local entities of a decentralized group.”
Andreas Schwarz | Director Group Treasury, Logwin AG,
Logwin Treasury Profil
About Logwin:

Logwin is a logistics provider offering tailored, industry-specific air and ocean cargo as well as contract logistics services. The company was listed on the Frankfurt Stock Exchange in 2000, and in 2002 DELTON AG (based in Bad Homburg, Germany) became the majority shareholder. 2008 saw the global company name changed to Logwin AG. The group has warehouse space amounting to over 5,400,000 ft² worldwide, employs 4,200 people, and in 2016 transported around 610,000 containers (TEU) of sea cargo and 150,000 tons of air cargo. Business is conducted from 190 locations in 35 countries, achieving a turnover of EUR 1 billion in 2016. Thanks to the successful business performance and the diligent pursuit of fiscal targets, the group’s financial position is very stable.

The international logistics provider has a flat hierarchy and lean organizational structure. Andreas Schwarz, who has been in charge of Logwin’s treasury for nearly ten years, is very appreciative of the fact that he knows almost all the decision-makers in the different divisions personally. He can approach them at any time, allowing him to closely align treasury activities with core business operations, and optimize work. Logistics operations are frequently subject to fluctuations at short notice, so you can often only plan from one quarter to the next. Nevertheless, long-term strategy is Andreas Schwarz’ chief means of keeping the business stable.


A network of networks

It still fascinates Andreas Schwarz how tight-knit the network of Logwin’s 190 locations is and how closely they work together. When faced with a request to transport goods over a distance that cannot be fully covered by your own offices (for example because your company doesn’t operate in this region), you make use of a partner’s or (in exceptional cases) even a competitor’s capacities to be able to process the job. Let’s say Logwin is commissioned to transport goods to Japan, a country where they don’t have their own office; the group then falls back on the resources and know-how of a local partner who picks up the cargo at the port and delivers it to its destination. Conversely, if the partner in Japan needs to ship goods to Germany, Logwin is involved and picks up the cargo at Frankfurt Airport to then deliver it to its final destination.

The way in which various partner companies collaborate to process customer requests is echoed in Logwin’s treasury: the group has established a global netting system, starting with the reconciliation of outstanding balances. When netting was introduced a number of years ago, Logwin made the conscious decision to not base their reconciliation process on individual invoices. The sheer volume of invoices would have been too much! This means that both parties only enter outstanding balances and confirm that their numbers match the partner’s position. Treasury then works out the net amount to be paid for currently 65 internal entities and 57 external partner companies that are integrated into the netting process. Amounts are either settled via the in-house bank’s accounts or the partners’ bank accounts. The netting process also covers the conversion of currency positions, where treasury makes use of the applicable exchange rate on the settlement date.


Seven-fold complexity

From a treasury point of view, netting is only one way of optimizing process workflows in a diversified group. Logwin has changed considerably since Andreas Schwarz first joined the company. He remembers his first day when he struggled to make sense of the complex corporate network, puzzling over seven pages filled with boxes connected by lines, meant to visualize the group’s shareholding structure. While Logwin is still a complex group today, the structure now easily fits on two pages.

Overall, there are almost 70 operating units in 190 locations in 35 countries, as well as partner companies in another 30 countries that Logwin does business with and which are integrated into the netting process. The group’s banking landscape, on the other hand, is very streamlined, reflecting Logwin’s lean organizational structure. Logwin relies on the services of four main banks and has around 270 accounts worldwide. They also have EUR and USD cash pools with these four banks and are currently introducing another cash pool in China. What is distinctive about the latter is that the 20 bank accounts that will be covered by the cash pool all belong to the same entity. This entails considerably less administrative effort than a “traditional” cash pool would – which would include several legal entities. Logwin has established a central treasury guideline for global banking, which – among other things – stipulates clear rules for opening bank accounts. Group entities require central treasury’s permission to open a new account. This measure is meant to underpin the strategy of only having accounts with the group’s main banks. Overall, concentrating on these four partner banks has worked very well, and there are few exceptions. In Asia for example, where Logwin has always been a strong contender, country-specific fiscal regulations necessitate some local bank accounts. Having been a banker himself, Andreas Schwarz is very familiar with the banks’ way of thinking, and he’s a great mediator when it comes to reconciling interests.

Efficient FX management for 190 locations

Given the group’s large country portfolio, FX management is another important treasury responsibility. Each entity is obliged to report any trade transactions that give rise to interest, FX or commodity risks. Group Treasury is responsible for hedging these transactions, and the local entities are not entitled to engage in any hedging activities of their own. Once the risk has been assessed and analyzed, it is hedged by way of a portfolio of approved transaction types. Requests are made to the treasury department via an internal trading platform, and they’re also confirmed there. The request is processed at maturity, either within the framework of the netting process or via the intercompany settlement accounts that are also used for cash pooling.

Treasury bases FX risk management measures on the current data of selected entities taken from the ERP system on a daily basis (daily changes to receivables and payables). This data is processed directly in Logwin’s treasury management system. In conjunction, outstanding FX positions and concluded FX deals allow treasury to calculate any differences and the hedge ratio. Any identified gaps are bridged by means of suitable FX forwards on a daily basis, in order to ensure comprehensive hedging. In this context, it is not treasury’s own market expectations or opinions that determine Logwin’s very technical hedging approach in various currencies. In addition to “the usual suspects,” such as USD, GBP or CHF, Logwin also hedges AUD, HKD, SGD, Eastern European currencies or off-shore CNY. It also needs to be taken into consideration that “Air + Ocean” in Aschaffenburg (Germany) is the central sea cargo purchasing company, invoicing the corresponding transactions in local currency. The specialist unit captures the resulting data directly in “the other TMS” – the transport management system rather than the treasury management system. This data is transferred to accounting by means of an automated interface, where it becomes available to treasury, who can take the information to determine the exposure and to hedge FX risks. All this results in an annual hedging volume that is nearly twice as high as the group turnover of around EUR 1 billion. That said, the turnover of a logistics group such as Logwin can fluctuate considerably in line with cargo prices. This makes the figure of limited use when assessing business performance – an unusual factor that means Logwin cannot easily be compared to businesses in other sectors.


Change is the new normal

The treasury department has become firmly established as an integral part of the group’s financial setup since Andreas Schwarz was put in charge of Logwin’s treasury. The department links group management and the operating units. On one hand, treasury is responsible for banking transactions, processes financial data and helps minimize financial risks. On the other hand, treasury provides internal consulting, acts as an in-house bank and is an active internal service provider, for example by effecting payments for the operating units. The five-person treasury team is made up of “all-arounders” who cover every aspect of treasury. In theory, they each need to be able to “cover any base,” whether it is payments, hedging or refinancing. The biggest challenges in this context are clearly constant compliance with regulations as well as internal rules and provisions. Refinancing, in particular, has changed dramatically over time and requires a great deal of flexibility. Where ten years ago Logwin was still focused on loans and interest optimization, it is now cash long. Andreas Schwarz considers himself more of an “asset manager” these days. In light of negative interest rates, Logwin has to manage liquidity to avoid falling into the “interest trap.” “Everything I ever learned about asset and interest management in my career or was taught during my training, has been turned on its head,” Andreas Schwarz comments on the current situation. “You’d think extensive regulations would be enough to contend with,” he adds with view to the multitude of regulations that also affect Logwin’s treasury – including KYC requirements from banks that ask all kinds of information from corporations, or EMIR reporting obligations for derivatives (a type of contract treasury trades extensively with many banks and entities).


Involving and supporting decentralized units

To optimize treasury processes, the team developed a questionnaire which determined the volumes, instruments and country-specific requirements that would need to be covered by a centralized approach, in particular for payments. The results were very instructive and revealed that local requirements play an important role for Logwin’s business. The survey also verified all accounts and other relevant data on record in the treasury department, as well as contact persons in the entities and at banks. To the treasury team, the fact that responses were both numerous and quick highlights the long-term value of good service – made possible not least by having system support. “Without technological support, such a small team could never live up to the challenges at Logwin,” Andreas Schwarz is certain. Any initial uncertainties on the part of the group entities or skepticism towards the system have long since been overcome. Any fear that a group entity might enter an erroneous FX deal, which would “play havoc” with treasury data due to the close interconnectedness in cash management, has been replaced with excitement about visibility and straight-through processing. No one is still under the impression that the system only benefits central treasury and creates additional work for the group companies – much the opposite has proven the case.


Entry of all guarantees in the TMS

The straight-through processing of data in the system has enormous advantages, for example in connection with guarantees or leasing contracts. Having a daily, global overview of all accounts has long become “business as usual” for the treasury team. This even covers accounts where statements are not automatically received as MT940s, but where group companies (for example in Shanghai) enter their current balances manually every day. “Each and every one of our 100 to 120 users contributes daily to solid and reliable underlying data – data we then use for treasury management,” explains Andreas Schwarz. Related departments also frequently make use of this reliable set of data, for example accounting who can now easily and quickly find individual payments in the system. “I would’ve never thought that group entities would capture every single guarantee in the system – but this is now standard procedure at Logwin,” he adds.


Strong teamwork at Logwin

Treasurers are faced with surprising challenges on a regular basis: when one of the world’s largest sea freight forwarders was suddenly forced to initiate insolvency proceedings in 2016, no one knew what was going to happen with the ships and their cargo, which were en route to deliver goods for Logwin. The customers started to query what was taking so long, and no one could provide any clear answers. Overnight, treasury provided the funds and lent support in pledging (and releasing!) the necessary deposit at the port, with the deposit amount due hundreds of times per container. This was the only way to enable the commissioned trucks to pick up the cargo at the closest seaport to finally deliver it. For Andreas Schwarz, this is a great example of how success ultimately comes down to teamwork and not to the achievements of one person alone. Many challenges require the commitment and expertise of everyone who works for the international logistics provider.

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