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Edgewater Ranzal provides Business Analytics solutions using Oracle EPM and BI technologies
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Dallas EPM ShowcaseDallas EPM Showcase
Profitability Management with HPCM
Dallas, TX, Feb 18, 2014
Mike Killeen
Vice President of Technology
mkilleen@ranzal.com
► Introduction
► The Need for Profitability Management
► How HPCM Enables Profitability Management
Agenda
► How HPCM Enables Profitability Management
► Profitability Management Case Study
► Closing and Q&A
► Oracle Platinum Consulting Partner - 100% Focus on Oracle/Hyperion Business Analytics (EPM/BI)
– 175+ Full time EPM/BI Billable Consultants throughout the US, Canada and the United Kingdom
► EPM & BI Experience & Success
– 1,500+ Oracle EPM & BI projects successfully delivered since our founding in 1996
► Depth & Breadth of EPM & BI Service Offerings
– Product Experts across the full EPM/BI Suite - Planning, HFM, HSF, HPCM, Essbase, OBIEE, DRM, FDMEE
– Visioning & Roadmaps, Full Life Cycle Implementations, Tech Review & Assessments, Staff Augmentation
► Additional Value Added Service Offerings
– Exalytics – Installation, Configuration & Benchmarking Services
Edgewater Ranzal Overview & Differentiators
– Exalytics – Installation, Configuration & Benchmarking Services
– Infrastructure Services – Design, Configuration, Performance Tuning & Upgrades
– Support Services – Remote Help Desk, Lev 1 Support, Patch release Support
– Training Services - Customized and Pre-Packaged EPM/BI Training Delivery
► 3 Ranzal Oracle ACEs Across EPM/BI Platform (Planning/BI, HFM & FDMEE)
► Co-Development Efforts with Oracle Product Management
► Customer Advisory Boards, Beta Testing, Certification Exam Development
• Workforce Planning
• Balance Sheet Planning
• Capital Planning & PFP
• HFM
• Financial Close Mgmt
• Disclosure Management
• HPCM
• HSF
• FDMEE/ERPi & EPMA
Dashboards & Scorecards, Financial Analytics &
Reporting, Operational Analytics, What-if Analysis,
Query & Reporting, Visual Exploration
Financial performance, Legal,
Segment & Mgmt Reporting, Financial Close
HFM Optimization, Performance Lab
SOX Compliance Support
Strategic Finance, Planning, Budgeting,
Forecasting, Workforce Planning, Capital
Planning, Project Financial Planning
Installation, Upgrades, Migration,
System Monitoring, Backup and
Recovery, Disaster Recovery, Load
Consolidation
Business
Intelligence
Enterprise
Planning
Edgewater Ranzal EPM & BI Service Offerings
HPCM Standard & Detailed Models,
Data Integration, Financial Data
Management, Data Warehousing,
Master Data Management &DRM,
ETL Services, Automation
Project/Program Mgmt, EPM Road Maps,
Application Reviews, Business Requirements,
Process Change, Documentation
Recovery, Disaster Recovery, Load
Testing, Hardware Sizing, Exalytics
Benchmarking Infrastructure
Training &
Support Services
Project
Management
Data
Services
Costing &
Profitability
Mgmt
Support Services – Infrastructure &
Application Support Contracts
Key Teach Course Delivery: Planning, Essbase, Financial
Reporting, Smart View, HPCM, HFM, FDM, DRM, OBIEE
Custom Training Delivery: Process & Reporting
HPCM Standard & Detailed Models,
Waterfall Allocations, Activity Based
Costing, Customer, Product & LOB
Profitability
Dashboards & Scorecards, Financial Analytics &
Reporting, Operational Analytics, What-if Analysis,
Query & Reporting, Visual Exploration
Financial performance, Legal,
Segment & Mgmt Reporting, Financial Close
HFM Optimization, Performance Lab
SOX Compliance Support
Strategic Finance, Planning, Budgeting,
Forecasting, Workforce Planning, Capital
Planning, Project Financial Planning
Installation, Upgrades, Migration,
System Monitoring, Backup and
Recovery, Disaster Recovery, Load
Consolidation
Business
Intelligence
Enterprise
Planning
Edgewater Ranzal EPM & BI Service Offerings
HPCM Standard & Detailed Models,
Ranzal has a long history of delivering Profitability Management Solutions
� 1998 - Custom Essbase BSO Profitability Apps (5.x)
� 2004 - Custom ASO/BSO Profitability Apps (7.x) – “Angel/Demon Customers”
� 2007 – Paid Engagement with Hyperion Dev to review HPCM (Project Oslo)
Data Integration, Financial Data
Management, Data Warehousing,
Master Data Management &DRM,
ETL Services, Automation
Project/Program Mgmt, EPM Road Maps,
Application Reviews, Business Requirements,
Process Change, Documentation
Recovery, Disaster Recovery, Load
Testing, Hardware Sizing, Exalytics
Benchmarking Infrastructure
Training &
Support Services
Project
Management
Data
Services
Costing &
Profitability
Mgmt
Support Services – Infrastructure &
Application Support Contracts
Key Teach Course Delivery: Planning, Essbase, Financial
Reporting, Smart View, HPCM, HFM, FDM, DRM, OBIEE
Custom Training Delivery: Process & Reporting
HPCM Standard & Detailed Models,
Waterfall Allocations, Activity Based
Costing, Customer, Product & LOB
Profitability
� 2009 – First HPCM Implementation replacing HBM (11.1.1.3)
� 2012 – Co-Developed Key Teach HPCM Training Course (11.1.2.1)
� Today – 20 Successful HPCM Project Implementations
The Need for Profitability ManagementThe Need for Profitability Management
Profitability Management Goal – Delivery of Strategic P&Ls
Profitability Challenge #1 -
Statutory Reports are not Timely or Detailed Enough
• What defines a profitable
customer?
• What is the profit
contribution margin of a
product or a service?
• What does it cost to sell
to or to service
Financial
transactionsConsolidation
(GL or HFM) to or to service
customers?
• What proportion of
resources does a specific
customer consume?
• Why hasn’t increased
revenue resulted in
increased profitability?
transactions
Financial
Data
(GL or HFM)
AccumulatorBottom-line
Results
Organizational P&L
Profitability Challenge #2 -
Indirect Cost Assignment to Products, Services & Customers
No Standard Process
Standard,
accepted
process
No Standard Process
� Indirect Costs are tracked
against supply side
structures, not demand side
needs. This makes
measurement difficult
Profitability Challenge #3 – Ensuring Consistent Performance as
Users, Data Volumes, & Frequency of Use Increases
Sales/Product Managers
Cost Center Managers
1000’s
1000’s
Departments
Products & CustomersUser
CountsData
VolumesFrequency
Of Use
1 MM’s Daily
LOB Execs.
Finance10’s
100’s
1000’s
LOB/Functions
Segments/Entities
100’s
1000’s
10K’s
Qtrs
Monthly
Weekly
Profitability Management Solution Elements
Reporting & Analysis
Product P&L by Activity
Financial P&L
Operational
Data
SourceData
MeaningfulAttributions &
Allocations
Source Data - Financial P&L
Legend
C Customer Specific Costs
P Product Specific Costs
F Financial/Overheads
Type P&L Line $ % of Rev
C/P Units Sold 100
C/P Gross Sales 1,000$ 102%
C/P Less Disc, Rtrns & Allow. (20)$ -2%
Net Sales 980$ 100%
C/P COGS @ Std 400$ 41%
Raw Materils,
Labor, Freight In,
Mfg Ovhd
► Core Statutory Fields
► Account
► Company/Legal Entity
► Affiliate/Partner
► High Level Management Fields
► Cost Center/Department/Geography
► Profit Center/Product Line/Channel
► Project and Related Attributes
► While some elements of product profitability C/P COGS @ Std 400$ 41%
F COGS @ Var 23$ 2%
Less: Total COGS 423$ 43%
Gross Profit 557$ 57%
P/F/O Selling & Marketing Exp 150$ 15%
F G&A Exp 100$ 10%
Less: Total Operating Exp 250$ 26%
Operating Income 307$ 31%
F Depreciation & Amortization (75)$ -8%
F Other Inc/(Exp) (50)$ -5%
Net Income Before Taxes 182$ 19%
Less: Income Taxes @ 40% 73$ 7%
Net Income After Taxes 109$ 11%
Dept Costs:
Accounting
Mgmt
IT
Mfg Plant
Departmental Exp
Variances
► While some elements of product profitability and customer profitability may be present, they are typically at a much higher level (e.g. many SKUs rolling up to a Product Line, or many Customers rolling up to a Channel)
► Significant manual effort may be involved in achieving this (e.g. Thick G/L, XL, Manual Journals)
► Complete Financial Results also occur at the close, where its often too late to react
► Need to be more detailed, timely, transparent & automated to be actionable
SHIPPED TO SOLD TO TERMS: FROM INVOICE DATEXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
2% 15 daysNet 16, USD
DIRECT INQUIRIES TO:1 (800) 999-9999
INVOICE SHIP DATE 11/01/2004INVOICE DATE 11/01/2004
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
PURCHASE ORDER NO. SHIP NO. CUST. NO. SALES DIST. PLEASE SHOW THIS INVOICE NUMBERWHEN REMITTINGTEST ORDER #1 S901999 B901999 2377
DATE INV’D11/01/04 2002009999
ORDER DATEMM/DD
DELIVERY DATEMM/DD ACCT. AT CUST. CARRIER SALES ORDER
19929988811/01 11/11 1202 Customer pick-up
QUANTITY UNITS PRODUCT CODE DESCRIPTION UNIT PRICE AMOUNT
Source Data – Sample Operational Data
QUANTITY UNITS PRODUCT CODE DESCRIPTION UNIT PRICE AMOUNT
700 CA 4100000295 TBAH 24/500 75.35 52,745.00
700 CA 4100000295 Efficiency Allowance 333333 0.05- 35.00-700 CA 4100000295 SpecAllow-OI RateCs 654737 0.50- 350.00-700 CA 4100000295 Freight-Backhaul 1.08- 155.74-700 CA 4100000295 Fuel Allow Percent 6% 9.34-700 CA 4100000295 Unload Allowance 0.04- 28.00-
Data Sources: Order Mgmt, A/R, Billing, Trade Spending apps
Customer
- By Customer
- Bill To/Sold To
- Shipped To
- By Market
- Mkt (Channel)
- Sales ID
- Shipped To
Product
- Category
- Sub-Category
- Brand
- Sku
Time
- Year
- Quarter
- Month(5-4-4)
- Week
- Day
Accounts
- Net Sales Dollars
- Gross Sales Dollars
- Less: Cash Disc
- 2% 15 days
- Efficiency Allow
- Spec Allow, etc
Attributes
Quantity
- SKU A
(Case = 12)
- SKU B
(Case = 1000)
Meaningful Allocations – Varying Approaches by Line Item
•Revenues, Returns
•Discounts, Allowances, Accruals
•Customer By Product
•Customer Specific
•Invoice Details
•% Net Sales to Product
•COGS
•Inventory Charges
•Customer By Product
•Product Specific
•Invoice Details
•% Net Sales to Customer
P&L Line Items Typical Dimensionality Allocation Method & Drivers Used
14
•Operating Expense - Labor
•Operating Expense – Non Labor•Org Channel or Product Line
•% Time Spent (Activities, Employee)
•% Net Sales to Customer
•Selling Expense
•Marketing Expense
•Org, Channel
•Org, Product Line
•Rep Commission, % Net Sales
•Initiatives, Trade Spend $
•Shared Services (IT, Fin, HR)
•Corporate Overhead
•Organization
•Overall Corporate
•Service Catalog, Projects, Mgmt Fee
•FTEs, Net Revenue, Square Footage
Reporting & Analysis: Interactive Analysis via Dashboards
Reporting & Analysis: Interactive Analysis via Dashboards
Outcomes: Expectations of a Profitability Management Solution
► Reliability– Visibly defensible profitability and
cost results through transparency & audit/control
► Agility
Senior Management
► Agility– Timely reflection of results to be
actionable
► Relevance– An ability to Allocate resources to
the most important opportunities
Financial Results
Revenue & Cost Models
Operational Results
FP&A
Overview of Oracle Business AnalyticsOverview of Oracle Business Analytics
Profitability Management Solution
Oracle Business Analytics – EPM/BI Software Architecture
EPM Apps: Information Generation
BI Foundation: Info Delivery
Master Data, Data Quality & Data Integration Tools: Information Management
• Packaged Profitability functionality
• Computes Profitability for Units, Segments and Services
• Pre-Built Framework for profitability modeling:
• Pre-built Measures dimension
• Support for Multiple Cost Allocation methodologies
• Pre-Built Validation reporting
• Graphical Interactive Traceability Maps
• Genealogy Reporting shows flow from any stage to any stage
• A User-Driven application
Solution Element: Hyperion Profitability & Cost Management (HPCM)
20
• A User-Driven application
• Measures, Allocates and Assigns Cost and Revenues via User
Defined Rules
• Finance User-facing Administration
• Provides Scenario Modeling for Decision Making
• Tightly integrated with the full Hyperion EPM Suite
• Shared Data and Master Data via EPMA
• Shared Reporting Tools like Financial Reports & Smart View
• Proven Technology Stack
Organizations need information management
solutions to address the challenges.
Why HPCM? To Meet these key requirements…
Flexibility
• Analyze different chargeback approaches to yield optimal mix of
Audit & Control
• Provide key stakeholders confidence in the numbers produced
Shared Methodology
• Define consistent allocation and charge back methodology across all
Transparency
• Give Units the detail costs they incur for the service consumed.
Organizations need information management
solutions to address the challenges. These needs
can be abbreviated as F-A-S-T!
optimal mix of services versus costs incurred by the shared service center.
• Rapidly evolve methodologies as the maturity model of the shared service center evolves.
numbers produced and methodologies employed to ensure compliance.
across all management cycles.
• Ensures consistent comparisons when reviewing and updating methodology result and planning for future management cycles.
consumed.
• Compare effectiveness of internal unit services with those of external providers to ensure efficiency.
Published Reports & Interactive Analytics
Model Development
• Create & Manage
Dimensions &
Hierarchies
• Deploy the Application
• Define Data Integrations
from Source Systems
• Manage User Security
Master Data & Data
Integration Management
Produce Management and
Performance Reports:
• Financial Results Books
• Margin Analysis
• Cost & Revenue
Contribution Analysis
• What-If Scenarios
Execute a Model POV:
1. Load Cost/Revenue Data
2. Load Driver Metric Data
3. Validate Model Inputs
4. Execute Calculations
5. Trace Allocations & Validate
Create & Manage the Business
Model:
1. Define the Stages
2. Create a Model Point-Of-
View (POV)
3. Define the Drivers
4. Define Assignment Rules
Model Execution
HPCM Workflow and Architecture
• Manage User Security
Enterprise Performance
Management Architect
(EPMA)
DimensionsHierarchiesAttributes
Hyperion Profitability & Cost
Management
(HPCM)
StagesDrivers
Assignments
Essbase
Calculation
Cube
(BSO)
Essbase
Reporting
Cube
(ASO)
Financial Reports, Smart View,
Business Intelligence Foundation
• What-If Scenarios
• Genealogy Reports
5. Trace Allocations & Validate
Model Results
6. Publish the Model POV
4. Define Assignment Rules
5. Assign Drivers
6. Create Assignments
Demo - Define POV, Business & Driver Metrics in EPMA
POV Dimensions Business Dims Driver Metrics
Demo - Business User Defines Stages in HPCM for Allocation Flow
Stage definition is wizard Stage definition is wizard driven, and provides the appropriate selections for
stage creation.
HPCM: Direct and Indirect (Genealogy) Allocations via Stages
Source StageProject Detail
Target StageCustomer
Project
Dept
Resource
Customer
ProjectDriver
Driver Selections – Defines what Driver
Definitions to use against the Source stage,
typically the dimension identified as the
driver definition.
Assignment Rules Definitions– Defines the
member combination in the target dimension
for the assignment.
Assignments– Defines the source dimension
Driver Definitions – Create an allocation
formula/methodology that references a
loaded metric within the model.
1
2
3
4
2 3
14
4
HPCM Model Definition Components
Assignments– Defines the source dimension
combination and the target Assignment Rule44
Demo - End Users Define Drivers in HPCM1
Select from list of user defined driver
metrics and allocation methodologies.
Demo - End Users Assign Drivers to Source Cost Pools in HPCM2
Select Default Drivers for Cost Pools, with an ability
to provide exceptions for unique projects.
Demo - End Users Create Target Range Assignment Rules in HPCM3
Demo - End Users Map Source Stage to Targets Via Assignments4
Or Allocation Assignments can be
bulk loaded via a staging table.
Demo – Traceability Analysis – What makes up a client charge?
35% of China Costs come from Asia Region Office Project 212375
2% of China Charge came from resource wswain from Dept X working on Project Y
What’s New in 11.1.2.2 HPCM – Detailed Profitability Models
What’s New – Performance Improvements & Exalytics Certification► 11.1.2.3.351 HPCM is Exalytics
Certified
► New Parallel Calc
► Non EPMA Mode
Profitability Case StudyProfitability Case Study
HR Consulting Firm
Podcast Available At:
https://blogs.oracle.com/epm/entry/the_deeper_realities_of_implementing
Mercer HR– Attributions & AllocationsImplemented Solution
● Edgewater Ranzal experts took only 4 months to build, test and put into production an HPCM application. ● Sourced data from Planning. ●Delivered multi-step, multi-stage Attributions & Allocations ● Provided traceability map reports. ● Developed self-service standardised reports for business partners to consume allocation results.
Results
● HPCM offers an outstanding accurate, transparent and flexible client profitability and cost management system that supports their daily client
Client Overview
● Mercer HR is a human resource and related financial services consulting firm headquartered in New York City. ●The world's largest human resources consulting firm providing retirement and health benefits services, human capital surveys, outsourcing services and other financial services to a large client base. ● Has over 18000 employees in 180 cities in 40 countries.
profitability and cost management system that supports their daily client activities. ● Cost allocations can be traced end-to-end across the entire organisation, giving a clear view of profitability and understanding of cost-to-serve for each business area and region. ● User-friendly self-service application negating the need to ask IT whenever allocations need to be changed.
Client Since January 2008
Date Services Delivered October 2012
Vertical HR Consulting
Products HPCM, Planning
Challenges and Opportunities
● A powerful, flexible, easy-to-use client profitability and cost management system to accurately allocate costs and clearly show profitability across the entire organisation. ● A transparent, out-of-the-box solution to provide all the features for improved profitability and cost management while offering critical interoperability and self-service functionality.
● Interface with existing HFM implementation.
Technology
● HPCM. ● Planning
EPMAHyperion Planning
Multi User Data Entry
Task Lists & Workflow
Bottoms Up Calculations
Reporting & Commentary
HPCM
Multi-Step Allocation Modeling
Validation Reporting
Traceability Maps & AnalysisData synch:
Costs by Account & Dept
Data synch: Direct Attribution to LOB
Data synch: Drivers by
Shared Dimensions &
Hierarchies (EPMA)
HPCM & Planning – Better Together
Reporting & AnalysisFinancial Reports
Smart View for Office
BI Foundation (OBIEEE/Essbase)
Data synch: Drivers by
Account & Dept & LOB
Data synch: Results by
Account & Dept & LOB
Driver Data
Hyperion Planning
Hyperion Profitability & Cost Management
Microsoft Excel
Attributions & Allocations - Solution Architecture
Load Costs
Load Driver Metrics
Attribute Load Pools Run
AttributionPlanning
HPCMCost Allocations
Budget PlanningApplication
HPCM StageManagement Utility
Set POV Variables
Load Costs Attribute Data
Load Pools
Update Alloc Rules
Run AllocsValidatePublish
Attributions & Allocations – Attribution Data Entry Form
Allocation Requirements
EntityBusiness Account
EntityBusiness
Stage 1 - Global
Stage 2 - Regional
Stage 3 - Local
HPCM Model Architecture
► HPCM allocates Costs &
Revenue Pools through
one or more stages in a
top down capacity
► Stage – Step in the
allocation process that EntityBusiness
EntityBusiness
Department
Stage 4 - Business
Stage 5 - Department
allocation process that
has similar pool
characteristics
► Separate stages enable
traceability.
Key Model Validation – HPCM Stage Balancing Report
Key Analysis – Trace Allocations in HPCM
Trace Allocation
Allocation Source
Closing and Q&AClosing and Q&A
► Does your company understand the true costs of its products or services?
► Are costing models transparent enough? Can you easily trace back the assigned costs to the activities and line item expenses that drive them?
► Do your costing methods operate at the right level of detail?
► Are you satisfied that you are allocating shared services (e.g. IT/HR) accurately?
► Are people spending too much time maintaining our costing models and other elements of our costing system?
Self-Evaluation Questions
Are people spending too much time maintaining our costing models and other elements of our costing system?
► Can people in your company quickly test how changes to commodity, input costs, lower or higher volumes will affect our profitability?
► Are you getting answers from our costing systems fast enough to be actionable? Would reducing this process time improve our competitiveness or profitability?
► Is all of the data that you need to understand true costs available in a single ERP system? If not, what are the initial and ongoing costs of integrating that data into your ERP system?
Closing and Q&A
Edgewater Ranzal Contact Info:
108 Corporate Park Drive, Suite 105, White Plains, NY, USA 10604US: +1-914-253-6600 E-mail: info@ranzal.com UK: +44 (0)2033 717174
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