Jaros

KPI Design and Implementationby

Paul Scheibal

KPI Design and Implementation - Agenda

o Introductionso KPI Example – Working Capitalo KPI Design and Implementationo KPI Demonstrationo Q & A

KPI Example – Working Capital

KPI Example – Working Capital

KPI Example – Working Capital

Working Capital Performance KPI’s

• Important in most businesses• Can get off most Income Statements and Balance Sheets• Published standards for WC numbers by industry• Dell Corporation knows WC

KPI’s in More Detail

Working Capital Performance KPI’s

• CCC (Cash Conversion Cycle)

• AR - Open Receivables • AR - Credit Sales• AR - DSO (Days Sales Outstanding)

• AP - Open Payables• AP - Spend or COGS• AP - DPO (Days Purchasing Outstanding)

• INV - Cost of Goods Sold• INV - Inventory Value• INV - Inventory Turns• INV - DIO (Days Inventory Outstanding)

KPI - Accounts Receivable

Working Capital Math 101 - AR

DSO = Accounts Receivables / (Credit Sales / 365)

The lower the number the better. For example, If your DSO is 40, then the average number of days it takes to collect on receivables is 40 days. That means your financing your customer’s cash for 40 days.

KPI - Accounts Payable

Working Capital Math 101 - AP

DPO = Accounts Payables / (COGS / 365)

The higher the number the better. For example, If your DPO is 40, then the average number of days it takes to pay a bill is 40 days. That means your vendor is financing your cash for 40 days.

KPI - Inventory

Working Capital Math 101 - Inventory

Inventory Turns = Yearly COGS / Period End Inventory Value

The higher the number the better. Companies calculate COGSdifferently. Some annualize COGS or use rolling 12 months.

DIO = 365 / Inventory Turns

Tells how long items sit in inventory. Lower is better.

KPI – Cash Conversion Cycle

Working Capital Math 101

CCC = DSO + DIO – DPO

The smaller the number the better. NegativeCCC means you sell something to a customerand get the cash for the sale before you have to pay your vendors. Each industry has publishedCCC numbers to be used as benchmarks

CCC highlights how well a company manages itssupply chain.

Dell has always been very good at this.

KPI Example – WC - Cash Cycle

Inventory

Accounts Receivable

Cash

Accounts Payable CCC

KPI Design and Implementation

KPI Design and Implementation

Reporting / Dashboards / KPI’s / Strategy

Drill Path

FSG’s

Transa

ctio

ns

Sub-Led

gers

Gener

al L

edger

KPI Data Model

FSG Data Model

General Ledger / Sub Ledger Data Model

Transactional Data Model

Rep

ortin

g / D

ashb

oard

s

FSG – What Management Knows as Truth

• Row Sets (Rows) - Dimension• Set of Accounts (GL Balances)• Calculation

• Period - Dimension• Budget or Actual - Dimension• Set of Books – Dimension

• Column Sets – Metric Value

Breakdown of Inventory KPIs

WC – Inventory Turns, DIO

Cost of Goods Sold

General Ledger

Inventory Value

Sub-LedgerTransactions

General LedgerSub-LedgerTransactions

GL BalancesGL HeadersGL Lines

MTL Material TransactionsMTL Transaction Accounts

On Hand QuantitiesItem Costs

GL BalancesGL HeadersGL Lines

KPI Model – Single Table

KPI Column

PERIOD_VALUE

PERIOD_TYPE

KPI_CLASS

KPI_NAME

KPI_ACTUAL_VALUE

KPI_PLANNED_VALUE

KPI_PERCENT_ATTAINMENT

KPI_DRILL_ATTRIBUTE1 - 10

KPI Model – Single Table

PERIOD_VALUE PERIOD_TYPE KPI_CLASS KPI_NAME KPI_ACTUAL_VALUE KPI_PLANNED_VALUEBacklog Booked (not Shipped) 923.97818

Accounts Payable Open AP $ 8477.77635Accounts Receivable Open AR $ 42192.567Accounts Receivable Open AR (61+ Days Old) 42192.567

2-Feb PERIOD FSG - Income Statement Net Sales 21720780.55 220000002-Apr PERIOD FSG - Income Statement Net Sales 22976749.3 220000002-Jan PERIOD FSG - Income Statement Net Sales 20787848.45 220000002-Mar PERIOD FSG - Income Statement Net Sales 23600349.64 220000002-May PERIOD FSG - Income Statement Net Sales 26189956.35 220000002-Feb PERIOD FSG - Income Statement Cost of Goods Sold 11573221.78 120000002-Apr PERIOD FSG - Income Statement Cost of Goods Sold 16577141.16 120000002-Jan PERIOD FSG - Income Statement Cost of Goods Sold 12860329.29 12000000

2-May PERIOD FSG - Income Statement Cost of Goods Sold 16818850.31 120000002-Mar PERIOD FSG - Income Statement Cost of Goods Sold 16297571.77 120000002-Apr PERIOD FSG - Income Statement Operating Expenses 5954034.54 60000002-Feb PERIOD FSG - Income Statement Operating Expenses 11140687.59 60000002-Mar PERIOD FSG - Income Statement Operating Expenses 6605636.04 6000000

2-Jan PERIOD FSG - Income Statement Operating Expenses 5582273.31 60000002-May PERIOD FSG - Income Statement Operating Expenses 5439291.01 6000000

Backlog Expected Ship $ 923.97818Backlog Entered (Not Booked) 10.196

Accounts Payable Open AP (Due in 30 days) 8477.77635

Inventory KPI Drill Path

WC – Inventory Turns, DIO KPIsFSG / non-FSG

General Ledger Fact Table

Inventory TurnsDetails

Period, KPI Class, KPI Name

Period, Account Structure, Set of Books

Inventory ValueDetails

Inventory COGSDetails

Period, Account Structure, Set of Books, Item, Inventory Org, Operation Unit, Transaction Type, ….

Sub-Ledger and Transactional Details

KPI Model – Benefits

• Simple Approach• KPI’s in Multiple Dashboards• Single Version of the Truth• Have underlying Drill Details• Self Documenting

KPI Demonstration

KPI Demonstration

Main Dashboard with KPIs

Click here

Drill to AR Aging Summary

Click Here

Drill to Open Receivables Summary

Click Here

Drill To AR Invoice Details

KPI Design and Implementation – Q & A

Q & A