Published on February 19, 2014
Dallas EPM Showcase Profitability Management with HPCM Mike Killeen Vice President of Technology email@example.com Dallas, TX, Feb 18, 2014
Agenda ► Introduction ► The Need for Profitability Management ► How HPCM Enables Profitability Management ► Profitability Management Case Study ► Closing and Q&A
Edgewater Ranzal Overview & Differentiators ► 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 – 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 • • • ► Workforce Planning Balance Sheet Planning Capital Planning & PFP • • • HFM Financial Close Mgmt Disclosure Management Customer Advisory Boards, Beta Testing, Certification Exam Development • • • HPCM HSF FDMEE/ERPi & EPMA
Edgewater Ranzal EPM & BI Service Offerings 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 Installation, Upgrades, Migration, System Monitoring, Backup and Recovery, Disaster Recovery, Load Testing, Hardware Sizing, Exalytics Benchmarking Data Integration, Financial Data Management, Data Warehousing, Master Data Management &DRM, ETL Services, Automation Strategic Finance, Planning, Budgeting, Forecasting, Workforce Planning, Capital Planning, Project Financial Planning Business Intelligence Consolidation Enterprise Planning Costing & Profitability Mgmt Infrastructure Data Services 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 Project Management Training & Support Services Project/Program Mgmt, EPM Road Maps, Application Reviews, Business Requirements, Process Change, Documentation Support Services – Infrastructure & Application Support Contracts
Edgewater Ranzal EPM & BI Service Offerings Dashboards & Scorecards, Financial Analytics & Reporting, Operational Analytics, What-if Analysis, Query & Reporting, Visual Exploration Ranzal has a long history of delivering Profitability Management Solutions Financial performance, Legal, Segment & Mgmt Reporting, Financial Close 1998 - Custom Essbase HFM Optimization, Performance Lab SOX Compliance Support BSO Profitability Apps (5.x) Strategic Finance, Planning, Budgeting, Business Forecasting, Workforce Planning, Capital Intelligence Planning, Project Financial Planning 2004 - Custom ASO/BSO Profitability Apps (7.x) – “Angel/Demon Customers” Installation, Upgrades, Migration, 2007 – and System Monitoring, BackupPaid Recovery, Disaster Recovery, Load Testing, Hardware 2009Exalytics Sizing, – First Benchmarking Enterprise EngagementConsolidation with Hyperion Dev to review HPCM (Project Oslo) Planning HPCM Standard & Detailed Models, HPCM Implementation replacing HBM (184.108.40.206) Waterfall Allocations, Activity Based Costing & Infrastructure Profitability Mgmt 2012 – Co-Developed Key Teach HPCM Training Course Data Integration, Financial Data Today – 20 Successful Management, Data Warehousing, Master Data Management &DRM, ETL Services, Automation Data Costing, Customer, Product & LOB Profitability (220.127.116.11) Project Services Management HPCM Project Implementations Key Teach Course Delivery: Planning, Essbase, Financial Reporting, Smart View, HPCM, HFM, FDM, DRM, OBIEE Custom Training Delivery: Process & Reporting Training & Support Services Project/Program Mgmt, EPM Road Maps, Application Reviews, Business Requirements, Process Change, Documentation Support Services – Infrastructure & Application Support Contracts
The Need for Profitability Management
Profitability Management Goal – Delivery of Strategic P&Ls
Profitability Challenge #1 Statutory Reports are not Timely or Detailed Enough Financial transactions Consolidation (GL or HFM) Organizational P&L Financial Data Accumulator Bottom-line Results • 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 customers? • What proportion of resources does a specific customer consume? • Why hasn’t increased revenue resulted in increased profitability?
Profitability Challenge #2 Indirect Cost Assignment to Products, Services & Customers 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 User Counts Products & Customers Data Volumes Frequency Of Use Sales/Product Managers 1000’s 1 MM’s Daily 10K’s Cost Center Managers Weekly 1000’s Monthly 100’s Qtrs Departments 1000’s LOB Execs. 100’s LOB/Functions 10’s Finance Segments/Entities
Profitability Management Solution Elements Financial P&L Operational Product P&L by Activity Data Source Data Meaningful Attributions & Allocations Reporting & Analysis
Source Data - Financial P&L ► Legend C Customer Specific Costs P Product Specific Costs F Financial/Overheads ► Type C/P P&L Line Units Sold C/P C/P Gross Sales Less Disc, Rtrns & Allow. Net Sales $ 1,000 $ (20) $ 980 C/P F COGS @ Std COGS @ Var Less: Total COGS $ $ $ 400 23 423 41% 2% 43% $ 557 57% Selling & Marketing Exp $ G&A Exp $ Less: Total Operating Exp $ 150 100 250 15% 10% 26% Operating Income $ Depreciation & Amortization$ Other Inc/(Exp) $ Net Income Before Taxes $ 307 (75) (50) 182 31% -8% -5% 19% Less: Income Taxes @ 40% $ Net Income After Taxes $ 73 109 7% 11% Gross Profit P/F/O F F F $ % of Rev 100 102% -2% 100% Raw Materils, Labor, Freight In, Mfg Ovhd Mfg Plant Departmental Exp Variances ► ► Dept Costs: Accounting Mgmt IT ► ► 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 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
Source Data – Sample Operational Data INVOICE SHIPPED TO SHIP DATE 11/01/2004 INVOICE DATE 11/01/2004 SOLD TO XXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX SHIP NO. PURCHASE ORDER NO. CUST. NO. SALES DIST. TEST ORDER #1 S901999 B901999 2377 ORDER DATE DELIVERY DATE CARRIER ACCT. AT CUST. MM/DD MM/DD 11/01 11/11 1202 Customer pick-up QUANTITY UNITS PRODUCT CODE 700 CA CA CA CA CA CA 4100000295 4100000295 4100000295 Data 4100000295 4100000295 Customer - By Customer - Bill To/Sold To - Shipped To - By Market - Mkt (Channel) - Sales ID - Shipped To DATE INV’D 11/01/04 PLEASE SHOW THIS INVOICE NUMBER 2002009999 WHEN REMITTING SALES ORDER 199299888 DESCRIPTION 4100000295 700 700 700 700 700 TERMS: FROM INVOICE DATE 2% 15 days DIRECT INQUIRIES TO: Net 16, USD 1 (800) 999-9999 UNIT PRICE TBAH 24/500 Sources: 75.35 Efficiency Allowance 333333 SpecAllow-OI RateCs 654737 Freight-Backhaul Order Mgmt, A/R, Billing, Trade Spending Fuel Allow Percent Unload Allowance Product - Category - Sub-Category - Brand - Sku Time - Year - Quarter - Month(5-4-4) - Week - Day AMOUNT apps 52,745.00 0.050.501.086% 0.04- 35.00350.00155.749.3428.00- 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 P&L Line Items Typical Dimensionality Allocation Method & Drivers Used •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 •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 14
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 ► Senior Management Agility FP&A – Timely reflection of results to be actionable ► Relevance – An ability to Allocate resources to the most important opportunities Operational Results Financial Results Revenue & Cost Models
Overview 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
Solution Element: Hyperion Profitability & Cost Management (HPCM) • 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 • 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 20
Why HPCM? To Meet these key requirements… Organizations need information management solutions to address the challenges. These needs can be abbreviated as F-A-S-T! Flexibility • Analyze different chargeback approaches to yield 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. Audit & Control • Provide key stakeholders confidence in the numbers produced and methodologies employed to ensure compliance. Shared Methodology • Define consistent allocation and charge back methodology across all management cycles. • Ensures consistent comparisons when reviewing and updating methodology result and planning for future management cycles. Transparency • Give Units the detail costs they incur for the service consumed. • Compare effectiveness of internal unit services with those of external providers to ensure efficiency.
HPCM Workflow and Architecture Master Data & Data Integration Management • Create & Manage Dimensions & Hierarchies • Deploy the Application • Define Data Integrations from Source Systems • Manage User Security Model Development Create & Manage the Business Model: 1. Define the Stages Model Execution Execute a Model POV: 1. Load Cost/Revenue Data 2. Load Driver Metric Data 2. Create a Model Point-OfView (POV) 3. Validate Model Inputs Published Reports & Interactive Analytics Produce Management and Performance Reports: • Financial Results Books • Margin Analysis 4. Execute Calculations 3. Define the Drivers 4. Define Assignment Rules 5. Assign Drivers • Cost & Revenue Contribution Analysis 5. Trace Allocations & Validate Model Results • What-If Scenarios 6. Publish the Model POV • Genealogy Reports 6. Create Assignments Dimensions Hierarchies Attributes Enterprise Performance Management Architect (EPMA) Stages Drivers Assignments Essbase Calculation Cube (BSO) Essbase Reporting Cube (ASO) Hyperion Profitability & Cost Management (HPCM) Financial Reports, Smart View, Business Intelligence Foundation
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 driven, and provides the appropriate selections for stage creation.
HPCM: Direct and Indirect (Genealogy) Allocations via Stages
HPCM Model Definition Components Source Stage Project Detail Target Stage Customer 1 2 Project Customer Dept Resource 4 2 3 Driver 1 Project 4 3 4 Driver Definitions – Create an allocation formula/methodology that references a loaded metric within the model. 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 combination and the target Assignment Rule
Demo - 1 End Users Define Drivers in HPCM Select from list of user defined driver metrics and allocation methodologies.
Demo - 2 End Users Assign Drivers to Source Cost Pools in HPCM Select Default Drivers for Cost Pools, with an ability to provide exceptions for unique projects.
Demo - 3 End Users Create Target Range Assignment Rules in HPCM
Demo - 4 End Users Map Source Stage to Targets Via Assignments Or Allocation Assignments can be bulk loaded via a staging table.
Demo – Traceability Analysis – What makes up a client charge? 2% of China Charge came from resource wswain from Dept X working on Project Y 35% of China Costs come from Asia Region Office Project 212375
What’s New in 18.104.22.168 HPCM – Detailed Profitability Models
What’s New – Performance Improvements & Exalytics Certification ► 22.214.171.124.351 HPCM is Exalytics Certified ► New Parallel Calc ► Non EPMA Mode
Profitability Case Study HR Consulting Firm Podcast Available At: https://blogs.oracle.com/epm/entry/the_deeper_realities_of_implementing
Mercer HR– Attributions & Allocations Client Overview Implemented Solution ● 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. ● 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 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 ● HPCM offers an outstanding accurate, transparent and flexible client 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 costto-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
HPCM & Planning – Better Together Hyperion Planning Multi User Data Entry Task Lists & Workflow Bottoms Up Calculations Reporting & Commentary EPMA Shared Dimensions & Hierarchies (EPMA) Data synch: Costs by Account & Dept Data synch: Direct Attribution to LOB Data synch: Drivers by Account & Dept & LOB Data synch: Results by Account & Dept & LOB Reporting & Analysis Financial Reports Smart View for Office BI Foundation (OBIEEE/Essbase) HPCM Multi-Step Allocation Modeling Validation Reporting Traceability Maps & Analysis
Attributions & Allocations - Solution Architecture Hyperion Planning Hyperion Profitability & Cost Management Driver Data Microsoft Excel Load Driver Metrics Load Costs Publish Budget Planning Application Attribute Data Load Pools Validate Attribution Planning HPCM Cost Allocations Set POV Variables Update Alloc Rules HPCM Stage Management Utility Run Allocs
Attributions & Allocations – Attribution Data Entry Form
HPCM Model Architecture Stage 1 - Global ► ► ► HPCM allocates Costs & Revenue Pools through one or more stages in a top down capacity Stage – Step in the allocation process that has similar pool characteristics Separate stages enable traceability. Business Entity Stage 2 - Regional Business Entity Stage 3 - Local Business Entity Stage 4 - Business Business Stage 5 - Department Department Entity Account
Key Model Validation – HPCM Stage Balancing Report
Key Analysis – Trace Allocations in HPCM Trace Allocation Allocation Source
Closing and Q&A
Self-Evaluation Questions ► ► 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? 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 10604 US: +1-914-253-6600 E-mail: firstname.lastname@example.org UK: +44 (0)2033 717174