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2. Delivering World Class Profitability and Cost Management Edoardo Bacchini Principal Sales Consultant Oracle Italia - EPM 3. Agenda Come riportare i modelli di profitability e costmanagement nelle mani dei business user Come comprendere in quale modo la vostra aziendaproduce profitti, le relazioni tra gli oggetti di costo,lidentificazione delle inefficienze Ho scoperto una fonte di inefficienza e adesso cosafaccio? Come supportare le decisioni di businessattraverso simulazioni what-if Il caso di una famosa banca americana Copyright 2009, Oracle and/or its affiliates. All rights reserved. 3 4. The Issue 5. Even in this simple cartoon 6. Understanding Profitability Exposes HiddenCost Behaviors Technology vendors are spending, on average, 19% of their selling, general, and administrative (SG&A) costs or $135,262 per quota-carrying salesperson in support-related activities. Few are aware of this enormous amount because the costs are hidden .Uncovering The Hidden Costs Of Sales SupportScott Santucci - April 13, 2009 Copyright 2009, Oracle and/or its affiliates. All rights reserved. 6 7. Companies are Using the Wrong Tools toEffectively Analyze ProfitabilityMost companies are not using the right toolsspreadsheet based models are hard to change, error prone and difficult and time-consuming to use. Relying on desktop spreadsheets can keep your company from doing the kind of analyses it needs to do when it needs to do them...Accurate Costing Is Key to ProfitabilityVentana Research, 2008 Copyright 2009, Oracle and/or its affiliates. All rights reserved.7 8. Finance Doesnt Spend Enough TimeUnderstanding Profitability In an economic environment that offers limited visibility intorevenue growth, finance functions are focusing on activitiesthat help their companies manage the bottom line[but] most of the respondents say finance should spend moretime analyzing profitability and performance, as well as moretime focusing business units on financial impacts and metrics. Driving Profitability in Turbulent Times with Agile Planning and ForecastingCFO Research Services- May 2009 Copyright 2009, Oracle and/or its affiliates. All rights reserved.8 9. Solution Overview Copyright 2009, Oracle and/or its affiliates. All rights reserved. 9 10. Oracle EPM Connects ManagementProcesses Common Reporting & InteractionStrategic Planning Planning & Forecasting Financial Close Profitability Management Common Integration & AnalysisData Quality and Consistent Dimensions Copyright 2009, Oracle and/or its affiliates. All rights reserved. 10 11. World Class Profitability & Cost ManagementProcess to support EPM Financial Data Drivers of Newfrom Close Process Cost Drivers toConductBusinessBehavioral Datafrom ERP ProfitabilityDecision UpdateData Collection AllocationsAnalysisSupport Plans????CustomerProfitability What-ifFull Product ScenarioCostingResults Copyright 2009, Oracle and/or its affiliates. All rights reserved. 11 12. Critical Components to ImplementProfitability and Cost Management Best PracticesCommon Reporting & Interaction Cost andCost, Revenue and Cost and Profitability Cost and ProfitabilityRevenue Allocation ProfitabilityReportingSimulation Calculations Analytics Forward-looking Analytic EngineAllocate Analyze ImprovePerformance Copyright 2009, Oracle and/or its affiliates. All rights reserved. 12 13. User Managed Profitability and CostingModels Determine which products / customers / services are PROFITABLE and which are not Discover which DRIVERS impact Costs and Profitability Flexible and powerful profitability reporting and ANALYSIS MODEL scenarios to evaluate action for improving profitabilityCopyright 2009, Oracle and/or its affiliates. All rights reserved. 13 14. Hyperion Profitability and Costing ModelsProvide: Reliability Visibly defensible profitability and cost SeniorManagement results Agility Timely reflection of FP&A organizational changes Relevance Allocate resources to the most important opportunitiesOperational FinancialRevenue & Results ResultsCost ModelsCopyright 2009, Oracle and/or its affiliates. All rights reserved. 14 15. Overview Profitabilityand Cost Management Copyright 2009, Oracle and/or its affiliates. All rights reserved. 15 16. Statutory Reporting Provides a Limited Viewof ProfitabilityGeneralLedger Financial transactions(AccountBalance)Organizational P&LFinancialAccumulatorBottom-line DataResults Copyright 2009, Oracle and/or its affiliates. All rights reserved. 16 17. Statutory Reports Dont Answer Critical Business Questions Like 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 hasnt increased revenue resulted in increased profitability? 18. Costing / Profitability SolutionOrganizational P&L Behavioral DataProduct P&L by Activity RawMeaningfulDecision Data Allocations Support 19. Inefficiencies Caused by Using Wrong ToolsCustomer Flexibility lack of Relationship responsiveness to changesMarketingResource Time missed opportunities Plans Utilization and obsolete plansSenior Management Cost wasted resources,questionable benefits Annual Plan & Forecast Quality lack ofHeadcountstandardization and Plans FP&A communication Departmental Revenue & PlansCost ModelsCopyright 2009, Oracle and/or its affiliates. All rights reserved.19 20. Delivering World ClassProfitability and Costing Copyright 2009, Oracle and/or its affiliates. All rights reserved. 20 21. Best Practices For World Class Profitabilityand Cost Management 1Create meaningful and defensible cost models 2Examine details of profit and cost 3Identify causality of costs and profit 4Evaluate scenarios for performance improvement Copyright 2009, Oracle and/or its affiliates. All rights reserved.21 22. 1Create meaningful and defensible cost models Use industry knowledge and activity experience: To allocate costs through appropriate stages oftransformation Through the use of flexible drivers And meaningful assignment rules Copyright 2009, Oracle and/or its affiliates. All rights reserved. 22 23. Business Users Define Stages of Allocation Copyright 2009, Oracle and/or its affiliates. All rights reserved. 23 24. Business Users Control Definition ofAllocation Methods Copyright 2009, Oracle and/or its affiliates. All rights reserved. 24 25. Business Users Control Definition ofAssignment Rules Copyright 2009, Oracle and/or its affiliates. All rights reserved. 25 26. 2Examine details of profit and cost Model results reveal new ways of looking at costs andprofitability: To identify which of our customers / products / services areprofitable Copyright 2009, Oracle and/or its affiliates. All rights reserved.26 27. Traditional Reporting Provides anAccounting View of Profit Organizational Profitability Copyright 2009, Oracle and/or its affiliates. All rights reserved.27 28. Profitability Management Provides aBusiness ViewProduct Profitability by CustomerCustomer Profitability byProduct Copyright 2009, Oracle and/or its affiliates. All rights reserved. 28 29. 3Identify causality of costs The model exposes previously unknown costbehavior To highlight the business drivers that really matter And to reveal what is impacting business efficiency Copyright 2009, Oracle and/or its affiliates. All rights reserved.29 30. How Customers / Products ConsumeActivity Costs Activity Costs consumed by product / customer Copyright 2009, Oracle and/or its affiliates. All rights reserved.30 31. How Efficiently Resources Are Being UsedLabor capacity andutilization Copyright 2009, Oracle and/or its affiliates. All rights reserved.31 32. 4Evaluate scenarios for performance improvement The model can be used to evaluate the impactproposed business changes To drive better resource utilization And the opportunity for improved profitability Copyright 2009, Oracle and/or its affiliates. All rights reserved.32 33. Compare Scenario Results to Choose BestCourse of ActionScenario Results Copyright 2009, Oracle and/or its affiliates. All rights reserved. 33 34. Customer Success Copyright 2009, Oracle and/or its affiliates. All rights reserved. 36 35. HPCM representative customers Defense / Financial Healthcare Telecom High-Tech Utilities Govt / NonProfit 36. Solving Common Customer IssuesCapabilities Delivered Shared Services Costing Product Profitability Shared Services Costing Pricing Contracts Regulatory Reporting Shared Services Costing Cost to Serve Shared Services Costing Regulatory Reporting Product Profitability Customer Profitability 37. HyperionProfitability &CostManagement at work Copyright 2009, Oracle and/or its affiliates. All rights reserved. 39 38. Models Managed by Business User Business user manages the model definitions Built-in Validation Reporting Pre-Calculation Post-Calculation Extended Reporting Examples Copyright 2009, Oracle and/or its affiliates. All rights reserved. 40 39. Business User Sees 40. Business User Sees 41. Business User Sees 42. Business User Sees 43. Pre-Calc Validation ReportsPre Calculation Validation Reports 44. Post-Calc Validation Reports 45. Allocation Tracing 46. Next Steps Compare your company with industry bestpractices Evaluate the gaps in your profitability and costmanagement process Integrate profitability and cost managementinto your EPM system Copyright 2009, Oracle and/or its affiliates. All rights reserved. 50 47. Self-Evaluation Questions 1. Does my company understand the true costs of its products or services?2. Are our costing models transparent enough? Can we easily trace back the assigned costs to the activities and line item expenses that drive them?3. Do our costing methods operate at the right level of detail?4. Are we satisfied that we are allocating shared services (such as IT or a centralized HR function) accurately? Copyright 2009, Oracle and/or its affiliates. All rights reserved. 51 48. Self-Evaluation Questions5. Are people spending too much time maintaining our costing models and other elements of our costing system?6. Can people in my company quickly test how changes to commodity, input costs, lower or higher volumes will affect our profitability?7. Are we getting answers from our costing systems fast enough to be actionable? Would reducing this process time improve our competitiveness or profitability?8. Is all of the data that I need to understand my true costs available in a single ERP system? If not, what are the initial and ongoing costs of integrating that data into our ERP system? Copyright 2009, Oracle and/or its affiliates. All rights reserved. 52 49. Bank of the West Copyright 2009, Oracle and/or its affiliates. All rights reserved. 53 50. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 54 51. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 55 52. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 56 53. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 57 54. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 58 55. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 59 56. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 60 57. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 61 58. Copyright 2009, Oracle and/or its affiliates. All rights reserved. 62