the way we do itBusiness Analytics

Operating Expense Analytics

Enhancing Margins and Gaining Competitive Advantage

The business environment has seen drastic changes in recent times, with increasing competition, complex tax regulations and more rigid compliance norms designated by the government all having detrimental impact on companies’ bottom lines. This has led to such corporations turning their attention to lowering operating costs within their decentralized operations through strategic analytics.

Today, the businesses that substantially outperform the competition are five times more likely to use analytics strategically in comparison to underperformers.

Controlling Operating Expenses: Typical Challenges for the CFO

• A lack of holistic reporting across expense category level(s) and BUs• Huge data sets with no tools for their analysis• Information failing to reach line managers for change implementation• Scarce financial resources in both the short- and long-term

Control and Reduce Operating Expenses and Gain Competitive Advantage Over Peers by:• Acquiring visibility at a

transactional level across business units

• Curbing financial leakage• Ensuring policy and

contract compliance• Equipping line managers

with tools to assume ownership of their costs

Studies show that a 1% decrease in operating expenses can increase profitability by up to ten times more than corresponding increase in revenue.

Methodology and Approach

Sales

Sales & MarketingResearch & DevelopementGeneral & Administrative

Total Operating expense

Gross Profit

Income and Loss Statement

Income (Loss) Before Taxes

Operating Income

Less Cost of Goods Sold

Less: Non Operating Expense

Operating Expense

Salaries and wages

Insurance

Depreciation

Commission

Rent

Travel

Utilities

Of�ce Supplies

Telephone

Maintenance and Repair

Freight and Logistics

Power & Fuel

Postage

Our OfferCapgemini’s Analytics solution provides a holistic service with actionable insights at a transactional level. As a result our clients gains granular visibility of each dollar of expense incurred by the organization and will be able to identify cost saving opportunities with effective multidimensional drill down analysis. This, in turn, allows effective prioritization of action areas.

Capgemini Value Proposition

Our focus area is operating expense categories with high flexibility of control such as travel, utilities, office supplies, telephone, maintenance and repair, freight and logistics, power and fuel, and postage to identify easy cost reduction opportunities.

Typical Reasons for High Expense in Certain Categories:

Travel• Last minute booking• Booking through agents• Failure to use company-approved hotels

Telephone• High usage per person• Non-compliance with office policy• Numerous service providers

Logistics• Under-utilization of truck capacity• Non-optimal route

Value Chain

Analytics

Reporting

Data Preparation

Data Extraction

Capgemini AdvantagesAccess to scarce, high quality analytics resources and proven methodology enabling limited client involvement and expedited implementation

Ensures an enterprise-wide approach to data management and analytics

Enhanced process excellence and effectiveness of decision making

Reduction in internal costs through leveraging the Center of Excellenceplatform

Ability to handle huge data sets

Prescriptive analytics

Actionable insight generation Reduce and control operating expenseIncrease compliance

Predict expenses for forecasting and budgeting

Improved visibility

Key metrics and trends impacting operating expense

Indexed, organized and optimized data

Access to structured and unstructured expense data:travel, telephone, utility bills

Predictive analytics

Visualization

KPIs, metrics, performance,trends, correlations

Data prepared for analysis

Containers and feeds of heterogeneous data

This is a Sample of the OCM Scorecard. Exact model

to be worked out once KPIs, Analysis, data sources,

Score weights are �nalized

How many events? Were the cost effective?

Were they as per policy? Is it within budget?

Was the alternate way considered ?

Dashboard Sample Dashboard Sample

O11 O12

20%

15%15%

18%

14%17% 16%

14%

10%10%

January

Spend Q12012 Spend Q2 2012

% Out of Policy

Spend Q2

2012

March May July

5%

0%

N11 D11 J12 J12 J12F12 M12 M12A12 A12 S12

41.0 44.047.0 48.0

35.0 40.0

47.037.0

30.0

42.047.0

41.039.0

by volume by value Online

73.0

74.071.0 70.0 72.0

69.0 68.0

80.0

73.068.0

75.0 76.0

58.0 60.0

O12S12A12J12J12M12A12M12F12J12D11N11O11

84.065.0 65.0

67.059.0

71.0 69.050.0

68.0 61.0 58.063.0

4.13.1

1.7

4.2

0.3

1.7

2.52.0

3.1

4.63.9

6.5 6.6

60.0

O12S12A12J12J12M12A12M12F12J12D11N11O11

248

903 738 768 530 566 963 414 1247 1271474 687 5371097

113

193

240

223

225106184

104

134

221

221

247

O12S12A12J12J12M12A12M12F12J12

BWColor

D11N11O11

Intra Europe Travel booked within 14 days % Out of Policy Hotel Spend as per Policy

Split by Booking Type Mobile Bills above policy limit

Printed Pages In Count

15%

1%

Quaterly % Spend Vs Policy

Spend Q1,Q2 2012% of in Policy

Spend Q1,Q2 2012% Out of Policy

Spend Q1,Q2 2012% Unknown84%

Key Service Highlights• Limitedclientinvolvement• Holisticreportingand

analytics• Detailed,consistent,

timelyviewofexpenses• Visualizationthrough

commonwebportal• Actionableinsightsfor

reducingexpenseandincreasingcompliance

• Easyaccesstorelevantinformation

DeliverablesAs a strategic partner, Capgemini leverages its Analytics tools to enable companies to improve visibility of underlying activities that perpetuate their operating expense and provide line managers with actionable insights to instill ownership cost behavior within their teams:

• Increase policy compliance by employee• Enhance contract compliance by supplier• Decrease transaction costs• Root cause analysis• Decrease expense through

improved negotiation

A control dashboard accompanies our insights to improve the visibility of your company’s operating expense situation.

Success StoriesOutcome: Helped Leading CPG company Reduce Their Operating Expense by 8%

Challenges Faced by the Client:• Limited alignment across teams on inputs or outputs• Suboptimal use of scarce financial resources• No “common approach” - risk of inaccurate/duplicated

data • Information continuously failing to reach line manager level

Approach and Solution• Analysis of operating expenses like travel, telephone,

stationary, conference, logistics, based on non-financial data.

• Analysts provided actionable insights: – Top employees and teams driving policy noncompliance

and high expense across various categories – Existence of expenses with scope for reduction in

particular BUs – Savings achieved by using video conference vs. traveling

to other locations – Savings lost due to policy noncompliance (e.g. staying in

a hotel above budget, last minute bookings) – Comparison of team average spend with overall

average spend

T&E Expense Analytics and Construction of Centralized Web Portal Executed for Leading European Paper Company

Challenges: • Limited visibility of T&E expense across different

EMEA regions• Frequently exceeding budget and absence of proactive tool

and analytics for tracking.

Approach and Solution• Drill down of travel expenses into: cars, lodging, business

conferences, business meals, travel agency fees, fuel etc., across EMEA regions to help identify outliers/high expense areas

• Visibility of actual vs. budgeted expense on a monthly basis for each category across regions to identify variances

• Profiling of T&E expense by employee for monthly expenses and actual vs. budgeted expense to drive policy compliance

Major CPG Company Benefits from Reduced Logistics Costs, Reversing Previous Stagnation Approach and Solution• Capgemini identified the following key levers: (1) buy

smart; (2) source locally (3) optimize resources; (4) increase utilization; (5) avoid waste (6) travel less

• Reduced logistics costs achieved through: improved truck utilization, transition from buffer movements, optimum regionalization, cross border movement avoidance, and direct dispatch push.

The information contained in this document is proprietary. ©2013 Capgemini.All rights reserved. Rightshore® is a trademark belonging to Capgemini.

the way we do itBusiness Analytics

About Capgemini

With more than 125,000 people in 44 countries, Capgemini is one of the world’s foremost providers of consulting, technology and outsourcing services. The Group reported 2012 global revenues of EUR 10.3 billion.

Together with its clients, Capgemini creates and delivers business and technology solutions that fit their needs and drive the results they want.

A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative Business Experience™, and draws on Rightshore®, its worldwide delivery model.

Learn more about us at

www.capgemini.com

The Capgemini ExperienceOur teams are led by senior practitioners and are recognized as specialists in their respective fields. The Operating Expense Analytics team has a strong analytical background comprising MBAs, finance graduates, Masters in Statistics, with experience in strategy, consulting and finance.

Our clients get lasting value because we engage directly and meaningfully with stakeholders at each level of the enterprise – from boardroom to shop floor and warehouse.

Our Other Analytics Offerings

Analytical Tools and Capabilities

• Huge data sets handled by our SQL data warehouses

• Efficiently analyzed using statistical tools like

• Visualization-focused business intelligence

Terry Sandifordterence.sandiford@capgemini.com

For more details contact:

The key components of the CFO Analytics solution include:

Revenue Assurance Analytics:  • Improved customer query to order conversion • Enhanced credit  and collection performance • Reduced billing leakage and more sell-ons  

Expenses and Payables Analytics: • Recovery of erroneous or duplicate payments • Increased compliance with procurement policy • Informed views of global spend

Control Analytics: • Dynamic real-time monitoring of key controls • Predictive leading indicators to prevent failures • Lower cost of better, broader risk mitigation

Working Capital Analytics: • Optimized treasury performance • Reduced write off of stock and bad debt • Effective use of discounts and promotions

Revenue Assurance Analyticsto reduce leakage from order to cash process

Expense Analytics to help reduce

wastage and improve margin

Working Capital Analyticsto help improve Cash Flow

Control Analytics

to help reduce business risk