SAP Business objects Profibility and Cost Management

Short Presentation TitleSpeaker’s Name/Department (delete if not needed)Month 00, 2011

Simuler les flux de coûts pour améliorer la rentabilitéJérémie Brunet – EMEA EPM Business DevelopmentMay 17, 2011

Decreasing margins or market

share?Significant

acquisitions?

New sales management

team?

Expanded Product portfolio or Market

coverage?

Predictive Profitability

© 2011 SAP AG. All rights reserved. 3

Agenda

1.What are we trying to achieve with cost and profitability reporting?

2.How is it currently being done – and what issues exist?

3.How does SAP BusinessObjects Profitability and Cost Management solve these issues?


Agenda




WHAT IS SUCCESS FOR YOU, YOUR TEAM, WHAT IS SUCCESS FOR YOU, YOUR TEAM, AND YOUR ORGANIZATION? AND YOUR ORGANIZATION?

GROWING PROFITSGROWING PROFITSOPTIMIZING RESOURCESOPTIMIZING RESOURCES

IMPROVING IMPROVING SHAREHOLDER SHAREHOLDER VALUEVALUEPREDICTING FUTURE PROFITABILITYPREDICTING FUTURE PROFITABILITY


Profitability analysis can get very complex

Income Statement

Revenue

Less Cost of Goods Sold

Less Cost of SG&A

= Profit

P&L for:-1 product-1 customer segment-1 distribution channel -1 manufacturing site -and handful of suppliers is fairly easy!

P&L for:-10000 products-50 customer segments-20 distribution channel -50 manufacturing site -and 100 suppliers Can get VERY COMPLEX

Especially if you want to run WHAT-IF ANALYSIS in real-time!


Analyst Opinion: Gartner

According to the 2010 Gartner FinancialExecutives (FEI) technology study, themost significant constraint with the officeof finance is the ability to understandprofitability, including at the product andcustomer levels. This was critical duringthe economic downturn, but may be moreimportant as companies return to growth.Recommendation: Leverage ProfitabilityManagement & Optimization businessapplications to replace your legacycosting and profitability analysis solutions


Analyst Opinion: IDC

The benefits of having information thatexpands the organizations’ understandingof where profits lie far outweigh the costs,and an investment in technology is aninvestment in accuracy; a sustainable,repeatable process; and the ability todeliver information to support true day-to-day decision making.

© SAP 2011 / 8


What information and insight are we trying to provide?

What are we doing?

Historic Actuals Budgets Re-forecasts

ACCURACY AND TRANSPARENCY

MORE ACCURATE, SEGMENTED REPORTING

INSIGHT AND COMPETITIVE ADVANTAGE

STRATEGYWhich Products, Customers and Channels to focus on?

IMPROVED MARGIN

OPTIMIZATIONPricing | Discounting Process Improvements

ALIGNMENT, AGILITY, PREDICTABILITY

FORWARD-LOOKING OPERATIONAL PLANS AND BUDGETS

Why are we doing it?

What is the desired outcome?

REDUCED SPEND AS % REVENUE

ACCURATE SERVICES COSTING AND CROSS CHARGING

SERVICES COSTING AND CROSS CHARGINGIT | HR | Finance

PROCESS COSTINGTasks | Activities | Processes

DETAILED PROFITABILITY REPORTINGProduct | Customer | Channel

DRIVER BASED SCEANRIOS AND PLANS

DRIVER-BASED SCENARIOS AND PLANS



COST AND PROFITABILITY REPORTING


Agenda





Pressing Issue to Better Understand Costs and Profitability (IDC Research)

Limitations of current profitability reportingWho is doing profitability reporting?

Yes-we do some bit it’snot consistent

22%

Yes-we provide it to the field regularly73%

No-we only respond to

ad-hoc requests2%

What are they using?

ABC application+ BI tool

21%

General Ledger system22%

Standalone ABC6%

None6%

Spreadsheet29%

Business Intelligence tool21%

Inability to respond toManagement request

19%

None22%

Lack of sophisticated

costing process16%

Lack of detail/granularity

10%

High level ofmanual effort21%

Most desired improvement

Produce reports more frequently

24%

Other3%

Reduce the manual workload

39%

Produce more accurate information34%


How does that translate into business issues?

Top executive issues

How do I take decisive actions that improve profits?

How do I optimize the product/ channel / customer mix?

How to I analyze profitability across multiple dimensions?

How do I identify underperforming areas of my business?

How do I understand the root causes of poor performance?


Agenda





Increase your margins with SAP PCM

Understand what drives costs in your organisation Re-engineer non added value activitiesRemove or re-price profit destroying products and channelsAlign capacity with demandExploit revenue and profit opportunities through better operational re-forecasting

Increase your margins with SAP PCM

Understand what drives costs in your organisation Re-engineer non added value activitiesRemove or re-price profit destroying products and channelsAlign capacity with demandExploit revenue and profit opportunities through better operational re-forecasting

How does your operating profit compare with your peers?

Can you measure the true profitability of customers and products?

How do you test out the impact of new go-to-market scenarios?

How does your operating profit compare with your peers?

Can you measure the true profitability of customers and products?

How do you test out the impact of new go-to-market scenarios?

The Key Is in Identifying the Opportunities


Profit-oriented Customer/product Segmentation

Cumulative Products / Customers

Cu

mu

lati

ve M

arg

in

Profit Creating Profit DestroyingNon Profit Creating

Cumulative Net Margin

Lost Profit

Protect & retain

Re-price and

develop

Rationalize(Only if they don’t

contribute to fixed costs)


Banking and Insurance Group Gains Bottom-Line Benefits with SAP® Software


Tunisie Télécom Monitors and Optimizes Costs with SAP® BusinessObjects™ solutions

Challenges and Opportunities

Recover profitability of landline activities via better expense control

Support large regulatory projects

Optimize use of accounting and operational data

Objectives

Determine fully loaded costs and profitability by lines of business (mobile, landline, data, Internet)

Perform analysis of actuals versus budget variances and for chargebacks of internal shared services

Benchmark with competitors

Implementation Highlights

Completed initial implementation in 4 months

QUICK FACTS

Tunisie TélécomHeadquarters: Tunis, TunisiaIndustry: TelecommunicationsProducts and services: TelecommunicationsRevenue: €780 millionEmployees: 8,000Web site: www.tunisietelecom.tnSAP® solutions and services: SAP BusinessObjects™ Profitability and Cost Management applicationImplementation partners: Business and Management Consulting, SAP Consulting

Why SAP

Traceable and auditable software; flexible and adaptablecost-allocation model

Integration of heterogeneous SAP® BusinessObjects™ Business Intelligence platform and Oracle landscape

Benefits

Tailored analytical data communication supporting group’s strategic projects

Daily online reporting to 24 regional managers of profit and loss by product and key financial ratios

Full autonomy of analytical accounting department in cost modeling and report design

Improved regulatory compliance (for interconnection fares, international financial reporting standards)

“SAP BusinessObjects Profitability and Cost Management lets us trace and audit billions of combinations. We reduced analytical reporting time from one week supported by three employees to two hours supported by one employee.”

Mehri KRAIEMHead of Financial Accounting DivisionCentral Finance OfficeTunisie Télécom

(10/

12)



Société Générale Retail Bank Analyzes Costs to Improve Profitability with SAP


La Poste Optimizes IT Costs with SAP® BusinessObjects™ Solution

Challenges and Opportunities

Justify IT budgets to headquarters and report on resource use

Exceed the analytical capabilities of general accounting methodologies and spreadsheet

Objectives

Optimize use of project resources

Identify in advance the resources needed by project, activity, and internal customer

Calculate return on investment

Improve IT system performance by measuring its efficiency among end-users

Implementation Highlights

Initial implementation completed within 3 months

QUICK FACTS

La Poste – Postal mail services departmentHeadquarters: Paris, FranceIndustry: Public sectorProducts and services: Postal servicesRevenue: €11.3 billionEmployees: 191,000Web site: www.laposte.frSAP® solutions and services: SAP BusinessObjects™ Profitability and Cost Management application, SAP ERP applicationImplementation partner: SAP Consulting

Why SAP

Expertise in activity-based costing (ABC) methodology

Supports IT process mapping (as described by CIGREF Foundation)

SAP’s IT services catalog supports all lines of business (LOBs)

Benefits

Identification of links between resources and activities during project lifecycle

Able to partner with LOBs to estimate IT spending and expenses

Able to provide auditors balance sheets that justify capital assets

Trusted dialog between users and budget controllers

Optimized use of IT resources and improved budgetary control

“SAP BusinessObjects allows us to evaluate project costs based on actual resources used during the project lifecycle. As a result, we can help our teams and the LOBs optimize IT costs and project management performance.”

Muriel FallyControlling directorPostal mail services director La Poste


COST ASSIGNMENT

DRIVES

ResourcesProperties People Capital Technology

COST ASSIGNMENT

DRIVES

ActivitiesOpen new accountMail Statements

Cause and Effect Relationships

Products, Customers, ChannelsChecking accounts Upscale single females

Resources& Costs

Cost Objects

Activities

Cost Assignment

Cost Assignment

RevenuesProduct, Customer, Channel, etc.

ProfitabilityProduct, Customer, Channel, etc.

Activity-based Costing

Resource Drivers

Activity Drivers

Activity-based Budgeting

What work is performed for?

What work is performed?

What’s needed to do the work?


User friendly, rapid and efficient model building

Flexible Hierarchies and attributes User-Defined

properties

Out-of-the-box dimensions


Point-and-click modelling

TargetTargetSourceSource Cost DriverCost Driver


Web or Excel Reporting


Customer Value AnalysisGuided Analytics

GUIDED ANALYSIS

DRILL THROUGH

POP UP DETAIL

TRENDED HISTORY


Customer Value AnalysisBest practice report formats

BEST PRACTICE REPORT FORMATS

RANKED REPORTS


Customer Value Analysis‘What-If?’ Analysis

OVERALL IMPACT

WATERFALL DISPLAY OF INDIVIDUAL CHANGES

BEFORE AND AFTER IMPACT ON NET MARGIN

SLIDERS FOR EACH VARIABLE


PCM Usage Scenarios by Industry (1/2)

Industry Usage scenario

Financial Services Transfer pricing, product /customer costing, shared services costing, claims management costing, broker profitability, process improvement, capacityplanning

Transportation & Logistics

Customer, Product and Route profitability, Container costing, Leg contribution, Network optimization, Infrastructure investment analysis, IT costing, Regulatory reporting (postal services)

Consumer products and Life Sciences

Product costing and pricing, SKU profitability, Supply chain optimization, Overhead optimization, Shared Services costing (IT, HR, Finance)

Healthcare Procedure costing, Regulatory bodies reporting

Oil & Gas Fuels and Lubricants costing & pricing, Distribution Point profitability, processcosting

Public sector Pensions, Benefits, and Allowances costing, Benchmarking, Public services pricing (customs, tolls…)

Wholesale distribution Product/Branch pricing, Customer and Distribution Channel Value Analysis, Supply chain optimization, Supplier rebates negociation

Telecom Regulatory requirements (unit costs per service and per minute), Product/customer profitability


PCM Usage Scenarios by Industry (2/2)

Industry Usage scenario

Automotive, Machinery Process/product costing and profitability analysis, Shared Services Costing

High Tech & Electronics Product/Customer segment profitability, Dynamic resource and capacityplanning, Shared Services Costing

Media Service Licence and Product/Broadcast profitability

Utilities & waste Process improvement, Resource optimisation, Customer segment profitability, Services pricing

Professional services Project costing, margin analysis, Shard Services Costing

Chemicals, Process, Mill Products

Process/product costing, Business unit benchamrking, Shared Services Costing, Order Line profitability

Defence and Security Central logistics costing, Missions and Operations Costing, Performance Management

Retail Cost to serve, Customer/Product lifetime value analysis, Suppliers negociationoptimization, margin control, Merchandising/Supply chain costing


PCM Use Case: IT Costing and Chargeback

Costs across various dimensionsService | Project | Business Unit etc

Asset Management Systems

Finance systems (GL)

Time ManagementSystems

Metering and MeasurementE.g. CPU, RAM, HDD, Time etc

Web-based data entry

IT Business ManagementTools E.g. Project Portfolio Management

Standard IT Services Libraries E.g. ITIL, CoBIT etc

Inputs

Transparent and Accurate Cross ChargingInformed consumption – Reduce buffet mentality

Cost AnalysisCost of Service Levels, Non Value Added Costs, Fixed Costs vs. Variable Costs

Performance Measures / BenchmarkingUnit rates, Cost drivers, Internal, External

Investment DecisionsMake or Buy, TCO, Replacement

Cost ReductionRemoval of Non Value Adding Activities, Changing Behaviours

Planning and BudgetingCapacity planning, Resource Planning, Marginal Costing

Process ImprovementProcess costs, Process Re-engineering

Use cases


Activity based modelling with cause and effect assignments

Collection and consolidation of line items

Profitability and Cost Management Planning and Consolidation 1

Budgets and Re-forecasts

Detailed Cost and Profitability Reporting

Process CostingFixed and Variable

Driver base scenarios and plans

Service Costing and Cross Charging

SAP NetWeaver® BW, ERP, GL, DW, CRM, etc.

Actuals

Easier and more accurate allocations and segmented reporting

Profit & Loss Cash Flow Statement Balance Sheet

Priorities and Assumptions

StrategyProduct | Customer | Channel

OptimizationPricing | Discounting | Process improvement

High Level Financials

Forward Looking Resource andCapacity Plan

Alignment and Accountability of Support Services

1 SAP BusinessObjects Planning and Consolidation for MS 7.5

PCM Use Case: Planning and Budgeting


Data layer

Applicationlayer

SAP BusinessObjectsProfitability and Cost Management

Presentation layer

End user data entry, query, analysis and ‘What-If?’ Web or LAN

Work Management Shipped with application

Model buildersModel structure / rules / assignments

SAP BusinessObjects Profitability and Cost Management Solution Architecture

SAP NW BW, ERP, GL, DW, CRM, TRX

Single open databaseOracle or MS SQL

Data BridgeFlat file or ODBO / MDX / BAPI

SAP BusinessObjects Financial Information Management

Bulk Data LoaderTable to table

SAP Business Objects Voyager and other 3rd party OLAP clients

SAP Business Objects Extended AnalyticsShipped with application

MDX ConnectorDynamic

SAP Business Objects BI

SAP Business Objects Universe

Create UniverseStatic

Other SAP BusinessObjects EPM applications

SAP BusinessObjects Financial Information Management

Export calculated results

External Data Warehouseor Data Mart


Data layer

Applicationlayer

SAP BusinessObjectsProfitability and Cost Management

Presentationlayer SAP BusinessObjects

Profitability and Cost ManagementModel buildersModel structure / rules / assignments

SAP BusinessObjects Profitability and Cost Management Solution Architecture options for SAP NetWeaver©

Single open databaseOracle or MS SQL

Other SAP sources

Non SAP sources

SAP ERPSAP FinancialsCOPA etc

SAP NetWeaver Business Warehouse

SAP BW DB Connect

Bulk Data LoaderTable to tableSAP BW Open Hub

Data BridgeFlat file or ODBO / MDX / BAPI

Results

SAP BusinessObjectsProfitability and Cost ManagementBook UserEnd user data entry, query, analysis and ‘What-If?’

SAP NetWeaver BW Business ExplorerBEx Web and BEx AnalyzerQuery / Reconciliation

SAP Business ObjectsBI suiteQuery, Visualization and Analysis

SAP Business Objects Universe

SAP NetWeaverBusiness Warehouse Accelerator Optional

SAP Internal ETL

SAP BusinessObjectsFinancial Information Management

Summary


DECIDE

Thank You!

Contact information:

Jérémie BrunetEMEA PCM Solution [email protected]


User-friendly rapid and efficient modelling

Scalable enterprise-class solution

Extend the value of profitability and cost management

Reliable on-demand what-if analysis and scenario modeling

PCM Summary Card

BenefitsVisibility

Alignment

Incisive decision making

Optimize costs and profitability

User-friendly rapid and efficient modelling

Scalable enterprise-class solution

Extend the value of profitability and cost management

Reliable on-demand what-if analysis and scenario modeling

Documents

SAP Business objects Profibility and Cost Management