Download pdf - Net Margin Analysis for Interactive, Graphical Analysis of Profit and Margins

Guidelines for Using SAP Net Margin Analysis for Interactive, Graphical Analysis of Profit and Margins Henner Schliebs SAP

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This presentation outlines our general product direction and should not be relied on in making a purchase decision. This presentation is not subject to your license agreement or any other agreement with SAP. SAP has no obligation to pursue any course of business outlined in this presentation or to develop or release any functionality mentioned in this presentation. This presentation and SAP's strategy and possible future developments are subject to change and may be changed by SAP at any time for any reason without notice. This document is provided without a warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. SAP assumes no responsibility for errors or omissions in this document, except if such damages were caused by SAP intentionally or grossly negligent.


Agenda

Introduction and Background

What is SAP Net Margin Analysis?

SAP Net Margin Analysis – Solution Details

Rapid Deployment Solutions

Wrap-Up

Introduction and Background


Increased Globalization §  Expansion into new markets §  Global process standardization §  Localization requirements

Economic Volatility §  Volatility in markets §  Decreased stock valuation §  Slow economic growth

Pressure on Margins §  Profitability by segments §  Decreased budgets and spending §  Cost to serve, Shared services

Focus on Risk §  Financial risk and fraud §  Enterprise & Operational risk §  Social sentiment affects brand value

New Business Models §  Product/service mix §  Internet-based business models §  Third-party partnerships

Regulatory Changes §  Increasing disclosure requirements §  Country-specific regulations §  Industry-specific disclosures

CFOs Need Help to Navigate a Changing Environment Internal and External Pressures on Finance Organizations


Solution Explorer and Solution Explorer for Finance (https://rapid.sap.com/se/executive)

Financial Planning and Analysis

Develop and Translate Strategy

Profitability and Cost Management

Planning, Budgeting, and Forecasting

Monitoring and Reporting

Accounting Accounting and Financial Close

Corporate Close Entity Close Reporting and

Disclosure Financial Close Governance

Treasury and Financial Risk Management

Payments and Bank Communications

Debt and Investment Management

Cash and Liquidity Management

Financial Risk Management

Commodity Risk Management

Collaborative Finance Operations

Receivables Management

Travel Management

Collaborative Invoice to Pay

Financial Shared Services

Enterprise Risk and Compliance Management

Risk Management Fraud Management Controls and Compliance Audit Management

Achieve Financial Excellence SAP Solutions Address Key Requirements


SAP Offers a Broad Range of Relevant Finance Solutions

Accounting and Financial Close

Treasury and Financial Risk Management

Financial Planning and

Analysis EPM Unwired

Integrated Business Planning

Collaborative Finance Operations

Consolidation & Disclosure

Collections Disputes

Controlling

Payments & Cash Mgmt

Planning Forecasting Budgeting Profitability

Management

Strategy Management

Electronic Invoicing

Bank Comm. & In-House Banking

Process Control

Accounting Financial Closing Cockpit

A/P, A/R

Finance Innovations Advanced Finance Core Finance

Reporting Financial Results Insight

Fraud Management

Commodity Risk and Hedge Management

Cash Mgmt on HANA

Financial Services Network

Shared Services Framework

Invoice Automation

TwoGo

Cloud for Travel & Expense

Treasury & Risk Mgmt

Audit Mgmt

Enterprise Risk and Compliance Management

Smart Accounting

Net Margin Analysis

Access Control

Global Trade Services

Risk Mgmt

Visualizations


The following key Finance companies have already realized value through business transformation enabled by SAP

Customer Goal Highlights Delivering a high-‐performing and agile financial model with SAP solu;ons

•  200x improvement in performance of audit trail analysis with real-‐;me repor;ng

•  Faster planning and consolida;on processes using the power of in-‐memory technology

•  Fewer data points, allowing for more agile planning and instant insights into relevant informa;on

Improve financial transparency with SAP Business Planning and Consolida;on

•  66% faster prepara;on of consolida;on reports (6 to 2 weeks)

•  50% fewer data errors

•  50% reduc;on in headcount required for consolida;on ac;vi;es

Managing risk with SAP solu;ons for governance, risk, and compliance

•  15% reduc;on in risk and loss events

•  15% increase in efficiency of central risk and control management processes

•  50% reduc;on in the average ;me required for loss documenta;on

Payment efficiency with SAP Treasury •  400% ROI on a 5-‐year project

•  Efficient processing of payments

•  Full FTE savings by automa;ng rejected payment processing

•  92.9% faster transfer of material ledger data (7 hours to 30 minutes)

•  3 days reduc;on to month-‐end forecas;ng cycle

•  4 and 8 week implementa;ons of profitability, finance, and controlling solu;ons (respec;vely)

Improving financial business processes with SAP HANA

•  Instant access to real-‐;me ERP back-‐end data for cost centers and internal orders

•  10 minutes: Time taken to train an end user to navigate the product func;onality

•  3-‐day implementa;on of the enterprise resource planning (ERP) back-‐end add-‐on and ac;va;on of SAP RealSpend

Makes be^er-‐informed decisions on the go with the SAP RealSpend mobile app

•  85% reduc;on in ;me to complete expense reports (US $750,000 in annual savings)

•  90% less ;me required for managers to approve expense reports (US $500,000 in annual savings)

•  $3.35m overall annual savings with no reduc;on in travel volume

Saving millions on travel expenses with SAP Cloud for Travel and Expense

SAP Drives Value for Finance Organizations


Products

Customers

Net Profitability

Channel

Companies Struggle With ...

Providing the insights to enable cost reduction

Differentiating customers: The customers with the highest revenue are not always the most profitable

Understanding the best product/channel mix


Vend

or

Proc

ess

Orde

r Pro

cess

ing

… But Need to Shift the Paradigm to Understanding True Profitability

Gross Revenue Net Revenue

Disc

ount

off

Invo

ice

Sust

ainab

ility

Char

ges O

ff In

voice

Dist

ribut

ion

COGS

Sellin

g Co

st

Freig

ht D

irect

OI

Net Margin

Mark

etin

g

Gross Margin

Retu

rns &

War

rant

y

Surc

harg

e & C

harg

e Inv

Fina

ncial

Ma

nage

men

t Mark

etin

g Ca

mpa

igns

Disc

ount

on

Inv

Gene

ral

Adm

inist

ratio

n

Profit crea*ng vs. profit destroying and

Knowledge of “bo:om line” contribu*on by mul*ple dimensions


Old Way: Profit Makers Against Each Other?

“My team hit their sales targets”

Increase Sales Right Product portfolio

“I launched the new range with the higher gross margin”

“I increased customer retention – and hit my target for new customers”

Increase Marketing Awareness Delight Customers

“We achieved every fulfillment and customer satisfaction target we were set”

+ + + = “Nobody knew how our decisions impacted the bottom line!’”

INDIFFERENT PROFITABLITY

? Sales Buyer Marketing Operations

þþþþ ý


New Way: Drive Net Margin Across Your Enterprise

Text

Finance Product Management Operations Sales/Marketing Maximize Profitability

Optimizing manufacturing cost, product mix/ alternatives requires a sound understanding of operational margins

Deep insight into the cost structure and drivers of (activity/process) cost for optimization initiatives

Breakdown of net margin to allow focus on optimization and changes to business practices/ incentives

Focused target market management for profit (net margin) and growth optimization

Shared insight for active, continuous net margin improvement

+ + + =

What Is SAP Net Margin Analysis?


What Does SAP Net Margin Analysis Do? Turning Profit Destruction into Profit Creation

Expose

§  Identify net margin improvement opportunities by customer and product

§  Uncover cost reduction potentials

Explore

§  Develop tactical/strategic transformation initiatives to improve profitability


What Is SAP Net Margin Analysis? A New Analytical Application for Margin and Cost Analysis

Analytical Application �  Predefined – Includes data service, data model,

reports, and dashboards �  Purpose-built for margin and cost analysis

Single source of cost data �  ERP CO-PA Profitability Analysis �  PCM data �  BW or any external cost data

Built on SAP HANA �  End-to-end HANA business process �  High performance for high data volume �  Direct impact and business outcome


Data Sources for Planned and actual Cost

SAP Net Margin Analysis, powered by HANA Solution Architecture

Application layer

Presentation layer

SAP BusinessObjects Simulations

Data layer SAP HANA

SAP Profitability & Cost Management

(Optional) SAP ERP CO-PA (Actual & Plan)

Export using SLT

Non-SAP data (Optional)

SAP BusinessObjects Universe

Export using data services

SAP Net Margin Analysis

Actual + Target (Plan)

SAP BusinessObjects Web Intelligence – Desktop and Mobile

SAP BusinessObjects Explorer for ad hoc analysis

Cost Element Hierarchy

Performance Index model

External Configuration Files

Localizations stored here Single source of all cost metrics Model is extendable and configurable


Why SAP Net Margin Analysis? Analytics “Pay Back $10.66 for Every Dollar Spent”

An investment in analytics represents one of the richest investment opportunities (NUCLEUS Research)

Focus on revenue-related data �  The more analytics was used to learn about revenue drivers,

including who the customers are, what they buy, and their price sensitivities, the more line-of-business managers were able to increase their top lines

Focus on cost-related data � By gaining more knowledge about margins of the different products

and services within a company’s offering, the better able an organization was to dedicate efforts towards higher-margin activities


Extend Your Analytics Capabilities Where You Want to Be!

Sense & Respond Predict & Act

Raw Data

Cleaned Data

Standard Reports

Ad Hoc analysis &

OLAP

Generic simulation and

Predictive Analytics

Predictive Modeling

Optimization

What happened?

What action can I take?

What will happen?

What is the best that could happen?

Com

petit

ive

Adv

anta

ge

Analytics Maturity

The key is unlocking data to move decision making from sense and respond to predict and act

How and why did it happen?

SAP Net Margin Analysis —Solution Details


SAP Net Margin Analysis Understand Your Net Margin and Drive Profitability

ECC FI CO PA

HANA

COPA Accelerator

ERP Opera*onal Repor*ng

Net Margin Analysis

Analytical application powered by SAP HANA �  Predefined – Includes data service, data model, reports/

dashboards, ad hoc analysis, and simulations

�  Purpose-built for margin and cost analysis Single repository of cost allocations from: �  ERP CO-PA Profitability Analysis and PCM �  BW or any external cost data

�  Works seamlessly with Finance Accelerator and other operational reports

Business Value •  Help stakeholders discover cost structure issues

across customer, product, and channel

•  Reduce indirect costs through optimizing business practices

•  Simulate tactical or strategic cost-saving initiatives across the company

•  Boost profits by transforming profit destroyers and leveraging profit creators

CO Accelerator ML Accelerator

FI Accelerator


SAP Net Margin Analysis Full Cost Analysis of Margin and Profitability

Enterprise view of margins and profit across customer, product, service, and channel. What are the year-over-year trends in each of these metrics?

Margin Summary Profit Waterfall analysis

What are the cost components causing margin erosion? Where can I find the most effective cost-savings potential?


SAP Net Margin Analysis Understand Profit Creation and Destruction

•  Who are the most profitable customers? Who are the profit destroyers? •  What are the top 10 costs for the profit destroyers that erode margins? And how do they compare

to those of creators?

Whale Curve Analysis


SAP Net Margin Analysis Simulations to Drive Profit

•  Select a cost that needs to be controlled and see the effect of each cost influencer, like order size, sales channel, etc.

•  Perform what-if analysis to identify steps that would maximize the cost savings

Cost savings simulator Transform non-profitable customers •  Classify your least profitable customers into four segments and

compare to the winner •  Identify actions to transform each customer into a winner by

controlling costs and driving revenue


Operational Cost Analysis — Ad Hoc Analysis into All Costs Across All Dimensions

•  Drill down into the cost details for each customer, cost, or even one day •  Identify root-cause across all the dimensions – Product, customer, sales organization, distribution

channel, and profit center


In the System

P&L Reports �  Detailed Profit & Loss components for financial reports by customer and customer segment �  Profit waterfall displays individual cost components leading to net margin


SAP Net Margin Analysis Configuring Cost Model to Your Business

•  Ability to completely configure the cost components in a three-level hierarchy that aligns with the configurability of SAP CO-PA as well as additional sources of costs

•  All customers across various industries will be able to get visibility into their costs based on their unique scenarios


Demonstrating SAP Net Margin Analysis

Rapid Deployment Solutions How Soon Can My Business Users Get This?


Blueprint up to 95% savings �  Business blueprint ready to use �  Best practice processes modeled and

described

Realization up to 50% savings �  Best practices processes already configured

and documented �  High degree of business configuration

automation �  Education material included

Testing up to 30% savings �  Test case template supplied �  Operations support template

available

Rapid Deployment Solution Implementation Methodology Go-Live in 12 Weeks with SAP Net Margin Analysis!

Go-live Testing Realization

0 10 20 30 40 50 60 70 80 90 100

Traditional Project

Rapid Deployment Solution

Preparation Business blueprint

At least – 40% time and effort compared to similar scope of traditional project Discover Deploy Run Start

Shorter time to start, deploy, and run through best practices


New Technologies Help CFOs Better Address Their Challenges

Mobility Cloud In-Memory

FINANCE ANALYTICS


Faster Insight into Financial Performance and Results with In-Memory Computing

Before in-memory With in-memory

13 seconds

77 minutes

Please refer to the latest SAP HANA Hardware sizing for the latest certified hardware sizes for maximum storage size of SAP HANA 1.0. Above tests were done in the SAP Lab with customer datasets.

Runs 355x faster

0.04 seconds analysis response time

On any device anywhere, anytime

70 retailers

460 billion records

50 terabytes of data


Empowering More Efficient Finance with SAP on HANA

The Most Modern Platform for Real-Time Financial Excellence

Real-Time Financial Close

Real-Time Finance

Operations

Real-Time Treasury

Management

Real-Time Compliance

Real-Time Performance Management


Mobile Finance Is Already a Reality Today

Payment approvals

Manage departmental spend

Customer credit and payment information

Dashboard analysis, including net margin

Travel expenses

Approve system access

Manage KPIs and strategic initiatives

Wrap-Up


Where to Find More Information

Analytics applied to Finance: www.sap.com/analytics

Experience it yourself at our new CFO and Finance Leadership Center by visiting: www.sapcfo.com

And subscribe to our monthly newsletter: www.sap.com/finance-newsletter

Follow us: https://twitter.com/sapanalytics

Follow me: https://twitter.com/hschliebs


SAP Net Margin Analysis — sap.com/solutions

www.sap.com/pc/analytics/applications/software/net-margin-analysis/index.html

http://service.sap.com/rds-nma-hana *

* Requires login credentials to the SAP Service Marketplace


Product Video — sap.com/solutions

www.sap.com/asset/index.epx?id=8ed40d62-b216-42bb-aba6-55e790c433be


7 Key Points to Take Home

1.  Help your CFO love you – Net Margin Management is one of the best ways to outperform your financial goals

2.  Help your product/service teams appreciate you – Visibility and guidance support making their area profitable

3.  Help your sales teams reach out to you – Either have them turn around unprofitable customers or drop them and focus on new customers

4.  Help your Payroll department feed you – A successful project might end in lots of $$$

5.  Help your IT department forget you – You can manage this solution all by yourself

6.  Help your Financial Planner call you – Your employee stocks most likely will increase value

7.  Help your favorite solution provider (SAP off course) – Send me your feedback and any ideas of improvement

©  2014 SAP AG or an SAP affiliate company. All rights reserved.

Henner Schliebs Analytics Audience Marketing

@hschliebs henner [email protected]

hschliebs

Thank you


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