© alg software 2005 leveraging what you’ve got business performance management from the bottom up...

© ALG Software 2005

Leveraging What You’ve GotBusiness Performance Management from the bottom up

July 2005Richard Barrett VP Marketing ALG Software

Business Performance Management and Business Intelligence 2005


Joining the dots

CostingScorecardBudgeting Financial ReportingIndividual elements of

Business Performance Management

• Historical• Predominantly

financial

• Ideally future orientated• Requires a deep operational

perspective


The silo approach

CostingScorecardBudgeting Financial Reporting

Marketing OperationsSales Finance


There might be some batched data exchange

Financial Reporting

The silo approach

Marketing Operations

CostingScorecardBudgeting

Sales Finance

Database DatabaseDatabase Database


Financial Reporting

The silo approach


Database DatabaseDatabase Database

There might be a corporate data warehouse and enterprise BI portal

Datawarehouse

But beware of people talking about “integrated BPM solutions”– it means you’ll need the plumbers


Observation 1

1. Most organizations have some foundation of BPM• Some parts will already be delivering value• Some parts may be less than robust• It needs joining up


The Re-forecasting Report 2004

• Independent telephone survey amongst the UK’s top 1,000 organizations by revenue

• Respondents were “in charge of the budgeting process”

• In 2004 the results from 200 medium to large organizations were analysed

• Average 115 cost centre managers contributing to the planning and budgeting process


Frequency of Re-forecasts 2002-2004

0%

10%

20%

30%

40%

50%

60%

2002 2003 2004

% R

espondents

MONTHLY - Desired

MONTHLY - Current


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2003 2004

% R

esp

ondents

Modelling inspreadsheets

Simple Estimates

Modelling inside thebudgeting application

Re-forecasting Line Item Expenses

75% still

modelled in

spreadsheet

s

75% still

modelled in

spreadsheet

s


LINE ITEM EXPENSES

Modelling in spreadsheets

Users modelling in spreadsheets to generate line item expenses

VOLUMES

CONSUMPTION RATES

UNIT COSTS

Budgeting

Database


Transforming the process

Traditional viewHierarchical, department viewPredominantly financial Finance

Marketing Call Centre Operations

Process viewBased on operational drivers that span departments

Marketing Call Centre Operations


Driver Based Budgeting

Call CentreMarketing Operations

Linking the operational drivers across the business to create a

dynamic budget model..

Sales Volumes Sales

Volumes

Sales Conversion

ratio

Sales Conversion

ratio

# Inboundcalls

# Inboundcalls

Marketingactivity

Marketingactivity


Operations resources

Operations resources

Call Centre resources

Call Centre resources

Driver Based Budgeting

Call CentreMarketing Operations

.. that predicts resource requirements and can be rapidly re-

forecast

Marketing resourcesMarketing resources

Sales Volumes Sales

Volumes

Sales Conversion

ratio

Sales Conversion

ratio

# Inboundcalls

# Inboundcalls

Marketingactivity

Marketingactivity


Observation 2

2. BPM needs to incorporate the operational (driver) perspective • It’s what managers work with – it’s how they think• Without it all you’ve got is a financial variance not a

cause/effect relationship that you can test with “What If?” analysis

• The operational perspective is critical to most BPM processes• Planning and Budgeting• Cost and Profitability Analytics• Scorecarding and Metrics Management• Key to answering the requirements of the OFR

1. Most organizations have some foundation of BPM• Some parts will already be delivering value• Some parts may be less than robust• It needs joining up


ALG’s Enterprise Performance Optimisation •ALG’s take on BPM

•Underpinned by a

deep operational

perspective

•On demand

calculation, “What

if?” analysis


DatabaseOracle or MS SQL

Transactional and legacy systems

General Ledger Data Integration


Single solution


Financial Reporting

The silo approach

Marketing Operations


Users all link into silo based applications….

Sales Finance

Database DatabaseDatabase

… each with their own database

Database


Single solution

UsersVia LAN or Web





Dynamic link to external

analysis and reporting

toolsMS Excel and BI Tools, E.g.. Cognos PowerPlay, Proclarity…


Single solution

Operational

Planning

and

Budgeting

Performance Management

BSC

UsersVia via LAN or Web





Dynamic link to external

analysis and reporting

toolsMS Excel and BI Tools, E.g.. Cognos PowerPlay, Proclarity…

Cost and Profitability Analytics


SINGLE OPEN DATABASE

Performance Monitoring

Strategy Mapping


Simple line item consolidation

Rolling Re-forecasts

Driver-Based Budgeting

Activity-Based Scenario Planning

Operational & Capacity Planning

Product, Channel & Customer

Profitability

Shared Services Costing

Cost to Serve

COST AND PROFITABILITY

ANALYTICS

PLANNING&

BUDGETING

PERFORMANCE MANAGEMENT

BSC

“More advanced methods of planning and budgeting”

ALG’s solutions


1

2


3

4


5

6


7


Performance Monitoring

Strategy Mapping


Simple line item consolidation

Rolling Re-forecasts

Driver-Based Budgeting

Activity-Based Scenario Planning

Operational & Capacity Planning

Product, Channel & Customer

Profitability

Shared Services Costing

Cost to Serve

PLANNING&

BUDGETING

PERFORMANCE MANAGEMENT

BSC

SINGLE OPEN DATABASE

COST AND PROFITABILITY

ANALYTICS

Routes to implementation


Case Studies


British Airways


Global cost and profitability analytics

Fuel

Planes

Maintenance

Ticketing

Capital

Insurance

Duty free

Ground costsServices

Staff

Baggage

Landing

Multi-location, multi-currency,multi-lingual

GLOBALMULTI-DIMENSIONAL

ROUTE PROFITABILITY


.. with predictive forecasting

Fuel

Planes

Maintenance

Ticketing

Capital

Insurance

Duty free


Staff

Baggage

Landing



ROUTE PROFITABILITY

Forecast volumes and capacity utilization – visualise the future


.. on an impressive scale

Fuel

Planes

Maintenance

Ticketing

Capital

Insurance

Duty free


Staff

Baggage

Landing



ROUTE PROFITABILITY

Forecast volumes and capacity utilization – visualise the future

“We have spoken to other airlines through our alliances and we believe that we are carrying out the most sophisticated route profitability analysis in the industry.” Paul Stafford, Information Management Design Manager at British Airways


International Division of a Global Asset Management Provider


Modelling Processes & Profitability

Cost Analytics

CostsCosts

ActivitiesActivities

Cost Objects

Cost Objects

ResourcesResources

Current costs and profitability by

Product, Customer etc



CostsCosts


Cost Objects

Cost Objects

ResourcesResources

Cost Analytics

Current costs and profitability by

Product, Customer etc

Reported to have identified significant reduction in costs


“What If?” analysis for Strategy Planning

CostsCosts


Cost Objects

Cost Objects

ResourcesResources

CostsCosts


Cost Objects

Cost Objects

ResourcesResources

Cost Analytics

Driver AnalysisActivity Based Budgeting

Adjust driver volumes & unit

rates

Make resource planning

decisions, adjust capacity


“What If?” analysis for Strategy Planning

CostsCosts


Cost Objects

Cost Objects

ResourcesResources

CostsCosts


Cost Objects

Cost Objects

ResourcesResources

3-5 Year Strategic

Plan

3-5 Year Strategic

Plan

Cost Analytics

Driver Analysis Budget / ForecastNew Line Item costs

based on new assumptions


With annual Driver Based Budgeting

CostsCosts


Cost Objects

Cost Objects

ResourcesResources

CostsCosts


Cost Objects

Cost Objects

ResourcesResources

Baseline CostsBaseline Costs

3-5 Year Strategic

Plans

3-5 Year Strategic

Plans

Cost Analytics

Driver Analysis

Target KPIs

Target KPIs

Budget / Forecast

Annual Driver Based Planning and Budgeting

Annual Driver Based Planning and Budgeting

CapitalCapital

New Line Item costs based on new assumptions


Increasingly common solution

• Multiple methodologies

• Cost and Profitability Analytics

• Activity Based Budgeting

• Driver Based Budgeting

• All done in a single application

• Pertinent solution

• Underpins strategic planning with real operational costs

• On demand re-forecast


Sagicor


Requirement

Credible methodology for planning, budgeting and cross charging

Shared Services

Accountability for

Operational Planning and Budgeting

Reliable line of business

Cost and Profitability Reporting

5 currencies

3 languages

Multiple locations


Solution

Vision

Strategic Plan

Operating Plan

Operating Budget

Rolling Re-

forecasts


Shared Services

Accountability for





Solution

Vision

Strategic Plan

Operating Plan

Operating Budget

Rolling Re-

forecasts

3 year rolling

12 months rolling


Shared Services

Accountability for




Annual


SS Operating

Plan

SS Operating

Budget

SS Rolling Re-forecasts

Solution

Vision

Strategic Plan

Operating Plan

Operating Budget

Rolling Re-

forecasts

3 year rolling

12 months rolling


Shared Services

Accountability for




Annual


SS Operating

Plan

SS Operating

Budget

SS Rolling Re-forecasts

Solution

Vision

Strategic Plan

Operating Plan

Operating Budget

Rolling Re-

forecasts

3 year rolling

12 months rolling


Shared Services

Accountability for




Annual

Cost & Profitability

Analysis

Monthly


TNT Express UK


TNT Express UK

1


Down to the individual transaction level

“In summary, despite slower growth in volumes, Express performance was excellent. The fastest and most reliable approach grew EBITA by 51.5%, boosting margins from 4.0% in 2001 to 5.8% in 2002.”

Peter Bakker, CEO, TPG Annual Report 2002


TNT Express UK

1



2

Traditional budgetingReplicate the current budgeting process (Excel hell)

+ 1 mid year reforecast

• Use a 52 week budget

• Shorter annual budget cycle

• Shorter re-forecasting cycle

Predictive Planning will remove 3 months from our current planning process... if we then build some rules, it could almost disappear..


TNT Express UK

1



2

Traditional budgetingReplicate the current budgeting process (Excel hell)

+ 1 mid year reforecast

3

Driver based planning and budgeting

Quarterly, then monthly rolling re-forecasts

Operations

resources

Operations

resources

Call Centre

resources

Call Centre

resources

Call Centre

Marketing

Operations

Marketing resourcesMarketing resources

Sales Volumes Sales

Volumes

Sales Conversion

ratio

Sales Conversion

ratio

# Inboundcalls

# Inboundcalls

Marketingactivity

Marketingactivity


TNT Express UK


Driver based planning and budgeting


Summary


Joining the dots in BPM

Costing and Profitability Analytics ABC

Performance Measurement

BSC

Operational Planning

and Budgeting

RollingRe-forecasts


www.algsoftware

Thank you

EPO CDROM

© alg software 2005 leveraging what you’ve got business performance management from the bottom up...

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