© alg software 2005 leveraging what you’ve got business performance management from the bottom up...
TRANSCRIPT
© 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
© ALG Software 2005
Joining the dots
CostingScorecardBudgeting Financial ReportingIndividual elements of
Business Performance Management
• Historical• Predominantly
financial
• Ideally future orientated• Requires a deep operational
perspective
© ALG Software 2005
The silo approach
CostingScorecardBudgeting Financial Reporting
Marketing OperationsSales Finance
© ALG Software 2005
There might be some batched data exchange
Financial Reporting
The silo approach
Marketing Operations
CostingScorecardBudgeting
Sales Finance
Database DatabaseDatabase Database
© ALG Software 2005
Financial Reporting
The silo approach
CostingScorecardBudgeting
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
© ALG Software 2005
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
© ALG Software 2005
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
© ALG Software 2005
Frequency of Re-forecasts 2002-2004
0%
10%
20%
30%
40%
50%
60%
2002 2003 2004
% R
espondents
MONTHLY - Desired
MONTHLY - Current
© ALG Software 2005
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
© ALG Software 2005
LINE ITEM EXPENSES
Modelling in spreadsheets
Users modelling in spreadsheets to generate line item expenses
VOLUMES
CONSUMPTION RATES
UNIT COSTS
Budgeting
Database
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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
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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
© ALG Software 2005
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
© ALG Software 2005
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 Software 2005
ALG’s Enterprise Performance Optimisation •ALG’s take on BPM
•Underpinned by a
deep operational
perspective
•On demand
calculation, “What
if?” analysis
© ALG Software 2005
DatabaseOracle or MS SQL
Transactional and legacy systems
General Ledger Data Integration
DatabaseOracle or MS SQL
Single solution
© ALG Software 2005
Financial Reporting
The silo approach
Marketing Operations
CostingScorecardBudgeting
Users all link into silo based applications….
Sales Finance
Database DatabaseDatabase
… each with their own database
Database
© ALG Software 2005
Single solution
UsersVia LAN or Web
DatabaseOracle or MS SQL
Transactional and legacy systems
General Ledger Data Integration
DatabaseOracle or MS SQL
Dynamic link to external
analysis and reporting
toolsMS Excel and BI Tools, E.g.. Cognos PowerPlay, Proclarity…
© ALG Software 2005
Single solution
Operational
Planning
and
Budgeting
Performance Management
BSC
UsersVia via LAN or Web
DatabaseOracle or MS SQL
Transactional and legacy systems
General Ledger Data Integration
DatabaseOracle or MS SQL
Dynamic link to external
analysis and reporting
toolsMS Excel and BI Tools, E.g.. Cognos PowerPlay, Proclarity…
Cost and Profitability Analytics
© ALG Software 2005
SINGLE OPEN DATABASE
Performance Monitoring
Strategy Mapping
Performance Management
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
© ALG Software 2005
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4
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6
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© ALG Software 2005
Performance Monitoring
Strategy Mapping
Performance Management
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
© ALG Software 2005
Case Studies
© ALG Software 2005
British Airways
© ALG Software 2005
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
© ALG Software 2005
.. with predictive forecasting
Fuel
Planes
Maintenance
Ticketing
Capital
Insurance
Duty free
Ground costsServices
Staff
Baggage
Landing
Multi-location, multi-currency,multi-lingual
GLOBALMULTI-DIMENSIONAL
ROUTE PROFITABILITY
Forecast volumes and capacity utilization – visualise the future
© ALG Software 2005
.. on an impressive scale
Fuel
Planes
Maintenance
Ticketing
Capital
Insurance
Duty free
Ground costsServices
Staff
Baggage
Landing
Multi-location, multi-currency,multi-lingual
GLOBALMULTI-DIMENSIONAL
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
© ALG Software 2005
International Division of a Global Asset Management Provider
© ALG Software 2005
Modelling Processes & Profitability
Cost Analytics
CostsCosts
ActivitiesActivities
Cost Objects
Cost Objects
ResourcesResources
Current costs and profitability by
Product, Customer etc
© ALG Software 2005
Cost and Profitability Analytics
CostsCosts
ActivitiesActivities
Cost Objects
Cost Objects
ResourcesResources
Cost Analytics
Current costs and profitability by
Product, Customer etc
Reported to have identified significant reduction in costs
© ALG Software 2005
“What If?” analysis for Strategy Planning
CostsCosts
ActivitiesActivities
Cost Objects
Cost Objects
ResourcesResources
CostsCosts
ActivitiesActivities
Cost Objects
Cost Objects
ResourcesResources
Cost Analytics
Driver AnalysisActivity Based Budgeting
Adjust driver volumes & unit
rates
Make resource planning
decisions, adjust capacity
© ALG Software 2005
“What If?” analysis for Strategy Planning
CostsCosts
ActivitiesActivities
Cost Objects
Cost Objects
ResourcesResources
CostsCosts
ActivitiesActivities
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
© ALG Software 2005
With annual Driver Based Budgeting
CostsCosts
ActivitiesActivities
Cost Objects
Cost Objects
ResourcesResources
CostsCosts
ActivitiesActivities
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
© ALG Software 2005
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
© ALG Software 2005
Sagicor
© ALG Software 2005
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
© ALG Software 2005
Solution
Vision
Strategic Plan
Operating Plan
Operating Budget
Rolling Re-
forecasts
Credible methodology for planning, budgeting and cross charging
Shared Services
Accountability for
Operational Planning and Budgeting
Reliable line of business
Cost and Profitability Reporting
© ALG Software 2005
Solution
Vision
Strategic Plan
Operating Plan
Operating Budget
Rolling Re-
forecasts
3 year rolling
12 months rolling
Credible methodology for planning, budgeting and cross charging
Shared Services
Accountability for
Operational Planning and Budgeting
Reliable line of business
Cost and Profitability Reporting
Annual
© ALG Software 2005
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
Credible methodology for planning, budgeting and cross charging
Shared Services
Accountability for
Operational Planning and Budgeting
Reliable line of business
Cost and Profitability Reporting
Annual
© ALG Software 2005
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
Credible methodology for planning, budgeting and cross charging
Shared Services
Accountability for
Operational Planning and Budgeting
Reliable line of business
Cost and Profitability Reporting
Annual
Cost & Profitability
Analysis
Monthly
© ALG Software 2005
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
Credible methodology for planning, budgeting and cross charging
Shared Services
Accountability for
Operational Planning and Budgeting
Reliable line of business
Cost and Profitability Reporting
Annual
Cost & Profitability
Analysis
Monthly
© ALG Software 2005
TNT Express UK
© ALG Software 2005
TNT Express UK
1
Cost and Profitability Analytics
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
© ALG Software 2005
TNT Express UK
1
Cost and Profitability Analytics
Down to the individual transaction level
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..
© ALG Software 2005
TNT Express UK
1
Cost and Profitability Analytics
Down to the individual transaction level
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
© ALG Software 2005
TNT Express UK
Cost and Profitability Analytics
Driver based planning and budgeting
© ALG Software 2005
Summary
© ALG Software 2005
Joining the dots in BPM
Costing and Profitability Analytics ABC
Performance Measurement
BSC
Operational Planning
and Budgeting
RollingRe-forecasts
© ALG Software 2005
www.algsoftware
Thank you
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