Hyperion Profitability & Cost Management - NTxHUG

Hyperion Profitability & Cost ManagementHelps filter the “Clutter”

Oracle’s Approach - Profit-Focused Enterprise A Profit-Focused Enterprise is one that maximizes Margins from information suppliedby Profit Clusters and Strategic P&Ls.Revenue AttainmentRevenueProfit ClusteringResource AlignmentSegmentationCapitalMarginsCustomers & Products.1 to 2.5%Operations OptimizationStrategic P&LsCost to DeliverPolicies & ProcessesMaturity of InformationCapital & ResourcesPFE Scorecard

Using Profit Clusters and Strategic P&LsThe “Right” Customers Customers Resource AlignmentCapitalPoliciesProduct Substitutions (PPL,CPL)Sales Incentives (SPL)Shared Services Behaviors (SS)Minimal Orders (CPL, IPL)Process Improvement ProductsPricing Considerations (PPL)Vendor Negotiations (VPL)Product Rationalization (PFPL, PPL)Product Profitability (PPL,STPL) Top, Middle, BottomPolicy Execution RevenueTargeted Marketing (CPL)Market Basket Analysis (BPL)Sales Strategy (IPL, GeoPL, CPL, SPL)Customer Profitability (CPL, STPL) Top, Middle, BottomThe “Optimal” Product MixRevenue AttainmentSupply Chain Monetization (SCPL,CHPL)Outsourcing / Procurement (VPL, RR)Support (SS, RR)Delivery / Channel (SCPL, CHPL)OperationsOptimizationCost to DeliverAlign Capital Redirect Interest Expense (CPL, PPL, RR)Invest in Profitable ClustersMaximize ROIResourcesProcessesResource Alignment Tops Down Strategy (RR)Align expenses to most profitableCustomer/ Product DimensionsCapacity / Utilization Analysis (SCPL)4

What is Your Profit Decision Maturity Level?Cluster Example:Product1.01.75 2.03.04.0RevenueGross MarginNet MarginProduct A 1,000M 400M (150)MProduct B 750M 450M 200MProduct C 500M 350M 250MProduct D 250M 125M 75M 75M 2,500M 1,325M 375M 275MProfit Clusters (*)TotalsStacked Clusters 200MCompany Score(*) By any Profit Cluster including Product, Customer, Channel, Vendor, etc.Strategic Emphasis 275M

What is a Profit Cluster?Current StateCustomerSegmentsLegal EntityCustomerGeographyBusiness UnitProductChannelStore SegmentsStoreRevenueFamilyDirect Expenses . but usually profit decision information is only availableat the revenue and gross margin level

Breadth and DepthFuture StateInvoiceCustomerSegmentsMarket BasketBundlingLegal EntityGeographyCustomerSales PersonBusiness UnitProductSales MgrRevenueChannelZip CodeVendorFamilyStore SegmentsDirect, Semi-Direct& Indirect ExpensesE CommerceStoreTransportationWarehouseStore AisleAmazon

Profit Clusters – Exploiting the WhaleService 140 MilWhy 60M Loss?50% 15%35% 81 MilIf you can generate a whale curve by Customer, by Service, by Channel, etc, you’re well on your wayto being able to make intelligent decisions about your business.

What is a Strategic P&L?Profit ClustersSHARED SERVICES – OVERHEAD – INDIRECTMANAGEMENT3rd T SERVTransportationChannelStores, Etc.Strategic P&LsRevenue 1,000Direct borProductSemi-Direct (450)Indirect (300)PROFITDELIVERYStrategic P&Ls( 100)

Oracle’s Approach – Systematic Improvement1 Profit Clustering 2 Strategic P&Ls 3 Root Cause

What we Hear 3 Business NeedsAllocationsProfitabilityTransfer Pricing IT Chargeback Profit Value Chain Operational Pricing Shared Services Profit-Focused Entity Customer Product Channel etc Tax Strategy andCompliance Ledger Support Forecasting/Budget

Flexible Design MethodologiesConfigured to RequirementsStructured FlowRequirements Costing for analytical purposes Highly regulated costing scenarios Activity Based Costing Aggregate level ProfitabilityDetailed FlowFree Form FlowRequirements Bottom up profitability computation Highly detailed, highly dimensionalcost and profit objects Customer event, order, or transactioncosting and profitabilityRequirements Management reporting Augment thin ledger efforts Planning and HFM allocation support Aggregate level Profitability

Management Ledger Applications – Genesis Standard Profitability Application Challenges— Built for extended ABC type modeling— Stage wise structure safe for user but limiting— Customers used HPCM for far more than it was designed for New use cases require— Flexible dimension structure— More easily maintained applications— More complex logic and variability Standard Profitability apps could not meet these challenges

Management Ledger Applications A modeling system for offline management reporting needs and allocations support for other Ledger oriented systemsDimensionality to support common management reporting uses and closelymatch HFM or General Ledger structureAnalysis support for Profitability, Product Costing and Shared ServiceCharge backs, Operational Transfer PricingIntegration with HFM, Planning, Multi-Vendor GLsAddresses functionality gaps where Standard Profitability application designhas been challenged in the past

Management Ledger Applications — Main FeaturesUnlimited DimensionsStage-less design allows 4 POV dimensions and unlimited business and attributedimensionsCalculation RulesSource side rules, iterative rule support for reciprocal allocations, flexible driverreferences, custom calculations, and easy clear / recalculateParallel ProcessingRule execution in parallel, serial, or iterations as needed, set by userRule BalancingBalancing by rule with allocations sent and received as well as adjustment valuesdetailed by ruleModel ViewsUser defined slices for enhanced rule balancing and trace analysisTrace AllocationsVisual allocations trace from aggregate or granular level, detailed by ruleReportingSmart View links, queries, standard system and validation reports

Management Ledger Applications — Main FeaturesUnlimited DimensionsBetter fit with GL data, HFM, and PlanningCalculation RulesEliminates staging tables, very fast design and delivery, enhances business user controlmessagingParallel ProcessingScale and Performance – Advantage ExalyticsRule BalancingSimplifies result validation and auditingModel ViewsUser defines stages and steps, analysis checkpointsTrace AllocationsEliminates ‘black box’ objectionsReportingFlexible delivery choices in addition to BIFS

Management Ledger ApplicationBusiness User Managed

Management Ledger App Architecture

Management LedgerFour Easy StepsAvailable Dimensions3HPCM Steps1Define Rule(Create Name)22Select Source“Connect the Dots”Facilities Exp AllocationsFacilities(Department)3Select DestinationAll Departments(Department)44Select Driver(Drivers)19Square Feet

“Connect the Dots”1Define Rule2Select Source203Select Destination4Select Driver

Run, Balance, and Trace ResultsTrace the CalculationSelect Run OptionsBalance Results

Questions and Answers

Contact InformationVince Tran – Vice President Operationsvtran@verticaledgecg.com214-566-1958

Aggregate level Profitability Requirements Bottom up profitability computation Highly detailed, highly dimensional cost and profit objects Customer event, order, or transaction costing and profitability Requirements Management reporting Augment thin ledger efforts