meeting the profitability and costing analysis challenge john fitzmaurice cpm product strategy

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Meeting the Profitability andCosting Analysis ChallengeJohn FitzmauriceCPM Product Strategy

S281901Meeting the Profitability and Costing Analysis Challenge

• We are going to talk about the challenges facing organizations

• - small, large, for profit and not-for-profit

• in understanding their current operations and performance

• explain to you how we position the Oracle CPM Suite and Oracle Profitability Manager to meet these challenges

S281901Meeting the Profitability and Costing Analysis Challenge

• … tying this to the theme of Oracle OpenWorld 2006 …

• Better Information

• Better Results


Program Agenda

• Introduce the Oracle CPM Suite • Examine some of the challenges• Meeting the challenge with Profitability Manager• A demonstration of Profitability Manager• Q&A – your chance to describe your challenges

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions.The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.


Our Mission

Making our software a source of continual competitive advantage for our customers

Better Information

Better Results

Unique, customer focused strategy

FUSION

Customers continue to get innovation in existing release and choose when they are ready to move to next generation technology.

EBS 12 EBS 12.2EBS 12.1

Enterprise 9 Enterprise 9.2Enterprise 9.1

Siebel 8 Siebel 8.2Siebel 8.1

EnterpriseOne 9.0 World A9.1 EnterpriseOne 9.1 World A9.2

Rapidly Changing Conditions• How can I accelerate my planning

and decision cycles?

• How do I monitor conditions and take early corrective action?

Accountability, Transparency• How do I comply with corporate

governance requirements?

• How can I ensure accurate, timely reporting?

Ineffective Decision Support• How do I filter extraneous data

and focus on relevant information?

• How can I access and rationalize disparate, fragmented data?

Efficiency & Cost Control• How can I sustain / improve

profitability?

• How do I keep information current?

Business Pressures

Marketing

Purchasing

Service

Sales

Project MgmtHuman

Resources

Manufacturing

Finance

Plan &ModelPlan &Model

ExecuteExecute

Report &Analyze

Report &Analyze

To Meet These Challenges, Businesses Must…

Connect strategies to plansConnect strategies to plans to align the organization for execution

Monitor ExecutionMonitor Execution to drive a culture of accountability

Drive Performance Drive Performance by operationalizing execution

Blueprint for the Insight-Driven Enterprise

CxO Partners SuppliersProcess Workers ManagersCustomers Sales Teams

Information-Driven Oracle Fusion Applications

BI ApplicationsCorporate Performance

Management

Supply Chain Sales ServiceHuman Capital MarketingFinance

Enterprise Information Model

Industry Specific

Oracle Fusion Middleware

Enterprise ApplicationsOracle

Databases Syndicated DataOther Operational & Analytic Sources

OtherDatabases

• Make timely decisions with integrated information systems

• Target information delivery with role-based dashboards

• Protect organizational integrity with secure information delivery

Financials, Supply Chain, Projects,PLM, Sales & Marketing, HR, Service

Transaction Processing

Us

ers Sensor

BasedServices

AnalystsManagersExecutives

OperationalReporting

ProfitabilityAnalysis

PerformanceScorecards

Consolidation & Compliance

Reporting Planning

Greater InsightComprehensive Corporate Performance Management

Forecasting& Modeling

Ad-HocReporting

Goal Setting

Budgeting


My Challenges Include …

My Challenges Include …

• need an integrated approach to analytics• need more dimensionality• need costing insights• need to bring discipline to the process• need ever more detailed profitability analysis

Challenge: need an integrated approach to analytics

• Have initiatives going on all over the place …• Planning

• Do it centrally, but it’s spreadsheet based• Consolidation

• Merged two entities together, but cannot get a complete view of operations

• Performance measurement• The major business units allocate costs and

calculate profitability … but there is no comparison to plans/forecasts

Challenge: need more dimensionality

• The Finance Department do not want to perform management accounting in the G/Ledger

…and Line of Business Managers keep saying…

• Need more dimensionality for our analytics• for processing business rules, and• for analysis and reporting

Challenge: need costing insights

• The industry regulator is asking for another review• Communications, Utilities• Health Care, Hospitals, Education• Financial Services• Need to provide justification for rate increases

• Need to compare the costs at our 3 Help Desks• We have a Shared Services model, but no agreement

• Our Customers are telling us that we’ve got to drop our prices as their income is down

Challenge:need to bring discipline to the process

• No formal process management• No formal approval process for changes to the

process• Methodologies get revised, but want to see the prior

versions – rules and hierarchies• Lack the ability to run ‘what if’ analysis

Challenge: need ever more detailed profitability

• Behavior of the market and customers is changing

• We know the numbers at the enterprise level, but …

• Now need to know revenues and expenses• by Customer, and

• by Product, and• by Channel

• for every transaction


Oracle Profitability Manager (PFT)

Profitability Manager

• Profitability Manager was launched September 2005

• Merges Oracle Performance Analyzer and Oracle ABM

• Use to model and analyze costs and profitability of products, customers, channels...

• Customers include financial services, telcos, public sector

• Integration to Oracle G/L • Shares data with EPB & FCH, for

planning, profitability analysis on consolidated results

Profitability Manager:Analyze Cost & Calculate Profitability

• Build, Model and Analyze Profitability

• Integrates Multiple Data Sources

• Easy to Use

• Embedded Activity-Based Management

Oracle Profitability ManagerThe Value

Rep

ortin

g La

yer

Rep

ortin

g La

yer

ControlControl

Security

Business

Process

Rule

Sets

Definitions

Oracle Profitability ManagerMethodology

Transactional

Data

Transactional

Data

General

Ledger

General

Ledger

OtherOtherOtherOther

Rules

EnginePrimedPrimed

DataData

PrimedPrimed

DataData

Reconciliation

Cleansing

Mgmt Ledger

Customer Data

Statistics

Validation Control

P&L

Ad Hoc

Audit

Drivers

Activity

Rates

Methods

Role

Based

Users


Meeting the Challenge with Profitability Manager

Meeting the challenge: need an integrated approach to analytics

• The Oracle CPM Suite

Oracle CPM Suite: Single, Unified Architecture

• Robust, shared relational dimensional model

• Common engines & utilities

• Seamless integration with Oracle General Ledger, open APIs for any source data

• Discoverer Reporting, open to 3rd party reporting

OracleE-Business Suite

Da

ily B

usi

ne

ss

Inte

llig

en

ce

Ba

lan

ced

Sco

reca

rd

Oracle DB, Oracle BI OLAP

Enterprise Performance Foundation (EPF)

Enterprise Performance Foundation (EPF)

Oracle Business Intelligence

External Systems

Ent

erpr

ise

Pla

nnin

g a

nd B

udge

ting

Pro

fita

bili

ty

Man

ager

Fin

anci

al

Con

solid

atio

n H

ub

FS

I A

nal

ytic

s: F

TP

Inte

rna

l Co

ntr

ols

Ma

na

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r

Enterprise Performance Foundation supports all Oracle CPM applications

Meeting the challenge: need more dimensionality

• A rich multi dimensional model• Dimensions and hierarchies centrally

managed and maintained• Ability to extend and customize to meet your

analysis and reporting challenge

Dimension

• Dimension• Define dimensions and hierarchies

Dimensional Model

• Basic Facts• 19 Base Dimensions• 10 User Defined Dimensions• Numerous Application Specific Dimensions

• Dimension Member Support• Unlimited number of members• Grouping of members into Levels• Filtering of member list based on the Ledger

Dimensional Model

• Analytic Dimensions• COMPANY/CCTR/ORG• PRODUCT• CHANNEL• PROJECT• CUSTOMER• TASK• ACTIVITY• COST OBJECT• CAL PERIOD• GEOGRAPHY• + 10 User Defined

• Financial Characteristics

• FINANCIAL ELEM • NATURAL ACCOUNT• LINE ITEM

• Financial Consolidation

• INTERCOMPANY• ENTITY

• Data Management• SOURCE SYSTEM• LEDGER• DATASET CODE• CURRENCY CODE

Dimensional Model

• Attribute Support• Simple vs. Attributed Dimensions• Unlimited number of Attributes• Level-specific Attributes

Dimensional Model

• Hierarchy Support• Unlimited number of hierarchies per dimension• Unlimited number of levels per hierarchy• Creation & Maintenance

• Create, Maintain in Hierarchy User Interfaces• Load with Dimension Hierarchy Loader• Load using OGL Integration• Versioning, Effective Dating Supported to track changes

Meeting the challenge: need costing insights

• An analysis approach that includes activity-based costing as a core part of the solution


“In the 1980’s and early 1990’s, back office departments used ABC for cost

analysis and to improve the bottom line, while the front office worried about

revenue and the top line.

Today a more integrative approach is needed – profitability analysis.”

“ABC Provides the Basics of Corporate Performance Management”

Frank Buytendijk, Nigel Rayner, Gartner IncAugust 08, 2005

Oracle Profitability ManagerMethodology

Traditional

Financial Statement

Activities

Resources

Models

Drivers

Methods

Analytics

Percent Distributions

Rate X Volume

Cost Pools

Transactions

Costs/Revenues

Statistics

Meeting the challenge:need to bring discipline to the process

• Embed process management into the application

Oracle Profitability ManagerModels and Rules

• Separation of Data, Model, Rules

• Role Based Security

• Process Admin. Controls

• Rule Sets /Processing Rules

• Restate and Reverse Entries

• Validation and Reconciliation

• Scalability

Meeting the challenge: need ever more detailed profitability

• A sophisticated data model, allowing the right level of detail for each analysis challenge

The right level of detail for each analysis challenge

Management Ledger

•G/L data – single view of truth

•Multi dimensional analysis

•Use aggregated transaction drivers

Customer Profitability

•Aggregate to Customers

•Rollup to Corporates or Households

Account Analysis

•Model revenue and expenses

•Develop a P&L per accountTransaction Detail

•Model transaction volume and cost/revenue – millions of events

•Aggregate to drive business rules


A demonstration of Profitability Manager


Profitability ManagerDemonstration

• Demo Flow• Present a demo flow, highlighting the functionality

• Navigation• Preview the main screen interfaces of the application

• Create a Business Rule• Create a Mapping Rule, step by step


• Demo Script Flow:

• Vision Support Dept. has a support help desk• The support operators answer Customer support calls

covering these issues:• Browser• Modem / Network• Hardware



Vision Corp wants to calculate the profitability of the Customers that use the Support Dept.

• Profitability Manager is used to calculate customer profitability, including determining the activity rates for the services performed



• The data model has received data from multiple sources:• G/L data: Balance Sheet and P&L• Customer detail• Support transaction detail



• Business Rules to cover:• Map indirect costs to operational cost centers• Determine activity rates for the support center• Show the results, highlighting unused capacity• Apply the costs to the customer transactions• Determine customer profitability


Profitability Manager (PFT)Navigation

Navigation

• Profitability Manager tabs• Business Rules• Process Management• Administration• Documents• Home

Business Rules

• Profitability Manager Business Rule tab• Mapping• Activity• Customer• Dimension• Condition• Data Inspector

Mapping

• Profitability Manager Mapping page• Adjustment• By Dimension• Field• Percent Distribution• Retrieve Statistic• Simple Source On

Activity

• Profitability Manager Activity page• Activity Rate• Cost Object• Cost Rollup• Statistic Rollup

Customer

• Profitability Manager Customer page• Account Consolidation• Profit Aggregation• Value Index Formula• Profit Calculation

For More Information

http://search.oracle.com

or

oracle.com

www.oracle.com/applications/cpm


Profitability Manager (PFT)Create a Business Rule

Create a Business Rule

• Here’s the business situation:

• Facilities is a department that provides real estate and security services to operational departments

• We are going to map the Facilities expenses out to the operational departments that Facilities serves

• The operational departments are going to receive the expenses based upon the square feet the departments occupy

Mapping Rule Formula Type:Percent Distribution

• Let’s now look at a demonstration of the Percent Distribution mapping rule

• We are going to include a local condition and a global condition with this rule• Filter on the source using a Local Condition• Filter on the percent distribution set using a Global Condition• The global condition will use both individual dimension values

and a dimension hierarchy

Preview: The Source and the Results

Preview: Percent Distribution Set

Preview: Impact on Support Department

Step 1:

Create Mapping Rule

Define the Folder,

Name, and

Description

Create Mapping Rule

Step 2:

Create Mapping Definition

Define the Version and Description.

Select the Formula Type:

Percent Distribution

Create Mapping Definition

Update Source:

Define the Table Name and the

Column Name.

Select Create Local Condition.

Update Source

Define the Dimension Components:

The dimensions are added, and the values are selected for the Source.

Select Dimension Components

Update Source completed:

Here we see that we have defined a Local Condition, and the dimension values that we selected are displayed.

Review Source Selections

Update Percentage Of:

Select the Table Name and Column Name.

Define whether the rule output target will be the Debit or the Credit.

Force to 100:

Default is enabled.

Define the Percent Statistics

Percent Dimension Details:

Select the Usage method:

We are selecting Percent Distribution for the CoyCCtrOrg dimension.

Match Statistics to Source

Percent Dimension Details:

Select the Usage method:

We are also selecting Percent Distribution for the Department dimension.

Define Distribution Output Dimensions

Choose Global Conditions:

We are selecting a Global Condition, created in a prior demonstration.

Global Condition to Identify Statistic Rows

Choose Global Conditions:

Here we can see our Global Condition selection, and the dimensions and their selections are displayed.

Review Percent Distribution Selections

Update Debit:

Select the Table Name and the Column Name for the target.

We already defined the Debit as our target, and we can see that 2 dimensions are defined as being mapped to the percent distribution set values.

Define the Target Output

Update Debit:

We are defining a specific value as the rule output for our Line Item target (debit).

We select Value as the usage.

Map the Output Results

Update Debit:

We are defining a specific value as the rule output for our target (debit).

We select the dimension value from the list.

Select Target Dimension Values

Debit:

Our selections are displayed here.

CoyCCtrOrg and Dept are defined as “Same As Pct”.

Line Item is defined as a specific value.

Review Target Output

Credit:

For this demonstration rule, the Credit is enabled, and the selection for all the dimensions is “Same As Source”.

This will create offset rows, so that our rule nets to $-nil-,

and the result is the expenses are allocated to the targets.

Review Offset

Review: Mapping Rule Output

meeting the profitability and costing analysis challenge john fitzmaurice cpm product strategy

Documents

oracle profitability

information current

relevant information

information purposes

oracle cpm suite

integrated approach

theme of oracle openworld

sole discretion of oracle