SAP EPM, The “ERP” of Performance

Management & Decision Making

Thierry Bruyneel & Michel Haesendonckx

22-5-2015

History of Delaware Consulting

• Founded in 1981; has been part of Bekaert, Andersen and Deloitte

• Independent partnership since 2003 with 124 professionals, now 1.000 people

Suzhou

2005

Antwerp

Global Delivery Center

Harbin

2006

2007

Atlanta

Delaware

Consulting Internatio

nal

Den Bosch

Lyon

2009

MergerAlliance Consultin

g

Wavre

Shanghai

2010

2011

Singapore

Nantes

New partnership Netherland

s

Luxembourg

2013

2014

New York

Paris

Manila

2015

1000 professionals worldwide

2008

Delaware Information

Solutions

2003

Independent partnership

2012

MergerB&M

Our Value Clusters

Strategy & Transformation Business Controlling

Analytics Accounting

Strategy &

DisruptionDigital TransformationOmni-channel Experience

Lead-to-service processesInsights & Personalization

Enterprise Resource Management (ERP)

Process Integration

& MobilityEnterprise Information

Management (EIM)

Global Managed Services

(GMS)

Infrastructure

Services

4

Agenda

Lunch & Learn with Thierry Bruyneel Performance Management as a Continual Process

SAP EPM, the “ERP” of Performance Management and

Decision Making The combined strengths of BPC & PCM… and beyond… to drive Value for the Business

Problem statement

85% of exec teams spend less than one

hour per month discussing strategy

execution

No consistent way to describe

strategy

95% of the work force does not understand the

strategy

70% of middle managers do not

have incentive compensation

linked to strategy

60% of the companies do not

link budgets to strategy

Need for a motivating strategy and performance management process

Performance management defined

A process of motivating and inspiring managers and employees to perform actions

that contribute to the achievement

of the organization’s goals and to the implementation of its strategies

7

Mastering performance management

Develop the strategy

Mission, Values, VisionStrategic AnalysisStrategy Formulation

Translate the strategy

Strategy Map / ThemesMeasures / TargetsInitiative PortfoliosFunding / Stratex

Align the Organization

Business UnitsSupport UnitsEmployees

Plan the operations

Improving key processesSales PlanningCapacity PlanningBudget

Test & Adapt

Profitability AnalysisStrategy CorrelationsEmerging Strategies

Monitor & Learn

Strategy ReviewsOperating Reviews

12

3

4 5

6

Processes

Initiatives

Performance

Management

Process

Mission

Strategies(Making choices)

What is changing in the environment

What’s our role to fulfill (Stakeholders Expectations)

How to compete?(Competitive Strategy)

Values

GoalsWhat do we want to achieve

Δ Industrial Environment

SH1

SH2 S

Hn

Giving Strategic Direction

Where to Compete?(Corporate Strategy)

A Story of… Strategists…

10

About making Choices…

Mission

Strategies(Making choices)

What is changing in the environment

What’s our role to fulfill (Stakeholders Expectations)

How to compete?(Competitive Strategy)

Values

GoalsWhat do we want to achieve

Δ Industrial Environment

SH1

SH2 S

Hn

Putting Strategy in Action

Where to compete?(Corporate Strategy)

Performance Indicators

Strategic Initiatives

What actions do we take to implement the strategy

Did we accomplish the targets

12

The Choice !

13

The Choice ! …

Was not Explicit

14

Excellence

for the

shareholder

Market

Share

New

Customer

Acquistion

Lean

overhead

services

Sales &

Marketing

Skills

Delighted

Customers

Account

Managem

ent

Product

innovation

Total

solutions

provider

Expertise

and

experienc

e

R&D

Employee

Satisfactio

n

Customer

Loyalty

Service

quality

Describing the Strategy (Strategy Map)

15

The Chrono/Pulse

16

Excellence

for the shareholder

Market

Share

New

Customer Acquistion

Customer

Loyalty

Lean

overhead services

Sales &

Marketing Skills

Customer

Satisfaction

Account

Management

Product

innovation

Service

quality

Total

solutions provider

Expertise

and experience

R&D

Employee

Satisfaction

Measuring the Performance (KPI’s)

17

Corrective Action !

18

Excellence

for the shareholder

Market

Share

New

Customer Acquistion

Customer

Loyalty

Lean

overhead services

Sales &

Marketing Skills

Customer

Satisfaction

Account

Management

Product

innovation

Service

quality

Total

solutions provider

Expertise

and experience

R&D

Employee

SatisfactionStrategicInitiative

Strategic Initiative

StrategicInitiative

Putting Strategy in Action

19

Corrective Action !

Funding?

STRATEX

20

Aligning the organization: creating consistency

“Alignment means creating consistency between all activities of an organization and its strategy.” Michael Porter.

21

How to organize Strategy as a Continual Process

The Office of

Strategy

Management

(OSM)

The OSM

1. Scorecard management

2. Organization Alignment

3. Performance Reviews

4. Strategy development

5. Strategy communication

6. Initiatives management

7. Planning/ Budgeting - CFO

8. Human capital alignment -HR

9. Best practice sharing - CKO

The office of strategy management is

responsible for integrating & coordinating

activities across functions and business units to

align strategy with operations.

Core Roles

Desirable Roles

CoordinatingRoles

Control & monitor data access, update-rights and change history

Making “Analytics” Perform

STRATEGY

(OSM)

Disruption

&

Creativity

DATA

(CDO)

Health

&

Enablement

Unlocking the true potential of

Data

Analytics

&

Data Scientism

(CAO) OPERATIONS

Commercial

&

Business

Key Success Factors

1. Integrated in Performance Management Process

Continual Process

2. Start from the decisions to be madeBusiness Relevance

3. Data as a ServiceTrust & Enablement

You can’t collaborate unless you agree on the Challenge !!!

23

Agenda

Lunch & Learn with Thierry Bruyneel Performance Management as a Continual Process

SAP EPM, the “ERP” of Performance Management and

Decision Making The combined strengths of BPC & PCM… and beyond… to drive Value for the Business

What is Enterprise Performance

Management ?

Budgeting, Planning &

consolidation

SAPBPC

SAP HANA

The typical technical answer…

(optional, mandatory in specific scenario’s)

My budgetingprocess starts in august, and takes 3-4 months…

… and once it is ready, it ‘s alreadyoutdated

Basic budgeting…

• Continuous change• IT can’t cope with the rate of change• Finance can’t implement the changes

Rate of Business Change

Rate of System Change

Acquisition Product Issues Missed Qtr

RequirementsPrototyping

Implementation

Testing

Deployment

Typical challenge

The “technology” answer: SAP BPCA solution owned by the business user

• Familiar and easy to use Integrated with Microsoft Office Leverages a central database User owned and managed

• Process-centric Configurable and controlled process with security

and business process flows Promotes process consistency

• Unified Single, integrated application

for budgeting, consolidation and reporting Centralised database Low maintenance, improved integrity Simplifies deployment

Basic budgeting…

My budgetingprocess starts in august, and takes 3-4 months…

… and once it is ready, it ‘s alreadyoutdated

SAP BPC supports the process, but…

… performance is an issue

… I need to add quite some script logic in order to get in allcalculation logic

… how do I integrate with myERP logic ?

The answer to these issues – part 1

Automation with in-memory technology

30

The blue bar is the original result on BPC on Oracle. The red bar shows the runtime of the same report on BPC on HANA – but without pushing the report execution into the HANA TREX engine. The purple bar is the same report executed on BPC on HANA where the execution is pushed into HANA via the new add-on HANABPC.

Execution of calculations in HANA

Operational Planning

Tactical Planning

Strategic Planning

SAP BPC

SAP ERP

Draw the line where it fits your business needs

The answer to these issues – part 2

Typical trade-off question is in the past…

Budgeting & forecasting using SAP software: what are the options ?

Budgeting in ERP Budgeting in BPC Classic model

Embedded model IBPF

What to use when ?

Basic budgeting…

My budgetingprocess starts in august, and takes 3-4 months…

… and once it is ready, it ‘s alreadyoutdated

Too granular detail (SKU/Sold To) & static budgeting process

Controlling department = Financial Figures Production center

No time for action planning and learning from insights

Is this the Value Creation you have been dreaming of?

You really want to automate this further?

Taking Enterprise Performance

Management to the next level

Mission

Strategies(Making choices)

What is changing in the environment

What’s our role to fulfill (Stakeholders Expectations)

How to compete?(Competitive Strategy)

Values

GoalsWhat do we want to achieve

Δ Industrial Environment

SH1

SH2 S

Hn

Putting Strategy in Action

Where to compete?(Corporate Strategy)

Performance Indicators

Strategic Initiatives

What actions do we take to implement the strategy

Did we accomplish the targets

This is where “EPM” really comes in

Strategyformulation

Strategyexecution

Putting strategy into action…

Agility

Business relevance

Forecasting accuracy

Automation

Driver-based

Run the business better

Sustainablecompetitive advantage

Mission

Goals

The role of predictive analytics and driver models foroperational budgeting

Resources requirements

Financial impact

Predictedvolumes

Business Activity Driver

38

Step 1: Demand proposal and the use of predictive analytics

39

Predictive analytics using SAP

Option 1: Using SAP PA (and offline BPC data)

40

Predictive analytics using SAP

Option 2: Using SAP PA with direct access to HANA data

41

Predictive analytics using SAP

Option 3: Using the SAP HANA PAL

A short example…

Rolling Forecast (Driver-based Budgeting)

• Direct Expense

• Indirect Expense

•Revenue

•Gross Margin

•- Sales- Logistics-

Administration

• R&D

•Contribution

• STRATEX

• ITDA•EBITDA

•Net Income

•$$•XX•(XX)•X

X

•(XX)•(XX)•(XX)•XX

•XX

•XX

•(XX)•(XX)•(XX)

•%

•100%

•(40)•60%•(10)•(5)•(15)•30%

•20%•15%

•(5)•(5)

•(5)

Opera

tional

Costprice calculation & profitability-analysis

DRIVER

MODELS

Step 2: Driver based modeling(as part of the “closed loop”)

44

Step 2: Cost to serve – How does it work ?

Rules Based Cost Assignment

If((caseWgt < 35,.25* NumCases, 1 * NumCases) + (Location == ‘Lawn&Garden’, 5, 0))

Transactions or Process Drivers

GL Accounts

Processes

• Picking

• Packaging

• Receiving

• Stocking

Business Dimensions

• Customers

• Orders

• Products

• Vendors

Operational P&Ls

• Customers

• Product

• Vendors

Resource Pools

• Customer Services

• Sales

• Warehouse

• Customer Service

• Finance

• Information Tech

• Sales & Marketing

• Supply Chain

Decision Makers

Costing Engine

CORE DIMENSIONS Customer

Product

Category

Channel

DC

etc.

BUSINESS ACTIVITIES Inbound Handling

Outbound Handling

Outbound Transport

Value Added Services

Administration

Storage

OPERATIONAL

DIMENSIONS Cases, pallets,

Weights

Air/Road Fleet

FTE

… For example, we’re able to see

for a given Customer, the Loading

& Transportation cost incurred

per Case & Pallet split out by

Product Category and source DCCost Assignments

ERP Other

What Cost to Serve brings to decision makers…CTS allows you to connect information that traditionally wasn’t possible…

Rapidly build models using best

practice methodology

Mo

de

l an

d

Un

de

rsta

nd

Costs

Cost Objects

Activities

Co

llect

Ide

nti

fy &

A

nal

yze

Collect and collate system and

non system data

Analyze results to develop a deep

insight into where profit is made

and what drives costs

Test out scenarios to assess

the impact of possible changes

– then actTe

st a

nd

Im

pro

ve

“All-in-One”:

Cost and profitability modeling

Shared services modeling

Integrated business modeling

Calculation

Reporting engine plus on-demand analysis

Fast model build and Business user owned and managed

Enterprise Scalable

Full Transparency and Audit Trail of all costs/revenues

Supports all ABC and Allocation methodologies

Taking advantage of SAP Profitability & Cost Management

Co-existence of SAP PCM and SAP COLeveraging the best in both tools

Profit Center

Accounting

EC - PCA

Cost Object Controlling

CO-PC-OBJ

Profitability

Analysis

CO-PA

Product Cost Planning

CO-PC-PCP

Cost and Revenue

Accounting

CO-OM-CEL

Cost Center Accounting

CO-OM-CCA

Order and Project

Accounting

CO-OM-OPA

Activity Based Costing

CO-OM-ABC

Product Cost

Controlling

CO-PC

Overhead

Management

CO-OM

SAP Controlling

IMPROVED COST AND

PROFITABILITY

REPORTING

?

ERP

GL

Other data

SAP

BusinessObjects

Profitability and

Cost Management

Putting strategy into action…

Current situation

Too granular detail (SKU/Sold To) & static budgeting process

Controlling department = Financial Figures Production center

No time for action planning and learning from insights

- 500 k euro/yr for 60 % off budget

Our Proposed solution

Predictive analytics to increase speed & accuracy of forecast

Collaboration with the business to control the drivers

Is this the Value Creation you have dreamt off?

AccurateForecast

2 % in resource planning

ProcessAutomation

2-5 fte extra available for value adding activities

Business Ownership

Agility and increased mobilization for action

Value Identification

Leverage your data into value

You really want to automate this further?

Cost to serve is agile, actionable, detailed, scalable and accurate

+ 500 k euro/yr in revealing new profit potential

Integrated Performance Management Platform

Budgeting, Planning &

consolidationCosting & Profitability

Management

Analytics Front-Ends

Mobile Self service BI Collaborative BI

FINANCIAL COMMERCIALOPERATIONAL

SAPPCM

SAPBPC

SAPMargin Analysis

Simulation & Scenario

Analysis

SAP HANA (or equivalent platform) + Predictive Analytics Library

Our proposed solution…Supported by the SAP Integrated Performance Management Platform

Putting strategy into action…

Agility

Business relevance

Forecasting accuracy

Automation

Driver-based

Run the business better

Sustainablecompetitive advantage

Mission

Goals

Ensuring intiatives are business relevantExcellence

for the shareholde

r

Market Share

New Customer Acquistion

Customer Loyalty

Lean overhead services

Sales & Marketing

Skills

Customer Satisfaction

Account Manageme

nt

Product innovation

Service quality

Total solutions provider

Expertise and

experienceR&D

Employee Satisfaction

Introdution to SAP Strategy Management

The closed loop

Rolling Forecast (Driver-based Budgeting)

• Direct Expense

• Indirect Expense

•Revenue

•Gross Margin

•- Sales- Logistics-

Administration

• R&D

•Contribution

• STRATEX

• ITDA•EBITDA

•Net Income

•$$•XX•(XX)•X

X

•(XX)•(XX)•(XX)•XX

•XX

•XX

•(XX)•(XX)•(XX)

•%

•100%

•(40)•60%•(10)•(5)•(15)•30%

•20%•15%

•(5)•(5)

•(5)

Strategy

Strategy mapBalanced Scorecard

• Themes

• Objectives

• CSF

• KPI’s

Strategic Initiatives

Str

ate

gic

Opera

tional

Costprice calculation & Profitability analysis

DRIVER

MODELS

HOW ?

SAP Enterprise Performance

Management

Putting the pieces together

Integrated Performance Management Platform

Budgeting, Planning &

consolidationCosting & Profitability

Management

Analytics Front-Ends

Mobile

Strategy &

Transformation

Management

Self service BI Collaborative BI

On Premise

Full solution

delivered as a

Service

Hosted

Traditional

model

(Licenses +

Services)

FINANCIAL COMMERCIALOPERATIONAL

SAPSSM

SAPPCM

SAPBPC

SAPMargin Analysis

Simulation & Scenario

Analysis

SAP HANA (or equivalent platform) + Predictive Analytics Library

SAP Integrated Performance Management Platform

EPM in the cloud

Step 1: Cloud for Planning

(integrated with SAP BPC )

Michel HaesendonckxSenior Manager, Business Insights

michel.haesendonckx@delawareconsulting.commobile: +32 472 491 699

Contact info

57

Thierry BruyneelPartner, Business Insights thierry.bruyneel@delawareconsulting.commobile: +32 473 862 153

Denis VanwaetermeulenBusiness Insights Sales denis.vanwaetermeulen@delawareconsulting.commobile: +32 497 511 128