Net Margin Analysis for Interactive, Graphical Analysis of Profit and Margins

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CFOs Need Help to Navigate a Changing Environment Internal and External Pressures on Finance Organizations - see how Net Margin Analysis can help

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Net Margin Analysis for Interactive, Graphical Analysis of Profit and Margins

  1. 1. Guidelines for Using SAP Net Margin Analysis for Interactive, Graphical Analysis of Profit and Margins Henner Schliebs SAP
  2. 2. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 1 Disclaimer This presentation outlines our general product direction and should not be relied on in making a purchase decision. This presentation is not subject to your license agreement or any other agreement with SAP. SAP has no obligation to pursue any course of business outlined in this presentation or to develop or release any functionality mentioned in this presentation. This presentation and SAP's strategy and possible future developments are subject to change and may be changed by SAP at any time for any reason without notice. This document is provided without a warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. SAP assumes no responsibility for errors or omissions in this document, except if such damages were caused by SAP intentionally or grossly negligent.
  3. 3. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 2 Agenda Introduction and Background What is SAP Net Margin Analysis? SAP Net Margin Analysis – Solution Details Rapid Deployment Solutions Wrap-Up
  4. 4. Introduction and Background
  5. 5. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 4 Increased Globalization §  Expansion into new markets §  Global process standardization §  Localization requirements Economic Volatility §  Volatility in markets §  Decreased stock valuation §  Slow economic growth Pressure on Margins §  Profitability by segments §  Decreased budgets and spending §  Cost to serve, Shared services Focus on Risk §  Financial risk and fraud §  Enterprise & Operational risk §  Social sentiment affects brand value New Business Models §  Product/service mix §  Internet-based business models §  Third-party partnerships Regulatory Changes §  Increasing disclosure requirements §  Country-specific regulations §  Industry-specific disclosures CFOs Need Help to Navigate a Changing Environment Internal and External Pressures on Finance Organizations
  6. 6. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 5 Solution Explorer and Solution Explorer for Finance (https://rapid.sap.com/se/executive) Financial Planning and Analysis Develop and Translate Strategy Profitability and Cost Management Planning, Budgeting, and Forecasting Monitoring and Reporting Accounting Accounting and Financial Close Corporate Close Entity Close Reporting and Disclosure Financial Close Governance Treasury and Financial Risk Management Payments and Bank Communications Debt and Investment Management Cash and Liquidity Management Financial Risk Management Commodity Risk Management Collaborative Finance Operations Receivables Management Travel Management Collaborative Invoice to Pay Financial Shared Services Enterprise Risk and Compliance Management Risk Management Fraud Management Controls and Compliance Audit Management Achieve Financial Excellence SAP Solutions Address Key Requirements
  7. 7. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 6 SAP Offers a Broad Range of Relevant Finance Solutions Accounting and Financial Close Treasury and Financial Risk Management Financial Planning and Analysis EPM Unwired Integrated Business Planning Collaborative Finance Operations Consolidation & Disclosure Collections Disputes Controlling Payments & Cash Mgmt Planning Forecasting Budgeting Profitability Management Strategy Management Electronic Invoicing Bank Comm. & In-House Banking Process Control Accounting Financial Closing Cockpit A/P, A/R Finance Innovations Advanced Finance Core Finance Reporting Financial Results Insight Fraud Management Commodity Risk and Hedge Management Cash Mgmt on HANA Financial Services Network Shared Services Framework Invoice Automation TwoGo Cloud for Travel & Expense Treasury & Risk Mgmt Audit Mgmt Enterprise Risk and Compliance Management Smart Accounting Net Margin Analysis Access Control Global Trade Services Risk Mgmt Visualizations
  8. 8. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 7 The following key Finance companies have already realized value through business transformation enabled by SAP Customer Goal Highlights Delivering  a  high-­‐performing  and  agile   financial  model  with  SAP  solu;ons   •  200x  improvement  in  performance  of  audit  trail  analysis  with  real-­‐;me  repor;ng   •  Faster  planning  and  consolida;on  processes  using  the  power  of  in-­‐memory  technology   •  Fewer  data  points,  allowing  for  more  agile  planning  and  instant  insights  into  relevant  informa;on   Improve  financial  transparency  with  SAP   Business  Planning  and  Consolida;on   •  66%  faster  prepara;on  of  consolida;on  reports  (6  to  2  weeks)   •  50%  fewer  data  errors   •  50%  reduc;on  in  headcount  required  for  consolida;on  ac;vi;es   Managing  risk  with  SAP  solu;ons  for   governance,  risk,  and  compliance   •  15%  reduc;on  in  risk  and  loss  events   •  15%  increase  in  efficiency  of  central  risk  and  control  management  processes   •  50%  reduc;on  in  the  average  ;me  required  for  loss  documenta;on   Payment  efficiency  with  SAP  Treasury   •  400%  ROI  on  a  5-­‐year  project   •  Efficient  processing  of  payments   •  Full  FTE  savings  by  automa;ng  rejected  payment  processing   •  92.9%  faster  transfer  of  material  ledger  data  (7  hours  to  30  minutes)   •  3  days  reduc;on  to  month-­‐end  forecas;ng  cycle   •  4  and  8  week  implementa;ons  of  profitability,  finance,  and  controlling  solu;ons  (respec;vely)   Improving  financial  business   processes  with  SAP  HANA   •  Instant  access  to  real-­‐;me  ERP  back-­‐end  data  for  cost  centers  and  internal  orders   •  10  minutes:  Time  taken  to  train  an  end  user  to  navigate  the  product  func;onality   •  3-­‐day  implementa;on  of  the  enterprise  resource  planning  (ERP)  back-­‐end  add-­‐on  and  ac;va;on  of  SAP  RealSpend     Makes  be^er-­‐informed  decisions  on  the   go  with  the  SAP  RealSpend  mobile  app     •  85%  reduc;on  in  ;me  to  complete  expense  reports  (US  $750,000  in  annual  savings)   •  90%  less  ;me  required  for  managers  to  approve  expense  reports  (US  $500,000  in  annual  savings)   •  $3.35m  overall  annual  savings  with  no  reduc;on  in  travel  volume   Saving  millions  on  travel  expenses  with   SAP  Cloud  for  Travel  and  Expense   SAP Drives Value for Finance Organizations
  9. 9. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 8 Products Customers Net Profitability Channel Companies Struggle With ... Providing the insights to enable cost reduction Differentiating customers: The customers with the highest revenue are not always the most profitable Understanding the best product/channel mix
  10. 10. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 9 Vendor Process OrderProcessing … But Need to Shift the Paradigm to Understanding True Profitability Gross Revenue Net Revenue DiscountoffInvoice Sustainability ChargesOff Invoice Distribution COGS SellingCost FreightDirectOI Net Margin Marketing Gross Margin Returns&Warranty Surcharge&ChargeInv Financial Management Marketing Campaigns DiscountonInv General Administration Profit  crea*ng  vs.  profit  destroying   and   Knowledge  of  “bo:om  line”  contribu*on  by  mul*ple  dimensions  
  11. 11. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 10 Old Way: Profit Makers Against Each Other? “My team hit their sales targets” Increase Sales Right Product portfolio “I launched the new range with the higher gross margin” “I increased customer retention – and hit my target for new customers” Increase Marketing Awareness Delight Customers “We achieved every fulfillment and customer satisfaction target we were set” + + + = “Nobody knew how our decisions impacted the bottom line!’” INDIFFERENT PROFITABLITY ?SalesBuyer Marketing Operations þþþþ ý
  12. 12. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 11 New Way: Drive Net Margin Across Your Enterprise Text Finance Product ManagementOperations Sales/Marketing Maximize Profitability Optimizing manufacturing cost, product mix/ alternatives requires a sound understanding of operational margins Deep insight into the cost structure and drivers of (activity/process) cost for optimization initiatives Breakdown of net margin to allow focus on optimization and changes to business practices/ incentives Focused target market management for profit (net margin) and growth optimization Shared insight for active, continuous net margin improvement+ + + =
  13. 13. What Is SAP Net Margin Analysis?
  14. 14. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 13 What Does SAP Net Margin Analysis Do? Turning Profit Destruction into Profit Creation Expose §  Identify net margin improvement opportunities by customer and product §  Uncover cost reduction potentials Explore §  Develop tactical/strategic transformation initiatives to improve profitability
  15. 15. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 14 What Is SAP Net Margin Analysis? A New Analytical Application for Margin and Cost Analysis Analytical Application Ÿ  Predefined – Includes data service, data model, reports, and dashboards Ÿ  Purpose-built for margin and cost analysis Single source of cost data Ÿ  ERP CO-PA Profitability Analysis Ÿ  PCM data Ÿ  BW or any external cost data Built on SAP HANA Ÿ  End-to-end HANA business process Ÿ  High performance for high data volume Ÿ  Direct impact and business outcome
  16. 16. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 15 Data Sources for Planned and actual Cost SAP Net Margin Analysis, powered by HANA Solution Architecture Application layer Presentation layer SAP BusinessObjects Simulations Data layer SAP HANA SAP Profitability & Cost Management (Optional) SAP ERP CO-PA (Actual & Plan) Export using SLT Non-SAP data (Optional) SAP BusinessObjects Universe Export using data services SAP Net Margin Analysis Actual + Target (Plan) SAP BusinessObjects Web Intelligence – Desktop and Mobile SAP BusinessObjects Explorer for ad hoc analysis Cost Element Hierarchy Performance Index model External Configuration Files Localizations stored hereSingle source of all cost metrics Model is extendable and configurable
  17. 17. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 16 Why SAP Net Margin Analysis? Analytics “Pay Back $10.66 for Every Dollar Spent” An investment in analytics represents one of the richest investment opportunities (NUCLEUS Research) Focus on revenue-related data Ÿ  The more analytics was used to learn about revenue drivers, including who the customers are, what they buy, and their price sensitivities, the more line-of-business managers were able to increase their top lines Focus on cost-related data Ÿ  By gaining more knowledge about margins of the different products and services within a company’s offering, the better able an organization was to dedicate efforts towards higher-margin activities
  18. 18. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 17 Extend Your Analytics Capabilities Where You Want to Be! Sense & Respond Predict & Act Raw Data Cleaned Data Standard Reports Ad Hoc analysis & OLAP Generic simulation and Predictive Analytics Predictive Modeling Optimization What happened? What action can I take? What will happen? What is the best that could happen? CompetitiveAdvantage Analytics Maturity The key is unlocking data to move decision making from sense and respond to predict and act How and why did it happen?
  19. 19. SAP Net Margin Analysis — Solution Details
  20. 20. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 19 SAP Net Margin Analysis Understand Your Net Margin and Drive Profitability ECC FI CO PA HANA COPA  Accelerator   ERP  Opera*onal  Repor*ng   Net  Margin  Analysis   Analytical application powered by SAP HANA Ÿ  Predefined – Includes data service, data model, reports/ dashboards, ad hoc analysis, and simulations Ÿ  Purpose-built for margin and cost analysis Single repository of cost allocations from: Ÿ  ERP CO-PA Profitability Analysis and PCM Ÿ  BW or any external cost data Ÿ  Works seamlessly with Finance Accelerator and other operational reports Business Value •  Help stakeholders discover cost structure issues across customer, product, and channel •  Reduce indirect costs through optimizing business practices •  Simulate tactical or strategic cost-saving initiatives across the company •  Boost profits by transforming profit destroyers and leveraging profit creators CO  Accelerator   ML  Accelerator   FI  Accelerator  
  21. 21. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 20 SAP Net Margin Analysis Full Cost Analysis of Margin and Profitability Enterprise view of margins and profit across customer, product, service, and channel. What are the year-over-year trends in each of these metrics? Margin Summary Profit Waterfall analysis What are the cost components causing margin erosion? Where can I find the most effective cost-savings potential?
  22. 22. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 21 SAP Net Margin Analysis Understand Profit Creation and Destruction •  Who are the most profitable customers? Who are the profit destroyers? •  What are the top 10 costs for the profit destroyers that erode margins? And how do they compare to those of creators? Whale Curve Analysis
  23. 23. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 22 SAP Net Margin Analysis Simulations to Drive Profit •  Select a cost that needs to be controlled and see the effect of each cost influencer, like order size, sales channel, etc. •  Perform what-if analysis to identify steps that would maximize the cost savings Cost savings simulator Transform non-profitable customers •  Classify your least profitable customers into four segments and compare to the winner •  Identify actions to transform each customer into a winner by controlling costs and driving revenue
  24. 24. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 23 Operational Cost Analysis — Ad Hoc Analysis into All Costs Across All Dimensions •  Drill down into the cost details for each customer, cost, or even one day •  Identify root-cause across all the dimensions – Product, customer, sales organization, distribution channel, and profit center
  25. 25. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 24 In the System P&L Reports Ÿ  Detailed Profit & Loss components for financial reports by customer and customer segment Ÿ  Profit waterfall displays individual cost components leading to net margin
  26. 26. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 25 SAP Net Margin Analysis Configuring Cost Model to Your Business •  Ability to completely configure the cost components in a three-level hierarchy that aligns with the configurability of SAP CO-PA as well as additional sources of costs •  All customers across various industries will be able to get visibility into their costs based on their unique scenarios
  27. 27. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 26 Demonstrating SAP Net Margin Analysis
  28. 28. Rapid Deployment Solutions How Soon Can My Business Users Get This?
  29. 29. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 28 Blueprint up to 95% savings Ÿ  Business blueprint ready to use Ÿ  Best practice processes modeled and described Realization up to 50% savings Ÿ  Best practices processes already configured and documented Ÿ  High degree of business configuration automation Ÿ  Education material included Testing up to 30% savings Ÿ  Test case template supplied Ÿ  Operations support template available Rapid Deployment Solution Implementation Methodology Go-Live in 12 Weeks with SAP Net Margin Analysis! Go-liveTestingRealization 0 10 20 30 40 50 60 70 80 90 100 Traditional Project Rapid Deployment Solution Preparation Business blueprint At least – 40% time and effort compared to similar scope of traditional projectDiscover Deploy RunStart Shorter time to start, deploy, and run through best practices
  30. 30. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 29 New Technologies Help CFOs Better Address Their Challenges MobilityCloudIn-Memory FINANCE ANALYTICS
  31. 31. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 30 Faster Insight into Financial Performance and Results with In-Memory Computing Before in-memory With in-memory 13 seconds 77 minutes Please refer to the latest SAP HANA Hardware sizing for the latest certified hardware sizes for maximum storage size of SAP HANA 1.0. Above tests were done in the SAP Lab with customer datasets. Runs 355x faster 0.04 seconds analysis response time On any device anywhere, anytime 70 retailers 460 billion records 50 terabytes of data
  32. 32. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 31 Empowering More Efficient Finance with SAP on HANA The Most Modern Platform for Real-Time Financial Excellence Real-Time Financial Close Real-Time Finance Operations Real-Time Treasury Management Real-Time Compliance Real-Time Performance Management
  33. 33. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 32 Mobile Finance Is Already a Reality Today Payment approvals Manage departmental spend Customer credit and payment information Dashboard analysis, including net margin Travel expenses Approve system access Manage KPIs and strategic initiatives
  34. 34. Wrap-Up
  35. 35. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 34 Where to Find More Information Analytics applied to Finance: www.sap.com/analytics Experience it yourself at our new CFO and Finance Leadership Center by visiting: www.sapcfo.com And subscribe to our monthly newsletter: www.sap.com/finance-newsletter Follow us: https://twitter.com/sapanalytics Follow me: https://twitter.com/hschliebs
  36. 36. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 35 SAP Net Margin Analysis — sap.com/solutions www.sap.com/pc/analytics/applications/software/net-margin-analysis/index.html http://service.sap.com/rds-nma-hana * * Requires login credentials to the SAP Service Marketplace
  37. 37. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 36 Product Video — sap.com/solutions www.sap.com/asset/index.epx?id=8ed40d62-b216-42bb-aba6-55e790c433be
  38. 38. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 37 7 Key Points to Take Home 1.  Help your CFO love you – Net Margin Management is one of the best ways to outperform your financial goals 2.  Help your product/service teams appreciate you – Visibility and guidance support making their area profitable 3.  Help your sales teams reach out to you – Either have them turn around unprofitable customers or drop them and focus on new customers 4.  Help your Payroll department feed you – A successful project might end in lots of $$$ 5.  Help your IT department forget you – You can manage this solution all by yourself 6.  Help your Financial Planner call you – Your employee stocks most likely will increase value 7.  Help your favorite solution provider (SAP off course) – Send me your feedback and any ideas of improvement
  39. 39. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. Henner  Schliebs Analytics Audience Marketing     @hschliebs henner henner.schliebs@sap.com hschliebs Thank you
  40. 40. ©  2014 SAP AG or an SAP affiliate company. All rights reserved. 39 © 2014 SAP AG or an SAP affiliate company. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG or an SAP affiliate company. SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG (or an SAP affiliate company) in Germany and other countries. Please see http://global12.sap.com/corporate-en/legal/copyright/index.epx for additional trademark information and notices. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. National product specifications may vary. These materials are provided by SAP AG or an SAP affiliate company for informational purposes only, without representation or warranty of any kind, and SAP AG or its affiliated companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP AG or SAP affiliate company products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. In particular, SAP AG or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release any functionality mentioned therein. This document, or any related presentation, and SAP AG’s or its affiliated companies’ strategy and possible future developments, products, and/or platform directions and functionality are all subject to change and may be changed by SAP AG or its affiliated companies at any time for any reason without notice. The information in this document is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. All forward- looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions.

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