optimizing data for epm
DESCRIPTION
Lecture at SP Jain Institute of Management on EPM and BITRANSCRIPT
Day 2: - Optimizing Data for EPM
Lecture at SP Jain Institute of Management
Executive MBA, Singapore – Oct 2009
Ravi Tirumalai
Oracle Corporation,, Asia Pacific
Agenda
• Understanding the EPM Data challenges
• Master key data management process
• Products and solutions:
– EPM
– Scorecards
– Dashboards & KPI’s
Enterprise Performance Management System
EPM Workspace
OLTP & ODSSystems
Oracle Data WarehouseData Mart
SAP, Oracle, Siebel,PeopleSoft, Custom
ExcelXML
BusinessProcess
OLAP
Middleware
Business Intelligence Foundation
BI ApplicationsPerformance Management
Applications
4
Performance Management Applications
Master Data
Business Rules
Metrics/KPIs
Targets, Plans & Actuals
Strategic Planning
Cost and Profitability Management
Define Costing
Methods
Perform
Allocations
Report & Analyze Define Cost Drivers
Financial Close Process
Data
CleansingConsolidate
Internal
Reporting &
Analysis
External
Reporting &
Compliance
Cascade Targets
Allocate Resources
Forecasting Detailed Budgeting
Planning and Budgeting
Set Strategic
Objectives
Corporate
Development
Treasury
Strategies
Long-Term
Planning
Transparency Challenges
Financial Consolidation At-a-Glance
Collect Data Calculate & Adjust Report
• Gather from multiple & disparate applications
• Store data in a centralized repository
• Generate financial statements, managerial reports, and perform ad hoc analysis
“Consolidations applications are seeing a resurgence after
what was considered a maturing of this market, driven
primarily by compliance issues in the United States (driven
by Sarbanes-Oxley) and worldwide (driven by the pending International Financial
Reporting Standards).” -- Kathleen Wilhide and Henry D. Morris
• Apply FASB and IFRS consolidation rules
• Perform currency translation & aggregation
7
The Financial Consolidation ChallengeDeliver High Value and Reduced Cycle Times
Source: Hackett Group Benchmarking-Solutions Book of Numbers
Collect data Close AdjustmentsCurrency
I/C
Subsidiaries
ReportManagement
Legal
External
Analyze
6 Days 12 DaysAverage
Collect Close Adjustment Report Analyze and Forecast
<2 Days 6 Days
World Class
More time!
Operational Challenges
Lengthy close process with weak internal controls
Rigid systems that cannot exploit new opportunities
Disconnect between strategy and execution
Parent Company
$
Subsidiary 1
¥
Subsidiary 2
£
Joint Venture
Affiliate
Accounting Differences
• Charts of accounts
• Accounting methods
Manual, Error-Prone Processes
• Data extraction, transformation, and load
• Adjustments and eliminations
Rs
€
Consolidation
Complex Ownership Structures
• Minority interest
• Cross holding
Multiple, Fragmented Systems
• Currencies
• Calendars
• Intercompany
transactions
Accounting scandals have
brought financial reporting
into focus as never before
Financial Close and Reporting Today
• Lengthy and cumbersome closes
• Inefficient and disconnected
processes
• Difficulty with reporting and analysis
• Data quality issues
• Inability to keep pace with change
• No control over the process
• Too many spreadsheets
…AUDIT ISSUES
Kenneth Lay
…a controlled process is not easy to achieve!
10
Performance Management Applications
Master Data
Business Rules
Metrics/KPIs
Targets, Plans & Actuals
Strategic Planning
Cost and Profitability Management
Define Costing
Methods
Perform
Allocations
Report & Analyze Define Cost Drivers
Financial Close Process
Data
CleansingConsolidate
Internal
Reporting &
Analysis
External
Reporting &
Compliance
Cascade Targets
Allocate Resources
Forecasting Detailed Budgeting
Planning and Budgeting
Set Strategic
Objectives
Corporate
Development
Treasury
Strategies
Long-Term
Planning
Fundamental Capabilities
Capability Detail
Planning and
Analysis
Fully embedded into BI and Microsoft Office
for real-time reporting and analysis
ModelingThe ability to model at the operational level,
assessing impact to the overall strategic plan
What-ifSee the business impact of changing business drivers
to make intelligent decisions
CollaborationTechnology that allows the entire user community
to communicate and plan in real time as well as offline
Top-down / Bottom-upBi-directional planning capabilities
to promote accuracy and accountability
Challenges - Excel/Manual Based Processes
– Lack of process
– Lack of integration
– Lack of confidence
– Rigid, costly to
maintain
– Inability to act
12
15
Today’s Integrated Planning Process
Sweat and Excel
ERP System
Functional Operational Planning
DemandManagement
CustomerManagement
Human Resources Planning
SupplyPlanning
ProductPerformanceManagement
LogisticsPlanning
Financial Planning
Long-TermFinancial Planning
TreasuryManagement
Financial Planning & Budgeting
WorkingCapitalPlanning
ProfitabilityManagement
PerformanceScorecards
17
Integrated Business PlanningBridging the Finance-Operations Disconnect
ERP System
Functional Operational Planning
DemandManagement
CustomerManagement
Human Resources Planning
SupplyPlanning
ProductPerformanceManagement
LogisticsPlanning
Financial Planning
Long-TermFinancial Planning
TreasuryManagement
Financial Planning & Budgeting
WorkingCapitalPlanning
ProfitabilityManagement
PerformanceScorecards
IntegratedImpactAnalysis
FinancialPerformanceModeling
StrategicOperationalModeling
Integrated Business Planning
Strategic Operational Modeling and Planning
Functional Operational Planning
ERP
Financial Modeling and Planning
GL AccountsAccounting PeriodsEntitiesActual
Budget Data
Profit targets, prices, costs,investment limits, working capital
Constrained Op Plans
Master DataTransactional Data
Execution Plan
Baseline Op Plans Operating Policies
Differences between Strategic Operational
Planning and Financial Planning
1. “Network” models
2. Planning Frequency
3. Concept of “Lead Time”
4. Data Driven Model Relationships
5. Constraint Based
20
Integrated Planning Drives Key RequirementsNeed for Core Technology Innovation
1. Modeling of operational constructs
– Rich expressiveness in modeling & calculation logic
– Complex dependencies, relationships, transformations
– Declarative calculations, not scripted
1
2
3
1
2
3
2. Rapid analysis of cross-functional impact
• “Change anywhere, analyze everywhere”
• Evaluate financial desirability & operational feasibility
• Interactive response times
3. Robust analytic transaction framework
• Scenario management & change isolation
• Reconciliation of concurrent plan changes
• System of record for plan changes: audit trails
Budgeting Process is Highly Inefficient
• Time – takes too long, results
obsolete
• Quality – political/negotiation, not
reflective of business
• Cost – many wasted resources,
dubious benefits
• Flexibility – lack of
responsiveness to changesFP&A Group
Senior Management
Dept A Dept B Dept C
Streamline Planning, Budgeting and Forecasting
• Centralized, not distributed
• Short budget cycles
• Collaboration across organization
• Consistent assumptions and
calculations
• Accurate data and plans
• Accountability
• Align top-down with bottom-up
• Driver-based planning
• Rolling forecasting
Reduce Fragmentation in Financial Modeling
• Complex spreadsheet models
• No consolidated view
• Spreadsheets are error prone
• Limited accounting integrity
• Lack of integrated models
make scenario analysis
cumbersome
• Long simulation times
Treasury
Board of DirectorsSenior Management
Banks Investors AcquisitionsDivestitures
Long-Term PlanningCorporate Development
24
Review Plan Exceptions Evaluate Alternatives
Assess Business ImpactUpdate Plan of Record
Marketing Sales
Finance
Supply Chain
• Create what-if scenario’s on plan revisions
• Rough-cut modeling
• Resolve constraints
Enabling an Iterative Planning Process
Manage collaboration
Assess cross-functional impact
Enable fast decision-making
Perform interactive scenario analysis
• Approve plan revisions
• Submit plan changes back to planning and execution systems
• Analyze critical gaps between financial and operational plans
• Compare impact of alternatives on key financial and operational metrics
25
Performance Management Applications
Master Data
Business Rules
Metrics/KPIs
Targets, Plans & Actuals
Strategic Planning
Cost and Profitability Management
Define Costing
Methods
Perform
Allocations
Report & Analyze Define Cost Drivers
Financial Close Process
Data
CleansingConsolidate
Internal
Reporting &
Analysis
External
Reporting &
Compliance
Cascade Targets
Allocate Resources
Forecasting Detailed Budgeting
Planning and Budgeting
Set Strategic
Objectives
Corporate
Development
Treasury
Strategies
Long-Term
Planning
26
Integrated Corporate Finance Modeling Allows You
to Create a Complete Plan
Covenant/Ratio Analysis
Funding Alternatives
Rating Agencies
Mergers & Acquisitions
Valuation Analysis
Divestitures
Top-Down Target Setting
Contingency Planning
Strategy Screening
Strategic Planning
Value
Management
Corporate
Development
Treasury
Strategies
Long-Term
Planning
27
Challenge
Financial Modeling
Limited cost-benefit analysis
Missed market opportunities
All scenarios not considered
Not enough focus on cash flow
Scenario ModelingExplore Options for Organizational Restructuring
• Copy and modify
existing hierarchies to
easily model options
– Move
– Add
– Remove
• Run consolidation on
modified hierarchy to
see potential outcome
– Balance Sheet
– Income Statement
– Statement of Cash
Flows
– Managerial Reports
Original State
Scenario 3
Scenario 2
Scenario 1
29
Risk Analysis
• Only 3 possible outcomes
• Limited view of risk
• What are most important risk factors?
• What are the odds I’ll miss the target?
• Which outcome is most likely?
• Monte Carlo simulation shows full range of
outcomes
• Illustrates probability of outcomes
• Immediate visibility into inherent risk
• True risk analysis for financial models
PossibilitiesThinking in Single Point Scenarios
ProbabilitiesThinking in Ranges
3 possibilities… No probabilities… All possibilities… Clear probability…
30
Predictive Modeling – Drivers Impact
Integrate Strategic Planning Budgeting & Forecasting
3 – 5 Years1 YearMonths / Quarters
Budget
Strategic Plan
Forecast
Rolling Forecast
YTD
Actuals
Seed targets and assumptions
Seed budget
Update strategic plan
with latest forecast
Cascade BU Targets
Prepare detailed financial plan
Consolidate budgets
Budget Reviews
Long-term planning
Corporate development
Optimize capital structure
Shareholder value
Capture forecast assumptions
Performance reviews
Driver-based planning
Key performance indicators
Profitability Management Questions
• What defines a profitable
customer?
• What is the profit contribution
margin of a product or a service?
• What does it cost to sell or
service customers?
• What proportion of resources
does a customer consume? Why hasn’t reducing costs increased profitability?
32
Enterprise Performance Management System
EPM Workspace
OLTP & ODSSystems
Oracle Data WarehouseData Mart
SAP, Oracle, Siebel,PeopleSoft, Custom
ExcelXML
BusinessProcess
OLAP
Middleware
Business Intelligence Foundation
BI ApplicationsPerformance Management
Applications
Across the Enterprise and Beyond
Corp
Division Division
CustomerSupplier
Partner
Scorecard
Dashboards
EUQR
Data Foundation
Business Intelligence
36
Operational Challenges
• Delayed, inaccurate reporting• Conflicting, departmentally-biased results
SalesData
Marketing Operations FinanceSales
Analyses, ReportsExecutives
IT
Cross-functional analysis only by ITSub-optimal enterprise performance
OperationsData 1
FinanceData N
FinanceData 1
OperationsData N
DataWarehouse
MarketingData
37
Valuable Insights Often Require Data from Multiple
Departments and Sources
How do I proactively manage risks of my receivables portfolio?
How does supplier performance impact customer satisfaction and revenue?
Serv
ice
Customers
Sale
s
Mar
keti
ng
Dis
trib
uti
on
Fin
ance
HR
/Wo
rkfo
rce
Op
erat
ion
s
Pro
cure
men
t
Customers
Customers
Suppliers
Suppliers
Suppliers
How does call center agent tenure, training, & compensation affect efficiency and cross-selling performance?
DASHBOARDS
“Visible”
“PLUMBING”
“Under the Surface”
Mappings to multiple applications
and data transformation all take
expertise and time
Upgrades
The Analytic Application Problem is Below the Surface
Information Delivery
Everything Else
What’s “Above the Surface”?
Reports & DashboardsMetrics and Attributes
So what’s Below the Surface?
Work Flows
& Execution
Plans
Extracts
&
Change
Data
Capture Account ID
Staging
Area
Transform
&
Loads
∑
Unified
Dimensions
Fact Tables &
Aggregates
Metadata
Ph
ysic
al
Lo
gic
al
Pre
se
nta
tion
What Percentage of Each Layer is Configured?
20% + 10% + 10% + 10% + 20% + 20% 40% 50%
Work Flows
& Execution
Plans
Extracts
&
Change
Data
Capture Account ID
Staging
Area
Transform
&
Loads
∑
Unified
Dimensions
Fact Tables &
Aggregates
Metadata
Ph
ysic
al
Lo
gic
al
Pre
se
nta
tion
Data Quality Control Points
WorkspaceData Warehouse BI Foundation
(BI Server)
Data Sources
BI Approach :From Warehouse to Workspace
• User Roles, Preferences
• Simplified View
• Logical SQL Interface
PRESENTATION LAYER
• Dimensions
• Hierarchies
• Measures
• Calculations
• Aggregation Rules
• Time Series
SEMANTIC OBJECT LAYER
PHYSICAL LAYER
• Map Physical Data
• Connections
• Schema
Manage
•Interactive Dashboards
•Ad Hoc Analysis
•Reporting & Publishing
•Disconnected & Mobile
Analytics
•Proactive Detection &
Alerts
•MS Office Integration
Consum
e
Acquire
•Single Database
•Multiple schemas,
logical separation
•Staging Data Layer
(SDL)
•Foundation Data
Layer (FDL)
•Access and
Performance Layer
(APL)
Security
Copyright © 2008, Oracle and / or its affiliates. All rights reserved. - Internal Use Only
Role Based Dashboards
Analytic Workflow
Guided Navigation
Security / Visibility
Alerts & Proactive Delivery
Logical to Physical Abstraction Layer
Calculations and Metrics Definition
Visibility & Personalization
Dynamic SQL Generation
Highly Parallel
Multistage and Customizable
Deployment Modularity
Abstracted Data Model
Conformed Dimensions
Heterogeneous Database support
Database specific indexing
BI Applications ArchitectureA
dm
inis
tra
tio
n
Me
tad
ata
BI
Presentation
Services
Dashboards by Role
Reports, Analysis / Analytic
Workflows
Metrics / KPIs
Logical Model / Subject Areas
Physical Map
BI Server
Direct
Access to
Source
Data
Data Warehouse /Data Model
ETL
Load Process
Staging Area
Extraction Process
DA
C
Federated Data Sources
SiebelOracle SAP R/3 PSFT EDW
Other
48
Dashboards and Scorecards Differing Perspectives
Dashboards
• Business results• Operational and strategic• Root cause analysis• Guided navigation
Past
Dashboards: Why did I miss
my goal?
Scorecards
• Strategy deployment • People & team scoring• Accountability maps• Management processes• Initiative tracking• Cause & effect• Collaboration
Future
Scorecards: How does my goal
support the corporate strategy?
Alerting
Benchmarking
Metrics
Graphics
Reporting
Metadata
Snapshot of Dashboard
50
Snapshot of Dashboard
Snapshot of Scorecard
Snapshot of Scorecard
These steps require significant resources with specialized skills / expertise
These steps
require different
types of BI, ETL
and DB
technology
Process & Steps to build a BI Application1. Research business requirements for processes & users
2. Design the underlying logical model – KPIs, Dimensions etc
3. Architect physical data model – Fact tables, Aggregates etc
4. Buy and configure a database management system to store
information
5. Buy an ETL tool to extract, transform and load data from the
transactional tables
6. Develop ETL programs based on an intimate understanding
of transactional data structures
7. Buy a BI tool for interactive end user access – Ad-Hoc,
Dashboards, Alerts, Offline, MS Office etc.
8. Develop Dashboards & KPI, Hierarchies and prompts
9. Integrate Security: authorization, authentication and auditing
10. Integrate user experience with transactional applications
11. Perform rigorous performance testing and QA
12. Manage changes to BI Apps – because of upgrades and
updates to the transactional systems
These steps
typically take a
long time to
perfect as
knowledge of
best practices is
learned
Receivables
AR Balance
• DSO
• Closing Group Amt
• Credit Limit Used %
• Total AR Overdue Amt
AR Aging
• AR Aging 1-30 Amt
• AR Due 1-30 Amt
• AR Overdue 1-30 Amt
Payment Performance
• AR Payment Days
• AR Weighted Days
• Times Paid Before Due
AR Transactions
• AR Avg Invoice Amt
• AR Credit Memo Amt
Payables
AP Balance
• DPO
• Closing Group Amt
• Total AP Overdue Amt
• Overdue Amt to Total %
AP Aging
• AP Aging 1-30 Amt
• AP Due 1-30 Amt
• AP Overdue 1-30 Amt
Payment Performance
• AP Payment Days
• AP Weighted Days
• Times Paid Before Due
AP Transactions
• AP Avg Invoice Amt
• AP Avg Payment Amt
Profitability
Profitability Returns
• Return on Equity
• Return on Assets
• Return on Capital
Margins
• Gross Margin %
• Operating Margin %
• EBT Margin %
• Net Income Margin %
Product Profitability
• Revenue
• Product Gross Profit
• Product Operating Profit
Customer Profitability
• Revenue
• Customer Gross Margin
Example Financial Analytics Metrics
Sample Pre-Built Dashboards
Financial Controller• Balance Sheet
• Cash Flow
• Budget Vs Actual
• P&L
Department Manager• Budget Vs Actual
• P&L
• Product Profitability
• Customer Profitability
Payables Manager• AP Balance
• Payments Due
• Effectiveness
• Invoice Details
Receivables Manager• AR Balance
• Payments Due
• Effectiveness
• Invoice Details
General Ledger
Balance Sheet
• Cash
• Accounts Receivable
• Debt to Equity Ratio
• Current Ratio
Asset Turnover
• AR Turnover
• AP Turnover
• Inventory Turnover
• Cash Cycle
• Fixed Assets Turnover
Cash Flow
• Operating Cash Flow
• Investing Cash Flow
• Financing Cash Flow
• Net Cash Flow
Built-in Best Practices - Metrics
Ensuring Alignment to Corporate Objectives
Objectives
Critical
Success
Factors
Critical
Success
Factors
Critical
Success
Factors
Actions Actions Actions
Headquarter
Subsidiary 1 Subsidiary 2 Subsidiary 3
56
Aligning to Corporate Strategy
• Accountability Maps
• Strategy Maps
• Cause and Effect
Maps
Building a Scorecard
Financial
Customer
Internal
Learning & Growth
ConsolidatedActuals
BudgetGoals
StrategicLong Term Goals
ERP, CRM, HR, Other (Oracle, SAP…)
Actuals Target YEAR 1 Target YEAR 5
58
E-MAIL ALERT
Send e-mail alert
when a problem is
detected
Analyze
Fix
How the Scorecard System Works
SCORECARD
STRATEGY ANALYSIS
The Business Intelligence Continuum
Which customers spend the most?
What did this customer buy?Which customers are most profitable?
What if demand falls short of forecast?
What if we rolled out this product
nationwide?
Will our cash balances take us
through this crisis?
What is the Q4 revenue forecast?
Future OrientedPast Oriented
Operational Static
Strategic Dynamic
Solve a Continuum of BI Needs
Ad-Hoc Query
& Reporting
Standardized
Reporting
Advanced
Analytics
Modeling
Future Oriented
Operational Static
Strategic Dynamic
Past Oriented
A Fusion of BI & Business Processes
• Visibility & Business Insight
– Understand Business Impact
• Action From Insight
– Empower Business Users
• Insight Driven Business Processes
– Business Intelligence Services for integrated insight and reporting
Business Process
BI & BAM
Business Process
BI
Business Process BI
Driving action from insight – Empowering Decisions
Business Process
Business Intelligence
Dashboards, Alerts, Reports
Enhance Customer
Satisfaction
Drive sales & marketing
promotions
Initiate employee
education initiatives
Remove production
bottlenecks
Escalate and rectify
approvals issues
Technology Value Chain
CollectStruct
ureStore
Synthesis
Use
Where Value is Created
External
Internal
By Decision
By Responsibility
Optimized
for Speed
Filter
Aggregate
Relate
Extract
Digets
Assess
Decide
Act
InsightPerformanceAction
SetGoals
Plan
Monitor
Analyze
Report
Align
• Develop strategies and goals
• Define key initiatives and KPIs
• Model scenarios
• Allocate strategic targets
• Financial budgeting
• Operational planning
• Rolling forecasts
• Financial and operational
• Revenue, profits, KPIs
• Efficiency and Utilization
• Benchmarking and metrics• Variances to budget
• Key trends across LOBs
• Profitability
• Effectiveness
• Financial & Statutory
• Management Reporting
• Compliance
• SDR – GRI Metrics
• Revisit Goals
• Update Models
• Update Plans
• Reallocate Resources
In Summary : Alignment and Accountability are
Key to Driving Enterprise Performance…
Applying Technology to Performance
Management- Fourth time lucky
1960 1970 1980 1990 2000 2010
DATA
INFORMATION
NETWORK
CONVERGENCE
CONVERGENCE
PAYOFF
People
Computing
Information
Communication
Back Up Slides
Performance Management - Best Practices
• Strategic Planning
– Definition of goal
• Tactical Planning
– Tactics, initiatives, resource allocation
• Financial Planning
– Preparation/consolidation of plan
• Management Reporting
• Forecasting
• Business Risk Management
Why Planning Fails
• Planning and reporting the wrong stuff
• Poor ownership and accountability
• Tying plan achievement to compensation
• Incomplete strategy definition
• Inadequate risk recognition
• Poor communication
• Weak Integration (connecting the dots)
• Information overload
• Mistaking detail for accuracy
Best Practice for leveraging Technology
• Integrate business and technology planning
• Break down the functional walls
• Set the right priorities
• Avoid automating inefficiencies
• Implementation is a team effort
• Focus on use, not deployment
• Manage complexity
• Link ROI to business value
75
Common Enterprise Information ModelSingle Consistent View and User Self-Sufficiency
User Roles, PreferencesSimplified ViewLogical SQL Interface
PRESENTATION LAYER
DimensionsHierarchiesMeasuresCalculationsAggregation RulesTime Series
SEMANTIC OBJECT LAYER
PHYSICAL LAYER
Map Physical DataConnectionsSchema
Role-Based Views of the Information Relevant to the User
Consistent Definition of Business Measures, Metrics, Calculations
Model Once, Deploy Everywhere
Across Any Data Sources
Identify the
Initial Data
Source
Identify The
Dimensions
To be Debited
Identify the
Dimensions
To be
Credited
Identify the
varying
Operation to be
performed
Create or Select a
Condition
Create or Select
Components
Simple Source On Mapping Rule
77
Ensuring Financial Data Quality
Business
Processes
Stewardship
Driver
Financial Data
Audit Trail
Trial Balance to Report
Data Reconciliation
Data Accuracy
Data Completeness
Internal Audit Controls
COSO Repository
Business Analysts
Regulatory Compliance
We mean
An Integrated approach to BI & DW
Consume
Acquire
Manage
Insight as a Service
Aligning People,
Processes & Technology
Security, Scalability,
& Performance
Multi-channel
Open API’s
User self-service
Federated query
Data Integration, Business
Processes (BPEL, BAM), MDM,
Content Management
Embedded OLAP, Data Mining RAC,
Clustering
Elements of a BI Initiative Success Factors
Pre-Built, Pre-Mapped, Pre-Packaged Insights
Pre-built warehouse with more than 16
star-schemas designed for analysis and reporting
on Financial Analytics
Pre-mapped metadata, including embedded best
practice calculations and metrics for Financial,
Executives & other Business Users.
1
2
3
4Pre-built ETL to extract data from hundreds of
operational tables and load it into the DW, sourced
from Oracle EBS, PeopleSoft Enterprise, SAP R/3,
and other sources.
A “best practice” library of over 360
pre-built metrics, Intelligent Dashboards, 200+
Reports and alerts for CFO, Finance Controller,
Financial Analyst, AR/AP Managers and Executives
Presentation Layer
Logical Business
Model
Physical Sources
The New BI approach
Workspace
BI Foundation
Infrastructure
Performance
Management
Apps.
BI Apps
Consume
Acquire Manage
visualization Dashboards
ScorecardsAnalytics