Published by

Supply Chain KPIsFeatured in this issue:

Also featured:

Improve receivables position with better risk analysis - pg. 8

Stay out of cash flow crisis - pg. 10

A holiday case study: the largest supply chain - pg. 12

Shifting your organization to forecasting mode - pg. 13

2014Q4

Keith Peterson Ph.D.

CEO - Halo

Written by:

Asj Smith

VP Sales & Strategy - Halo

Volume 2 Issue 4

Are you taking the right measurements?

HALOEFFECT

2

??

??

Message from the CEO ............................................................................................. 3

Featured Article

10 Supply Chain KPIs you’ll want every morning .............................................. 4

Shifting your organization to forecast mode ........................................................ 7

Improve receivables position with better risk analysis ..................................... 8

Stay out of cash flow crisis ..................................................................................... 10

The worlds largest, fastest, most agile supply chain ......................................... 12

About Halo .................................................................................................................... 13

Table Of Contents

HALOEFFECT

3

A message from the CEO

Promotion!Spread the news! Spread the news!

Supply chain 2015

Welcome to the Q4 edition of the Halo Effect. This quarter,

we look at the KPIs that drive supply chain performance.

In our feature article on page 4, 10 Supply Chain you’l l

want every morning, we examine how an organization’s

business orientation impacts KPI selection. Specifically, by

applying the SCOR supply chain performance framework,

we can identify the top five KPIs relevant to service-oriented,

product-oriented, and operationally-oriented companies.

Also, our team contributes articles on using analytics

to manage accounts receivables and cash flow more

effectively.

Enjoy these contributions as well as the rest of the issue’s

insights and industry trends. We hope you are planning for

a productive 2015!

Keith Peterson

President and CEO

Halo

Keith Peterson, Ph.D.President and CEOHalo

Are you happy with Halo? If you refer us to another firm for a product demonstration by

January 31, 2015 we wil l enter you into our Amazon Fire Giveaway!

Contact Carmen Wilson, Account Management, at carmen.wilson@halobi.com.

Feature Article

4

Company Year Problem Impact

Nike 1999Poorly implemented demand planning software mis-

forecasts demand for branded sneakers

$100 M in lost sales and 20% drop in stock price

in one year.

Tri-Valley

Growers1997 Never completed ERP/SCM implementation Contributed heavily to company closure

FoxMeyer 1996 Failed SCM implementation causes shipping errors Bankruptcy

Adidas 1996 WMS failure causes Adidas to undership by 20%Significant loss of market share. Huge loss of IT

talent.

Cisco 2001Demand planning systems unable to forecast demand

slowing associated with economic meltdown

$2.2 B in inventory write down and 20% drop in

stock value.

10 Supply Chain KPIs You’ll Want Every MorningA qu ick scan o f the I n te rne t w i l l y i e ld a long- l i s t o f “b igges t supp ly cha in fa i l s . ” A few o f the mos t i n famous are l i s ted be low. The common th read – each o f these d isas te rs c rea ted huge and las t i ng i n j u r i es to the compan ies .

Wou ld access to be t te r supp ly cha in and IT per fo rmance in fo rmat ion have he lped

aver t o r m i t i ga te these fa i l u res? Maybe, bu t what i s cer ta in l y c lear f rom these

examp les i s tha t the comp lex i ty o f modern supp ly cha ins requ i res be t te r v i s ib i l i t y

i n to every phase o f p roduc t ion and d is t r i bu t i on . And be t te r v i s ib i l i t y requ i res da ta .

Every company today runs on da ta – the key to us ing your da ta i s choos ing the

r i gh t met r i cs fo r v i s ib i l i t y i n to your supp ly cha in . Wh i l e Key Per fo rmance Ind ica to rs

(KP Is ) may be rev iewed quar te r l y o r month ly , the speed w i th wh ich supp ly cha in

opera t ions occur makes a da i l y v iew o f more tac t i ca l and opera t iona l met r i cs a

g row ing necess i ty .

I n our exper ience across hundreds o f imp lementa t ions , we f i nd tha t wh i l e every

company has i t s own un ique dynamics tha t mus t be measured ; mos t bus inesses

fa l l i n to one o f th ree opera t iona l types – and these types can be grouped by a

focus on cus tomers , p roduc ts , o r opera t iona l e f f i c i ency .

Serv ice Excel lence

Serv ice Excel lence companies make their pr imary focus

the customer exper ience. In a consumer-or iented wor ld,

there has never been stronger focus on serv ice del ivery.

Amazon and Zappo’s typi fy companies that create

compet i t ive advantage and loyal ty with their del ivery and

return arrangements. General ly, product companies that

offer h igh value-add fa l l in th is category.

On a dai ly basis, Serv ice Excel lence companies should

have their f inger on the pulse of their customers

and their compet i tors. Their supply chains must be

f lex ib le and responsive to customer and market needs.

Management must be cognizant of issues of procurement,

manufactur ing, inventory, and distr ibut ion that impact

sat isfact ion and loyal ty.

• Ca l l vo lume and queue

• F i r s t con tac t reso lu t i ons

• I t em f i l l ra te

• Per fec t o rder

• De l i ve red fu l l / on t ime .

Top 5 KP Is fo r Serv ice Exce l l ence compan ies :

5

Lean KP Is tend to be the mos t tac t i ca l and da i l y -

o r i en ted . One o f the keys to cos t e f f i c i ency i s

an t i c ipa t i ng supp ly cha in p rob lems ear ly us ing sys tem

data and then ac t i ng be fo re the prob lems impact

f i nanc ia l per fo rmance .

Top 5 inc lude :

• Asse t u t i l i za t i on ra te

• De fec t and acceptance ra tes

• Queues and wa i t t imes

• S tock leve l s and sa fe ty s tock

Top 5 KP Is fo r Produc t Exce l l ence compan ies :

Product Excel lence

Compan ies w i th a focus on opera t iona l exce l l ence

v iew a l l aspec ts o f the supp ly cha in ho l i s t i ca l l y . The

focus i s d r i v i ng cos ts ou t o f each leg o f p roduc ing

and se l l i ng goods . App le and techno logy leaders

are typ ica l l y p roduc t -o r i en ted . These compan ies are

genera l l y focused on commod i ty goods and de l i ve r i ng

the bes t va lue a t m in ima l cos t .

On a da i l y bas is , Produc t Exce l l ence compan ies are

pr imar i l y concerned w i th the supp ly cha in ’ s f l ow, i t s

re l i ab i l i t y , and i t s cos t .

• To ta l cos t o f goods so ld

• Supp ly cha in cos t per un i t so ld

• Labor u t i l i za t i on

• Warehous ing and t ranspor ta t i on cos ts

• En te rp r i se so f tware per fo rmance

Operat ional Excel lence

Lean organ iza t i ons focus on e l im ina t i ng was te i n

the i r supp ly cha in a t every s tage . Fo l l ow ing lean

management p r i nc ip les , KP Is a re mapped by seven

ca tegor ies o f was te and ine f f i c i ency in a bus iness :

• Excess i ve wa i t i ng

• Overproduc t ion

• Re jec ts

• Mot ion

• Process ing

• I nven to ry

• T ranspor t

SCOR Attribute Metrics Description Best for Type

CostsCOGS, To ta l Supp ly Cha in Cos t , P roduc t i v i t y , Re tu rns Rates , Car ry ing Cos t o f I nven to ry

Focus on measurement of total cost and its drivers.

Operational Excellence

ResponsivenessOrder Fulfi l lment Lead Times, Late Order, Order Accuracy, Inventory to Sales Ratio

Focus on how quickly and effectively the company delivers goods to customers.

Service Excellence

Reliabil ityFil l rates, Perfect Order, Delivery Quality, Inventory turns, Order Status

Focus on the right product to the right customer at the right time.

Product Excellence

Flexibil ity Production Flexibil ityFocus on the abil ity of the company to adjust operational processes to react to changing market needs.

Service ExcellenceProduct Excellence

Asset EfficiencyCash-to-Cycle Time, Inventory on-hand, Asset turn, Repair and Maintenance Cycle

Focus on effectively managing its working and fixed capital.

Operational Excellence

Your Supply Chain Type

So what o r i en ta t i on does your company have? Many o f our cus tomers say “we l l , a l i t t l e b i t o f each . ” Fa i r enough .

I n fac t , the Supp ly Cha in Opera t ions Re fe rence (SCOR) mode l pub l i shed by the Supp ly Cha in Counc i l ou t l i nes core

a t t r i bu tes common to any bus iness w i th a supp ly cha in and assoc ia ted core (o r “Leve l One” ) met r i cs .

6

There are two ways to choose your

KPIs. Before that though, your

supply chain measurement program

must be based on some idea about

your end goals. Pick a part icu lar

attr ibute as the main emphasis.

Whi le other metr ics can be

measured, KPIs are only usefu l to

the extent they can promote posi t ive

change in an organizat ion, and most

organizat ions can focus on only one

or two areas at a t ime.

Next, how do you assess

performance? KPIs that show

performance re lat ive to industry

benchmarks and peer performance

are usual ly strategic KPIs that may

be assessed monthly or quarter ly .

SCOR Level 1 Metr ics are good

examples of measures that have

longer-ranging focus.

However, many companies are

focused more on real t ime/r ight t ime

metr ics that can be updated dai ly

and provide greater opportuni ty for

faster react ion to operat ional issues

and opportuni t ies. These fa l l into

three categor ies: demand, supply,

and operat ions.

Dai ly demand character ist ics that

should be measured are changes

in market condi t ions or leading

indicators that suggest a shi f t in

demand is moving through the

supply chain. These metr ics are

designed to help address the “bul l

whip” effect of smal l moves in

end buyer act iv i ty r ippl ing back

through the supply chain in

unexpected ways.

Demand KPIs should, by nature,

be predict ive. Histor ical sales and

customer act iv i ty are key inputs

to a more ref ined measurement or

forecast of where sales are trending.

Dai ly supply KPIs are re lated to the

interact ion between your suppl iers,

procurement and product ion.

With the wor ld demanding more

responsive supply chains, there is

greater focus on suppl iers who can

work with your f i rm’s capabi l i t ies

and l imi ts . I f you are less

responsive in your f lex ib i l i ty, then

choosing suppl iers who can augment

your operat ions can be key.

Dai ly operat ional KPIs dr i l l to

machine and process performance.

Queue t imes, re ject ion rates, and

transport metr ics such as cross-

dock rates are key.

F igure 1 shows an example

dashboard that managers can use

to monitor supply chain performance

dai ly . With i ts focus on shipment,

th is dashboard emphasizes serv ice

excel lence. I t provides a hol ist ic

v iew of the supply chain, process

eff ic iency, and order outcomes.

Mos t compan ies can bene f i t

f rom a rev iew o f the i r cu r ren t

met r i cs and KP Is . Are they

be ing used e f fec t i ve ly? Or

a re they jus t co l l ec t i ng dus t?

Has the o rgan iza t i on a l ready

ad jus ted to these met r i cs so tha t

measurements cons is ten t l y fa l l

w i th i n to le rances? I f so , i t may

be good news fo r management

bonuses . However , i t shou ld

a l so s igna l to sen io r management

tha t i t i s t ime to se t the bar

h igher and look fo r newer

d iagnos t i cs measures w i th in the

o rgan iza t i on to he lp d r i ve even

be t te r ou tcomes . F igu re 1

7

Bonus Art ic le

Shifting Your Organization To Forecast Mode

Most compan ies use modern Bus iness In te l l i gence and Supp ly Cha in too l s to look a t pas t per fo rmance , wh ich

g i ves a snapsho t i n t ime to unders tand what has a l ready happened . Th i s i s a c r i t i ca l f i r s t s tep in unders tand ing

the bas ic Key Per fo rmance Ind ica to rs (KP Is ) tha t a re impor tan t fo r a bus iness .

Some compan ies are tak ing the nex t s tep to no t on ly look a t pas t per fo rmance bu t a l so to look in to the fu tu re to

unders tand the d i rec t i on the bus iness i s go ing . Th i s moves the d i scuss ion f rom “ today we are here ” to “ tomor row

we w i l l be the re , ” and a l l ows fo r e f fec t i ve p lann ing o f resources and inven to ry based on upcoming t rends tha t w i l l

a f fec t the bus iness .

The Ha lo Pred ic t

Forecas t i ng Modu le i s

an au tomated s ta t i s t i ca l

fo recas t i ng so lu t i on

des igned spec i f i ca l l y fo r

m id-marke t compan ies

tha t need to unders tand

and p lan fo r the i r fu tu re

bus iness needs . W i thou t

requ i r i ng a team o f

da ta sc ien t i s ts to spend

months ana lyz ing da ta ,

Ha lo Pred ic t w i l l l e t you

unders tand your fu tu re

bus iness needs by :

• Es t imat i ng fu tu re g rowth to an t i c ipa te chang ing needs in the supp ly cha in

• Mon i to r i ng per fo rmance th rough pred ic t i ve KP Is fo r opera t ions and t rad ing par tne rs

• An t i c ipa t i ng changes in raw mate r ia l cos t and ava i l ab i l i t y tha t a f fec t p r i c i ng ta rge ts

• He lp ing to uncover h idden cos ts and revea l new oppor tun i t i es

With Ha lo Pred ic t , compan ies can access a grow ing number o f mode l -based app l i ca t i ons , qu ick ly app ly mode ls ,

spec i fy da ta hand l i ng and prepara t ion and choose f rom a range o f s tandard s ta t i s t i ca l p rocedures . Th i s a l l ows a

company to :

» Eas i l y app ly soph is t i ca ted pred ic t i ve mode ls to v i r tua l l y any da ta source

» V isua l i ze p red ic ted ou tcomes in an in te rac t i ve way

» Make on- the- f l y changes to fu tu re pred ic t i ons to see the resu l t s th rough What - I f Ana lys i s

» Rev iew and compare d i f fe ren t scenar ios (bes t case , wors t case , e tc . )

Our pre-packaged app l i ca t i ons fo r supp ly cha in w i l l i nc lude the fo l l ow ing , bu t many more op t ions are ava i l ab le :

• Demand Forecas t i ng fo r Sa les and Opera t ions P lann ing

• Asse t Opt im iza t ion fo r Leased and L icensed Produc ts

• Spend Ana lys i s fo r Supp ly Cha ins

• Marg in Ana lys i s fo r P&L Management

• Payment R isk Ana lys i s fo r Cus tomer Management

• Supp l i e r Scor ing and Rank ing

For more in fo rmat ion on Ha lo Pred ic t con tac t :

carmen .w i l son@ha lob i . com

These v i sua l p rompts l e t you eas i l y see the h i s to ry . I n the case o f the examp le to the le f t ,

we see th i s par t i cu la r cus tomer i n the pas t had t raded we l l w i th l i t t l e o r no amounts i n the

over 90 days ou ts tand ing un t i l recen t l y , where i t has r i sen rap id ly . As soon as you see

th i s spark l i ne you can see you have a prob lem and you wou ld take ac t ion immed ia te ly .

Improve your receivables position with better risk analysisThe r ight tool for the job

I f you dr i ve a car then you know what a dashboard i s . There are two ma in gauges tha t we are a l l

ve ry fam i l i a r w i th - the speedomete r and the fue l gauge . The o ther gauges we don ’ t usua l l y take

much no t i ce o f . I t i s a s im i la r s to ry i f you are runn ing a bus iness - the speedo i s revenue and

the fue l gauge i s money in the bank , and i t i s those two measures mos t bus inesses keep an eag le

eye on .

The o ther gauges are impor tan t , bu t on ly i f they s ta r t to move . I f they do s ta r t to move and you don ’ t do

any th ing abou t i t , then the ou tcome can be ca tas t roph ic . When you th ink abou t the tempera tu re gauge on your

car dashboard , then l i ke me you are probab ly aware o f i t subconsc ious ly . You know i t moves up when you f i r s t

s ta r t the car un t i l i t reaches the norma l opera t i ng tempera te , and then i t doesn ’ t move f rom tha t l eve l . I f i t does

s ta r t to move fu r the r i t usua l l y doesn ’ t take you long to rea l i se someth ing i s no t r i gh t (maybe you need to top

up the coo lan t , fo r examp le ) . I f i t re tu rns to norma l and s tays the re then a l l i s good, however i f i t s ta r ts to r i se

aga in you know tha t you have a prob lem, and i f i t i s a rap id r i se then you have a ma jo r p rob lem.

There are a number o f bas ic bus iness func t ions tha t cou ld do w i th a tempera tu re gauge (and one w i th a few

more leve l s o f soph is t i ca t i on ) . One o f those bus iness func t ions i s Accoun ts Rece ivab le (o r Co l l ec t i ons ) .

What makes a good Accounts Receivable dashboard?

When you th ink abou t your rece i vab les , a s imp le tempera tu re gauge- type ind ica to r i s p robab ly no t go ing to cu t

the mus ta rd , because by the t ime i t s ta r ts to move i t i s p robab ly too la te to take e f fec t i ve ac t ion . I n add i t i on ,

you rea l l y want to be ab le to d r i l l down to more de ta i l and see the gauge fo r i nd i v idua l deb to rs /cus tomers . I n

theory , a h igh rece i vab les number i s a good th ing bu t no t i f i t i s a l l owed by one o f two cus tomers and they

haven ’ t pa id you fo r the las t 90 days . You need to be ab le to eas i l y see th i s .

When crea t i ng your Accoun ts Rece ivab le dashboard the re are some grea t i nd ica to rs tha t we recommend you

incorpora te .

8

Spark L ines

Data bar

Th is v i sua l i s exce l l en t to show you where one cus tomer i s i n re la t i on to

o thers . A qu ick g lance and you can see the prob lem. I n the examp le , a l l

t he cus tomers are over the i r c red i t bu t Kap i t i E lec t r i ca l i s by fa r the wors t

o f fender . Us ing an ind ica to r l i ke a red X i s a l so a very e f fec t i ve way to make

o f fenders who have exceeded the i r l im i t s tand ou t .

Aging Buckets

As prev ious ly ment ioned , hav ing rece i vab les i s a good th ing ; hav ing them ou ts tand ing fo r over 30 days i s no t so

good . So be ing ab le to see your rece i vab les pro f i l e b roken down in days ou ts tand ing i s ex t reme ly use fu l . I n the

examp le we have a lso shown the var iance % in re la t i on to the pos i t i on las t year and co lou r coded th i s to aga in

make i t easy to spo t and unders tand . The pro f i l e

a l l ows you to snapsho t your exposure r i sk and the

var iance shows i f you are ge t t i ng be t te r o r worse a t

manag ing tha t r i sk over t ime .

How to with Halo

9

Dri l l down and Sl ice ‘n ’ Dice

Keep ing w i th our ana logy , i f your car tempera tu re gauge does s ta r t to r i se o r i s i n the

red , then the nex t s tep i s usua l l y to look under the hood to t ry and f i nd the prob lem

cause and so lu t i on . You need th i s same ab i l i t y f rom your Accoun ts Rece ivab le

dashboard . I f you see tha t your 61 -90 days exposure i s r i s i ng , you need to be ab le

to d r i l l down on tha t number to f i nd the reason - i s i t j us t a few prob lem cus tomers o r

i s i t ac ross the board? Maybe you need to s l i ce i t a d i f fe ren t way, fo r examp le i s i t

j us t re la ted to a marke t sec to r , l i ke Rese l l e rs , o r a reg ion , say Pac i f i c? I f tha t was the

case you wou ld rea l l y want to focus in on any o f your Pac i f i c cus tomers who are Rese l l e rs .

TrendsGraphs are g rea t too l s tha t a l l ow you to s imp ly and eas i l y convey a lo t o f i n fo rmat ion tha t can be ins tan t l y

unders tood . T rend l i ne g raphs have the added advan tage o f show ing you per fo rmance over t ime , and by add ing

co lo r you can eas i l y ge t more ins igh t . I n the examp le , the co lou red t rend l i nes

a l l ow us to eas i l y see how we are per fo rm ing . We shou ld be rea l l y concerned

abou t the t rend in our 61 -90 days ou ts tand ing rece i vab les , and a l though in the las t

month i t has s ta r ted to go down th i s cor responds to an inc rease in the over 90 day

ou ts tand ing . So a l l tha t seems to have happened i s the 61- 90 days hasn ’ t been

co l l ec ted and has ro l l ed i n to over 90 days ou ts tand ing . Tha t i s no t good news and

shou ld be g i ven u rgen t a t ten t i on .

AlertsThese are l i ke the f lash ing l i gh ts on your car dashboard ac t i va ted when someth ing has been exceeded, the

o i l l eve l i s too low, i t has been too long s ince the las t se rv ice e tc . I n a good Accoun ts Rece ivab le dashboard

you shou ld be ab le to se t up a le r ts . For examp le , i f a c red i t l im i ted i s exceeded or l i ke ly to be exceeded then

an a le r t ( say , ema i l ) i s sen t to the appropr ia te person to i n fo rm them o f th i s , a l l ow ing them to take some pre-

empt i ve ac t ion .

Benchmarking and Rat ios Whi le i n te rna l l y use fu l , they are o f ten used by ex te rna l par t i es such as aud i to rs , bankers , shareho lders and

inves to rs to de te rm ine the hea l th and r i sk o f your company . One key ra t i o o f ten used fo r rece i vab les i s Days

Sa les Outs tand ing (DSO) - th i s i s the to ta l o f your rece i vab les d i v ided by your average da i l y sa les to g i ve you

your day ’s sa les ou ts tand ing . The lower tha t number , the be t te r . I n te rna l l y , th i s ra t i o i s impor tan t as i t a f fec ts

cash f l ow, the requ i rement to bor row and ne t p ro f i t .

Ex te rna l l y , i t i s someth ing your aud i to rs w i l l l ook a t

and , i f h igh , w i l l be no ted as a r i sk and there fo re can

impact share pr i ce/shareho lders and make i t harder

o r more expens i ve to bor row. Those same ex te rna l

o rgan isa t ions w i l l use these ra t i os to benchmark you

aga ins t s im i la r compan ies , so i t i s o f ten pruden t to

benchmark yourse l f and see how you ra te aga ins t

s im i la r compan ies .

SummaryWhen i t comes to reduc ing Accoun ts Rece ivab le r i sk , tha t o ld say ing “a s t i t ch i n t ime saves n ine ” ho lds t rue . I f

you can eas i l y see a prob lem or what cou ld po ten t ia l l y be an emerg ing prob lem and then qu ick ly ac t to reso l ve

i t , you can save a lo t o f t ime , e f fo r t , resource and money . To do th i s , however , you need the in fo rmat ion i n

f ron t o f you in a fo rmat tha t i s easy to unders tand and in te rp re t . Th i s i s where a good Accoun ts Rece ivab le

dashboard i s i nva luab le . I t a l l ows you to qu ick ly spo t po ten t ia l i ssues and quan t i f y those i ssues . By dr i l l i ng

down in to the de ta i l you de te rm ine the reason fo r the prob lem, and by s l i c i ng and d ic ing you can see i f i t i s an

i so la ted prob lem or a f fec ts a par t i cu la r cus tomer o r marke t se t . A good dashboard a lso a l l ows you to t rack

your per fo rmance over t ime . Are th ings ge t t i ng be t te r o r worse? The va lue o f be ing ab le to do th i s can have a

s ign i f i can t pos i t i ve impact on your bus iness . For examp le , a s ign i f i can t reduc t ion i n Days Sa les Outs tand ing w i l l

have a huge pos i t i ve e f fec t on cash f low fo r wh ich the knock-on e f fec ts can be immense .

I f you want to reduce your Accoun ts Rece ivab le exposure and en joy the bene f i t s o f do ing so ,

why no t l ook a t imp lement i ng a dashboard so lu t i on l i ke Ha lo today .Bre t t F raserNew Zea land Of f i ce

Stay out of cash flow crises using Cash Position AnalysisCash f l ow i s the l i f eb lood o f every company . D i l i gen t f i nanc ia l ana lys i s , i nc lud ing the Cash Pos i t i on Water fa l l ,

i s an essen t ia l componen t to mon i to r i ng the cur ren t hea l th o f your bus iness . However no t a l l o f us are f i nanc ia l

ana lys ts who l i ke to wade th rough de ta i l ed spreadshee ts . Th i s i s where good da ta v i sua l i za t i on comes in . By

presen t i ng i n fo rmat ion i n g raph ica l fo rm, every manager can grasp what i s happen ing w i th cash f l ow . And, when

every manager unders tands the impor tan t bus iness met r i cs , mos t compan ies w i l l ach ieve fa r g rea te r success .

How does a Cash Posi t ion Waterfa l l help your CFO/CEO?

The idea behind a Cash Posi t ion Waterfa l l is s imple

and generat ing a waterfa l l chart is easy. The key is to

understand what data are needed and how to organize

i t . But before going there, let ’s take a minute to rev iew

the “what” and “why” of cash posi t ion analys is and

forecast ing.

For mid-s ize and fast growing companies, keeping track

of cash posi t ion and cash f low in a meaningfu l way is

di f f icu l t ! The statement of cash f lows is a standard

component in a set of f inancia l statements and is used

to reveal the sources and uses of cash by a business.

I t presents informat ion about cash generated from

operat ions and the effects of var ious changes in the

balance sheet on a company's cash posi t ion.

Cash f low is most commonly calculated using the indirect

method. I t can easi ly be der ived from exist ing reports

with in the account ing system. The indirect method takes

net income and adds or deducts non-cash revenue

and expense i tems, resul t ing in net income generated

by operat ions. However, the preferred method for

report ing purposes is cal led the direct method. The

advantage of the direct method over the indirec t method

is that i t reveals operat ing cash receipts and payments.

Unfortunate ly, the direct method is rare ly used because

the informat ion in i t is d i f f icu l t to assemble; companies

s imply do not col lect and store informat ion in the manner

required for th is format. Using the direct method may

require that the chart of accounts be restructured in order

to col lect d i f ferent types of informat ion.

A simple approach to f inancia ls for v isual managers

The ma in bene f i t o f the d i rec t method i s tha t i t p rov ides v i sua l i za t i on o f cash pos i t i on . The wate r fa l l char t s imp ly

and qu ick ly summar i zes company cash in f l ows and ou t f l ows . I f you look a t the char t be low, you w i l l no t i ce tha t

the re are many d i f fe ren t ou tpu ts (expenses ) compared to the few inpu ts ( revenues ) . Expenses are typ ica l l y more

re l i ab le and cons is ten t than revenues . Th i s i s what keeps managers awake a t n igh t !

The cash f l ow wate r fa l l i s the on ly v iew in to a l l the cash i t ems tha t mus t be managed to keep a company a f loa t .

The Cash Pos i t i on Water fa l l i s emp loyed to ca lcu la te and mon i to r the ne t movement i n cash ba lance as we l l

as the end ing cash ba lance fo r a g i ven per iod .

W i th th i s i n fo rmat ion , a company w i l l know i f i t

i s meet i ng i t s f i nanc ia l and opera t i ng ob jec t i ves ,

and , i f no t , how ser ious the prob lem i s and mos t

impor tan t l y what i s caus ing the prob lem.

The Cash Pos i t i on Water fa l l more spec i f i ca l l y

ensures tha t cash in f l ows and ou t f l ow i tems are

pr io r i t i zed in the bes t i n te res t o f the bus iness .

When cash i s t i gh t , segment i ng and pr io r i t i z i ng

deb t payments can be key to manag ing supp l i e rs

and cash f l ow .

10

How to with Halo

Figure 1

Bui ld a Cash Posi t ion Waterfa l l today

Back to how to bu i l d a Cash Pos i t i on Water fa l l . A l l the da ta i s i n the char t o f accoun ts and w i l l t yp ica l l y res ide

in a genera l l edger tab le i n your f i nanc ia l sys tem.

And, by us ing an in te rac t i ve dashboard , we can dr i l l down to the de ta i l w i th i n each expense area to he lp

s t ra teg ica l l y manage cash . I n F igu re 1 , t rade shows are c lear l y the g rea tes t expense . By dr i l l i ng down to l i ne

i t em de ta i l , we can make more in fo rmed dec is ions abou t where to re -a l l oca te o r cu t .

Key ou tpu ts a re a ser i es o f cash f l ow t rends . The

spec i f i c l i ne i t ems o f va lue are :

• Ne t cash pos i t i on

• Source and s i ze o f deb ts

• Source and s i ze o f revenue

• Revenues

• Expenses

• Tax

• Debt se rv ice

• D is t r i bu t i ons

• Ne t movement i n

cash ba lance

Summary

Cash Pos i t i on Water fa l l s a re “easy ” to imp lement – i f you have the t ime and pa t i ence . They can be genera ted

w i th da ta f rom your accoun t i ng sys tem and by us ing M ic roso f t Exce l fo r char t i ng . However , the t ime-consuming

par ts i nc lude summar i z i ng the da ta in to a g raphab le fo rmat , bu i l d i ng and va l i da t i ng your spreadshee ts , and

es tab l i sh ing a process to update the g raphs a long w i th new data each t ime you want an update .

B I sys tems l i ke Ha lo tha t p rov ide prebu i l t da ta cubes and wate r fa l l dashboards make imp lementa t ion a snap .

And , because B I too l s a re g rea t fo r d r i l l downs , you can ge t to the leve l o f de ta i l needed fo r more in fo rmed

dec is ion mak ing .

S ta r t us ing a wate r fa l l char t today . C- leve l execu t i ves w i l l f i nd your new repor t an essen t ia l par t o f the i r

week ly read ing .

11

Supply Chain News and Numbers

I n te res ted in some i nnova t i ve ideas fo r supp ly cha in

per fo rmance? I n S i x Ways to s tay ahead in the

g loba l supp ly cha in , au thor Guy Cabeke f rom REL

Consu l tancy emphas izes lead t imes and f l ex ib i l i t y .

Fo r a v iew in to how food qua l i t y sys tems can reduce

r i sk and crea te marke t oppor tun i ty , read De lo i t t e ’ s

Bu i l d i ng Qua l i t y Assurance Throughou t the Food

Va lue Cha in :

Marke t research has long been used to s t reng then

the pos i t i on ing o f s t ra teg ic p lans w i th boards and

inves to rs . B I shou ld be a key resource in de l i ve r i ng

the news in a mean ing fu l way . I n E f fec t i ve IR : Know

Your Aud ience and “Te l l I t L ike I t I s ” De lo i t t e i n te rv iews

Chr i sk Jakub ik , V ice Pres iden t o f I nves to r Re la t i ons a t

Kra f t Foods .

I n our backyard here i n San D iego , Ca l i f o rn ia , our

g rower /p roducer cus tomers are shou lder i ng the

burden o f skyrocke t i ng wate r cos ts assoc ia ted w i th

our s ta tew ide drough t . See an update i n , Where the

g rass i s g reener – a push to share drough ts burden .

Las t , two in te res t i ng p ieces appeared recen t l y on the i nc reas ing use o f a range o f da ta amongs t fa rmers and

growers . See the New York T imes ar t i c l es :

Work ing the Land and the Data .A low pr ice a l te rna t i ve to p r i cy b ig da ta on the fa rm

Cl ick To Read More Cl ick To Read More

Cl ick To Read More Cl ick To Read More

Cl ick To Read More Cl ick To Read More

To bu i l d a cash f l ow wate r fa l l , a l l cash f l ow i tems

are o rgan ized in the o rder i n wh ich they occur .

The ma in ca tegor ies cou ld be :

12

Bonus Article

The world’s largest, fastest, most agile supply chain

There i s one sh ipp ing f i rm in the wor ld , maybe the

ga laxy , tha t i s coun ted on more than Fedex , UPS, and

DHL comb ined . I n fac t , th i s o rgan iza t i on has an even

more comp lex supp ly cha in . I t takes i t s own orders ,

makes i t own goods , and sh ips them a l l i n one n igh t .

Wh i l e i t mus t be inc red ib ly p ro f i tab le , the f i rm i s no t

pub l i c so s ta ts a re no t ava i l ab le . However , i t ’ s w ide ly

known tha t they emp loy on ly one CEO, 12 re indeer ,

and severa l e l ves exc lud ing the one who ’s a den t i s t

and the odd one who moved to New York .

So , i t ’ s i n te res t i ng to see how a rea l “Fo r tune 1 ” f i rm,

wh ich re l i es so le ly on Ha lo B I , uses our so f tware fo r

the i r supp ly cha in per fo rmance mon i to r i ng . Le t ’ s take

a look a t th ree v iews they shared w i th us . Maybe you

can use them as we l l .

A t the top o f the f i rm, the CEO needs a v iew o f h i s

cus tomer base and how we l l they are be ing served .

H is Execu t i ve Dashboard shows year -over -year

per fo rmance and qu ick ly l e ts h im know tha t cus tomers

are happy bu t he i s hav ing i ssues w i th de l i ve ry . Th i s

i s no t a “ f r i c t i on less supp ly cha in , ” ye t .

Nex t , the manufac tu r i ng un i t needs inpu t to p lan

produc t ion . SKU pro l i f e ra t i on has been an i ssue

as the e lec t ron ics ca tegory exp loded the pas t few

years . Because the en t i re company uses a s imp le

bu t e f fec t i ve Sa les and Opera t ions P lann ing (S&OP)

p rocess , the i r da ta needs are s imp le . They need to

see demand fo recas t a t a ca tegory l eve l . Fo r examp le ,

“B reak ing Bad Ac t ion F igu res ” i s i n the Top 10 w ish

l i s t . Un fo r tuna te ly o r no t , our f i rm won ’ t p roduce these

i t ems – they ’ l l have to come f rom Wa l Mar t .

Las t , w i th a re f reshed f l ee t veh ic le fo r de l i ve ry th i s

year , we fo recas t a h igher on- t ime de l i ve ry ra te . No

need to wor ry abou t cus tomer sa t scores dropp ing th i s

year .

The team a t Ha lo B I w ishes a l l o f

our cus tomers , par tne rs and o ther B I

users a happy ho l i day – wor ldw ide !

13

About HaloFor compan ies tha t re ly on da ta fo r be t te r supp ly cha in per fo rmance , Ha lo de l i ve rs so f tware fo r repor t i ng

and ana ly t i cs tha t uncovers new cos t sav ings and growth oppor tun i t i es across sa les , f i nance , and opera t ions

func t ions .

Ha lo empowers i ndus t r ia l and food and beverage compan ies w i th purchas ing & procurement , opera t iona l &

produc t ion , i nven to ry and sa les ana lys i s tha t y ie ld ac t ionab le i ns igh ts . Ha lo i l l um ina tes supp ly cha in i ne f f i c i enc ies

such as l im i ted vendor e f fec t i veness , opera t iona l p rob lems, and o ther cha l l enges connec ted to c r i t i ca l I nven to ry

and Sa les & Opera t ions P lann ing prob lems .

By synchron i z i ng purchas ing opera t ions , i nven to ry , and sa les and marke t i ng p lans , Ha lo p resen ts users w i th

a cons is ten t v iew o f the i r bus iness , p rov id ing an essen t ia l too l tha t enhances reduced cos ts , op t im izes c r i t i ca l

p rocesses and improves cus tomer serv ice .

Founded in New Zea land in 2002 as Q4b iz , Ha lo re loca ted corpora te o f f i ces to San D iego , Ca l i f o rn ia i n 2007 .

Or ig ina t i ng as an ETL Acce le ra to r fo r Orac le JDE, Ha lo has grown to be a comp le te ana ly t i cs p la t fo rm fo r supp ly

cha in app l i ca t i ons .

Halo Ins iderAmanda Smi th - Sen io r Produc t Manager , San D iego

In 2015 I am look ing fo rward to i nc reas ing Ha lo ’ s da ta v i sua l i za t i on capab i l i t i es fo r Supp ly

Cha in and Pred ic t i ve ana ly t i cs . We w i l l have some exc i t i ng produc t enhancements com ing

ou t i n th i s a rea in the f i r s t ha l f o f 2015 tha t I hope w i l l be o f g rea t va lue to enhanc ing the

cur ren t v i sua l i za t i on capab i l i t i es o f Ha lo today . Outs ide o f work , I w i l l be t ra in i ng to run my

second ha l f mara thon and poss ib ly go ing fo r the “T r ip l e Crown” wh ich i s comp le t i ng th ree ha l f

mara thons in a year .

Joseph Tan - VP Produc t & Eng ineer i ng , Auck land , New Zea land

In 2015 , I ’m look ing fo rward to de l i ve r i ng produc ts and serv ices to he lp our cus tomers p lan

fo r demand they can ’ t p red ic t w i th supp ly they don ’ t con t ro l .

Jam ie Gregory - Par tne r Engagement Manager , San D iego

In 2015 , I ’m look ing fo rward to he lp ing our c l i en ts fam i l i a r i ze themse lves w i th our so f tware v ia

our new t ra in i ng cur r i cu lum. Hopefu l l y i t w i l l a l so g i ve me an oppor tun i ty to meet a few

o f you !

Pau l Hu tson - D i rec to r , So f tware Eng ineer i ng , Auck land , New Zea land

In 2015 , I ’m look ing fo rward to launch ing some grea t new f l ex ib le and ex tens i ve fea tu res i n

the Ha lo 2015 produc t su i te . Outs ide o f work , I ’ l l be en joy ing a (hope fu l l y ) sunny Auck land

summer w i th my fam i l y .

HALOEFFECT

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2014Q4Volume 2 Issue 4

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