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CFOs Need Help to Navigate a Changing EnvironmentInternal and External Pressures on Finance Organizations - see how Net Margin Analysis can help
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Guidelines for Using SAP Net Margin Analysis for Interactive, Graphical Analysis of Profit and Margins Henner Schliebs SAP
© 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.
© 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
Introduction and Background
© 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
© 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
© 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
© 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
© 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
© 2014 SAP AG or an SAP affiliate company. All rights reserved. 9
Vend
or
Proc
ess
Orde
r Pro
cess
ing
… But Need to Shift the Paradigm to Understanding True Profitability
Gross Revenue Net Revenue
Disc
ount
off
Invo
ice
Sust
ainab
ility
Char
ges O
ff In
voice
Dist
ribut
ion
COGS
Sellin
g Co
st
Freig
ht D
irect
OI
Net Margin
Mark
etin
g
Gross Margin
Retu
rns &
War
rant
y
Surc
harg
e & C
harg
e Inv
Fina
ncial
Ma
nage
men
t Mark
etin
g Ca
mpa
igns
Disc
ount
on
Inv
Gene
ral
Adm
inist
ratio
n
Profit crea*ng vs. profit destroying and
Knowledge of “bo:om line” contribu*on by mul*ple dimensions
© 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
? Sales Buyer Marketing Operations
þþþþ ý
© 2014 SAP AG or an SAP affiliate company. All rights reserved. 11
New Way: Drive Net Margin Across Your Enterprise
Text
Finance Product Management Operations 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
+ + + =
What Is SAP Net Margin Analysis?
© 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
© 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 � Predefined – Includes data service, data model,
reports, and dashboards � Purpose-built for margin and cost analysis
Single source of cost data � ERP CO-PA Profitability Analysis � PCM data � BW or any external cost data
Built on SAP HANA � End-to-end HANA business process � High performance for high data volume � Direct impact and business outcome
© 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 here Single source of all cost metrics Model is extendable and configurable
© 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 � 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 � 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
© 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?
Com
petit
ive
Adv
anta
ge
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?
SAP Net Margin Analysis —Solution Details
© 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 � Predefined – Includes data service, data model, reports/
dashboards, ad hoc analysis, and simulations
� Purpose-built for margin and cost analysis Single repository of cost allocations from: � ERP CO-PA Profitability Analysis and PCM � BW or any external cost data
� 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
© 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?
© 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
© 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
© 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
© 2014 SAP AG or an SAP affiliate company. All rights reserved. 24
In the System
P&L Reports � Detailed Profit & Loss components for financial reports by customer and customer segment � Profit waterfall displays individual cost components leading to net margin
© 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
© 2014 SAP AG or an SAP affiliate company. All rights reserved. 26
Demonstrating SAP Net Margin Analysis
Rapid Deployment Solutions How Soon Can My Business Users Get This?
© 2014 SAP AG or an SAP affiliate company. All rights reserved. 28
Blueprint up to 95% savings � Business blueprint ready to use � Best practice processes modeled and
described
Realization up to 50% savings � Best practices processes already configured
and documented � High degree of business configuration
automation � Education material included
Testing up to 30% savings � Test case template supplied � Operations support template
available
Rapid Deployment Solution Implementation Methodology Go-Live in 12 Weeks with SAP Net Margin Analysis!
Go-live Testing Realization
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 project Discover Deploy Run Start
Shorter time to start, deploy, and run through best practices
© 2014 SAP AG or an SAP affiliate company. All rights reserved. 29
New Technologies Help CFOs Better Address Their Challenges
Mobility Cloud In-Memory
FINANCE ANALYTICS
© 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
© 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
© 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
Wrap-Up
© 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
© 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
© 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
© 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
© 2014 SAP AG or an SAP affiliate company. All rights reserved.
Henner Schliebs Analytics Audience Marketing
@hschliebs henner [email protected]
hschliebs
Thank you
© 2014 SAP AG or an SAP affiliate company. All rights reserved. 39
© 2014 SAP AG or an SAP affiliate company. All rights reserved.
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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.