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Profitability Analysis & Acorn Software

Gain insight into the drivers of profitability across your enterprise. Understand how Acorn's profitability and cost management software easily allocates costs to specific products and customers. This software is compatible with all mobile browsers.

This slide deck is part of a recorded Senturus webinar, "Business Solutions: Profitability Analysis.” To view the free recording of this entire presentation and download the slide deck, visit www.senturus.com

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Profitability Analysis & Acorn Software

  1. 1. Senturus Business Intelligence Demystified Series BUSINESS SOLUTIONS: Profitability Analysis 20 – 40% of your products and customers are losing you money. Do you know which ones?Acorn Systems, Inc.
  2. 2. This slide deck is part of a recorded webinar. To view the FREE recording of this entire presentation and download the slide deck, go to www.senturus.com/recorded-webinars.php You will find this—and many other recorded webinars-- under the “IBM Cognos Office of Finance Solutions: TM1, EP, Controller, FSR”Acorn Systems, Inc.
  3. 3. Agenda  Introductions and Senturus Overview  Net Profitability -- Driven by Cost to Serve (CTS)  Acorn’s Transactional CTS Analysis and Solution Functionality  Converting CTS Insight into Value  Delivering Insight to Users  Modeling Performance  Client Success  Acorn Overview  Q&AAcorn Systems, Inc. 3
  4. 4. Steven Rasch Greg Herrera VP PROFESSIONAL SERVICES CHIEF EXECUTIVE OFFICER ACORN SYSTEMS SENTURUSAcorn Systems, Inc.
  5. 5. Who is Senturus?  Consulting firm specializing in Corporate Performance Management − Business Intelligence − Office of Finance • Enterprise planning & budgeting • Consolidate, close, report and file (CCRF) − San Francisco Business Times Hall of Fame -- Four consecutive years in Fast 100 list of fastest-growing private companies in the Bay Area  Experience − 12-year focus on performance management − More than 1,200 projects for 500+ clients  People − Business depth combined with technical expertise. Former CFOs, CIOs, Controllers, Directors... − DBAs with MBAsAcorn Systems, Inc. 5
  6. 6. A few of Senturus’ 500+ ClientsAcorn Systems, Inc.
  7. 7. Net Profitability Driven by Cost to ServeAcorn Systems, Inc.
  8. 8. 20-40% of your Customers or Products Lose you Money 20% of your business generates 20% of your business loses most 200% of your profits of the extra 100% of potential profits OPERATING PROFIT PROFILE UNREALIZED PROFIT POTENTIALSource: “Time-Driven Activity-Based Costing:A Simpler and More Powerful Path to Higher Profits”Kaplan & Anderson and Acorn Systems clients Acorn Systems, Inc. 8
  9. 9. Actionable P&Ls ––Quick Analysis & Resolution Actionable P&Ls Quick Analysis & ResolutionAcorn Systems, Inc. 9
  10. 10. Category Profitability GROSS MARGIN VS. NET PROFIT BY MAJOR PRODUCT LINES 60% 50% 40% PERCENT 30% Gross Margin 20% Net Profit 10% 0% -10%Acorn Systems, Inc. 10
  11. 11. Importance of Accurate Net Profitability Driven by Cost to Serve  Net profit is the metric that defines success for an organization  Provides support for business decisions in line with a company’s strategic initiatives  Takes into account all services that companies are providing to customers or incurring because of relationships with customers, vendors and products  Provides insight into services that different customers value and are willing to pay for  Supports detailed analyses of decisions previously made and their impact on the businessAcorn Systems, Inc. 11
  12. 12. This slide deck is part of a recorded webinar. To view the FREE recording of this entire presentation and download the slide deck, go to www.senturus.com/recorded-webinars.php You will find this—and many other recorded webinars-- under the “IBM Cognos Office of Finance Solutions: TM1, EP, Controller, FSR”Acorn Systems, Inc. 12
  13. 13. Objectives of Cost to Serve Engagements  Provide visibility of profitability and cost to an organization’s approach with customers.  Give more quantitative and robust support to negotiation, supply chain efficiencies, pricing, rebate bracket discussions and broader strategic and operational initiatives. Selling ORGANIZATIONAL ALIGNMENT Costs AND ACCOUNTABILITY ACCOUNT, CHANNEL, Understand Discounts CONSUMER DIMENSION Profit Understand COGS Sales Cost COST TO SERVE C3- Understanding Value CTS Added C2 - C1 – Warehouse Supply & Transport Chain PRODUCT, BRAND, CATEGORY DIMENSION GEOGRAPHIC DIMENSIONAcorn Systems, Inc. 13
  14. 14. Price Waterfall with Cost to Serve A. SELLING COSTS AND DISCOUNTS SELLING COSTS COST-TO-SERVE DISCOUNTS (REBATES) ELEMENTS B. COST OF GOODS SOLD VARIABLE COSTS C. COST-TO-SERVE FIXED COSTS COST-TO-SERVE W&T COST-TO-SERVE ORDERS & CASH COLLECTION ‘VALUE-ADDED’ COST-TO-SERVE BASE PRICE NET SALES GROSS MARGIN OPERATING PROFITAcorn Systems, Inc. 14
  15. 15. Acorn’s Transactional Cost-to-Serve AnalysisAcorn Systems, Inc.
  16. 16. Transaction Level Cost Assignment Sales Warehouse Sales DIMENSIONAL HIERARCHY Customer Supply Fee Sales Reductions Total Sales COGS Marketing COGS Manager Market G/L – Other Market G/L – Slotting Market G/L – PA/FB Market G/L – Private Label Market G/L – Post Audit Market G/L – Volume Incentive Customer LIFO Expense Vendor Product Line Total COGS Bill To Gross Profit Indirect Expense Account Managers Customer Service Customer Finance DC SKU Ship To IT Marketing Merchandising – Expense Merchandising – Income Safety/Security Transportation – Expense Transportation – Income Invoice DC SKU WACC Warehouse – Inbound Warehouse – Other Warehouse – Outbound Warehouse – Storage Total Indirect Expense Net Profit Line Item Non-Transportation Services (net) Direct (Net) Total Net ProfitAcorn Systems, Inc. 16
  17. 17. Solution Functionality BUSINESS RESOURCE POOLS PROCESSES DIMENSIONS OPERATIONAL P&LS • Customer Services • Picking • Customers • Customers • Sales • Packaging • Orders • Product • Warehouse • Receiving • Products • Vendors • Stocking • VendorsGL Accounts DECISION MAKERS TRANSACTIONS • Customer Service OR PROCESS DRIVERS • Finance • Information Tech • Sales & Marketing • Transportation Dynamic Assignment of Costs If((caseWgt < 35,.25* NumCases, 1 * NumCases) + (Location == ‘Lawn&Garden’, 5, 0)) EPS ENGINEAcorn Systems, Inc. 17
  18. 18. Assigning Cost Based on Utilization of Resources Business Process Name: Picking: West PROCESS MAP RESOURCE DEPARTMENT PROCESS COST BUSINESS POOLS DRIVERS DRIVERS DIMENSIONS Salaries, Bonuses, Headcount PICKING WEST Drive based on Qty, Cube_ Line Item Benefits, Forklift & Volume, Weight, Equipment, Utilities, Storage_Location and Rent, Insurance, Pick_Type Security, Storage ACTIVITY DETAIL: DESCRIPTION: Each pallet on the order takes 5 minutes to pick, 5 minutes are added for “bulky” products (over 15 cube volume) and for heavy products (over 60lbs). 10 minutes are added for products stored on the second tier of warehouse storage. 10 minutes are added for orders which require individual case picks instead of full pallet picks. EQUATION: 5 * Qty/Pallet_Qty + if(Cube_Volumne > 15, 5, 0) + if(Weight > 60, 5, 0) + if(Right(Storage_Location,1) == “2”,10, 0) + if(Pick_Type == “Case”, 10, 0) COST DRIVER Qty, Pallet_Qty, Cube_Volume, Weight, Storage_Location, Pick_Type Picking: West 1 2 3 4 5 NO NO NO NO NO Case Pallet Heavy Bulk 2nd Stop Pick? Pick? Product? Product? Tier? YES YES YES YES YES 1 min 5 min per pallet 5 min 5 min 10 min per caseAcorn Performance Group, Inc. Systems, Inc. 18
  19. 19. Cost to Serve Analysis Across All Business Dimensions CORPORATE STATEMENT CUSTOMER CATEGORY Scenario: January 03 CUSTOMER CUSTOMER ORDER ORDER LINE ITEM VENDOR VENDOR PRODUCT PRODUCT CATEGORY PRODUCT SALES REPRESENTATIVEAcorn Systems, Inc. 19
  20. 20. Converting CTS Insight into Value for the BusinessAcorn Systems, Inc.
  21. 21. 20-40% of your Customers or Products Lose you Money 20% of your business generates 20% of your business loses most 200% of your profits of the extra 100% of potential profits OPERATING PROFIT PROFILE UNREALIZED PROFIT POTENTIALSource: “Time-Driven Activity-Based Costing:A Simpler and More Powerful Path to Higher Profits”Kaplan & Anderson and Acorn Systems clients Acorn Systems, Inc. 21
  22. 22. This slide deck is part of a recorded webinar. To view the FREE recording of this entire presentation and download the slide deck, go to www.senturus.com/recorded-webinars.php You will find this—and many other recorded webinars-- under the “IBM Cognos Office of Finance Solutions: TM1, EP, Controller, FSR”Acorn Systems, Inc. 22
  23. 23. Value Opportunities Informed by Cost to Serve • Optimize Selling Prices PRICING & • Rationalize Discounting DISCOUNTING • Align Net Prices To Volume SAMPLE BUSINESS CASE COMMODITY PRODUCT • Rationalize SKUs MANUFACTURER PRODUCT • De-cost Low Margin Products PORTFOLIO • Refocus Sales Force • Optimize Distribution Points Sales 1,000.0 1,030.0 3% SUPPLY • Increase Utilization Rates Cost of Goods 900.0 880.0 (2%) NETWORK • Outsource Non-Strategic Functions Gross Margin 100.0 150.0 50% Operating Expense 80.0 60.0 (25%) • Streamline Service SERVICE Operating Income 20.0 90.0 350% • Simplify Organization Structure MODEL • Eliminate Low-value Activities CUSTOMER • Reduce Complexity SEGMENTS • Align Costs to Segment Value Net Price Optimization Complexity Reduction Expense Rationalization Resource UtilizationAcorn Systems, Inc. 23
  24. 24. Identifying Poor Performers 5,000,000 ACME PRODUCTS 4,000,000 3,000,000 645 Customers $20M Revenue Revenue $4.7M Operating REVENUE Loss FAVORITE BRANDS 2,000,000 1,000,000 LAGGARD INDUSTRIES - (700,000) (500,000) (300,000) (100,000) 100,000 300,000 500,000 (1,000,000) NET PROFIT Net ProfitAcorn Systems, Inc.
  25. 25. Identifying Market Basket Opportunities Product BZH Product AXY REVENUE Product DEF OPERATING INCOME 25Acorn Systems, Inc.
  26. 26. Identifying Pricing Opportunities Product XYZ REVENUE Product ABC OPERATING INCOMEAcorn Systems, Inc. 26
  27. 27. Internal Process Benchmarking TOTAL COST PER UNIT BY DC TOTAL COST PER UNIT BY DCAcorn Systems, Inc. 27
  28. 28. Vendor Negotiations ITEM PROFITABILITY BY VENDOR - ITEMS WITH WAREHOUSE SALES > $3,000 VENDOR 1 REVENUE PRIVATE LABEL VENDOR 2 VENDOR 3 VENDOR 4 SAMPLE DATA -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% Net ProfitAcorn Systems, Inc. 28
  29. 29. SKU Optimization CATEGORY 4 ITEM B PREMDLX KIT AG-10G $1,800,000 $1,600,000 $1,400,000 ITEM A A BOW RO T I $1,200,000 REVENUE $1,000,000 $800,000 HGN-PURP BETTA PALS MARINA ITEM D $600,000 ITEM C $400,000 Item C AGA-48"x18"D OK CAB STND $200,000 $0 (500,000) (400,000) (300,000) (200,000) (100,000) 0 100,000 200,000 NET PROFITAcorn Systems, Inc. 29
  30. 30. Delivering Insight to UsersAcorn Systems, Inc.
  31. 31. Integration With Salesforce ® “Salesforce has created democracy around the flow of information throughout the organization” Chief Information Officer Results from Acorn can be directly integrated with CRM tools to present Net Profit and Cost to Serve results to the sales team Real change happens at the operational levelAcorn Systems, Inc. 31
  32. 32. Client Success Leveraging Salesforce ®  Leveraging Salesforce to provide Acorn results to sales, operations, and management − Dynamically identifies customers and products for analysis and review each month − Benchmarking facilities against one another to identify differences in product handling using results of cost to serve model − Used to aid sales reps to identify areas to negotiate price, adjust market basket by client to provide more profitability, drive sales volume increases − Provides a resource to assign tasks to sales reps and tracking progress  Migrating quoting process to Salesforce and aligning cost elements from cost to serve model to provide backbone to pricing and quotingAcorn Systems, Inc. 32
  33. 33. Modeling PerformanceAcorn Systems, Inc.
  34. 34. This slide deck is part of a recorded webinar. To view the FREE recording of this entire presentation and download the slide deck, go to www.senturus.com/recorded-webinars.php You will find this—and many other recorded webinars-- under the “IBM Cognos Office of Finance Solutions: TM1, EP, Controller, FSR”Acorn Systems, Inc. 34
  35. 35. Example Data for Cost-to-Serve Analysis SAMPLE DISTRIBUTOR GENERAL LEDGER PRODUCT MASTER Account Number Product ID Account Description Product Name Amount Product Category Type Vendor ID Category Units Per Box Boxes Per Case Cases Per Pallet Special Handling Codes Stock Location PURCHASE ORDER VENDOR MASTER DISTRIBUTION CENTER ORDER HEADER CUSTOMER MASTER Inventory Turns HEADER Period Beginning Vendor ID PO ID DC ID Order ID Customer ID Inventory Vendor Name PO Name DC Name Order Name Customer Name Period Ending Balance Payment Terms PO Amount DC Type Order Amount Customer Category Length Vendor Type PO Date PO Date Width Number EDI POs Ship To Ship To Height Number Fax POs Vendor ID Store ID Weight PO Errors Freight Charge DC ID Complexity Factor Freight Charge EDI Capable Pick Zone PURCHASE ORDER DETAIL ORDER DETAIL Product ID Product ID Product Name Product Name Quantity Shipped Quantity Shipped Cost Cost Unit of Measure Unit of Measure PO ID PO ID Quantity Ordered Quantity OrderedAcorn Systems, Inc.
  36. 36. Actual Client Performance Statistics Business GL Process Model Calc Time Client Industry Resource Pools Processes BD Instances DB Size Servers Dimensions Accounts Drivers Time Periods Financial Services 6 100 250-500 8 M customer accounts 4 hours 36 6 TB 50 K Contracts, 10 K Utility 8 4,620 225 235 140 10 minutes 95 2 servers Customers Manufacturing 9 2458 259 218 4.5 hours 3 servers 160 M transactions, 80 M 1-3 hours for 2 servers, 8 Logistics 12 280,000 20,607 1208 600 25 7.2 TB packages all 5 models total cores 9 M transactions, 2 M 2 servers, 8 Logistics 16 80,000 7,373 75 300 5 hours 25 2 TB shipments total cores 3.5 M Line Items; 2.5 M Distribution 13 1500+ 200+ Customer SKU; 150,000 < 12 hours 24 SKUs; 75,000 customers 100 per store * 64 per store - 158 M aggregates based on 16 servers, 64 Retail 8 1,500 stores = 1,500 stores = 300 200+M transactions; 250,000 < 24 hours 24 65 TB total cores 150,000 96,000 SKUs; 1,500 stores Retail 10 115 26 21 85 2.5 M DC Level Transactions 1.5 Hours 24 2 servers 1.5 M Store Level Retail 14 405 138 47 105 1 Hour 24 2 servers Transactions 1.4 M Customer Level Retail 6 173,489 43,905 1386 619 2 hours 36 2 Servers Transactions 6000 Suppliers, 600,000 Distribution 7 9000 150 200+ 200-300 2 hours 36 1 TB 2 Servers Products, 350,000 Customers 7.0 M Line Items, 3.4 M 2 servers, 3 Distribution 12 12,220 2,436 175 544 Orders, 90 K SKUs, 50K 4 hours 27 total cores Customers Ship-To 1 m Line Items, 7 M work Manufacturing 13 2495 259 220 247 4 Hours 48 3 Servers ordersAcorn Systems, Inc. 36
  37. 37. Customer SuccessAcorn Systems, Inc.
  38. 38. Industry Success in Profit Improvement Distribution Industry Solutions  Global 2000 Distributor • Activity-Based Costing  Product Profitability: Pinpoint Unprofitable SKUs • Branch or Organizational Profitability  Profit Improvement: $10M annually • Channel Profitability • COGS Standard vs. Actual Product Cost Manufacturing • Cost-to-Serve Analysis • Customer Profitability  Chemical Manufacturer • Customer Segment Profitability  Operational Improvement: Optimize Logistics Process • Fact-based Contract Negotiations  Profit Improvement: $15M annually • IT/Shared Services Costing and Chargeback • Line of Business Profitability Financial Services • Market Basket Analysis  Fortune 500 Financial Services Company • Menu Based / Product and Service Pricing  Customer Profitability: Identify True Cost • Operational Efficiency (process changes,  Profit Improvement: Over $600M annually benchmarking, and capacity utilization) • Pricing • Product/Service/Channel Operational Decisions Retail • Product Profitability  Major Retail Grocer • Product Unit Costing  Supply Chain Profitability: Simulate Operational Scenarios • SKU Rationalization  Profit Improvement: $10M annually • Sourcing/ Merchandising Decisions (import/export, category management) • Supplier Profitability Consumer Products • Supply Chain Costing and Profitability  Multinational Consumer Products Company  Product Profitability: Analyze Net SKU Profitability  Profit Improvement: Over $1M annuallyAcorn Systems, Inc. 38
  39. 39. About AcornAcorn Systems, Inc.
  40. 40. Profitability. Cost Management. Optimization. It’s All We Do. Acorn provides the complete solution to maximize business profitability. Methodology Advanced Consulting Targeted Technology Services Solutions We develop pragmatic We then instantiate Acorn’s professional Our targeted methodologies for the theory and services teams applications focus dealing with very methodologies into ensure that your on a specific industry complex, data intensity advanced, implementation will be and/or business issues, and bring comprehensive successful. Acorn initiative, and include clarity and focus to the technology. provides services that enhanced analytic, management decision- fit your defined simulation, and/or user making process. requirements through- interface capabilities. out the project lifecycle and beyond.Acorn Systems, Inc. 40
  41. 41. Focus on Value We strive to deliver value to our clients through cost and profitability performance measurement and improvement. Maximize Increase Decrease Profit Operational Costs How We Accomplish Our Goals: Efficiency  Unique Approach Leverage a unique approach to cost and profitability performance measurement that combines a unique methodology with a packaged software solution  Accurate Information Provide our clients with accurate cost and profitability data that validates to their financial and business transaction systems at the lowest levels of detail  Efficient Engagements Save our clients time and money by delivering information faster and with fewer resources than traditional approaches require  Sustainable Solution Establishing a solution that the client can leverage on an on-going basis to generate detailed cost and profitability information to measure success and drive continuous improvement efforts  Value Identification Work with our clients to analyze the information generated to identify the value and quantify the benefits that can be realized  Value Capture Work with our clients to devise the strategy and execution plan for capturing the value that has been identifiedAcorn Systems, Inc.
  42. 42. Acorn Systems’ Clients FINANCIAL SERVICES RETAIL & CONSUMER PRODUCTS WHOLESALE,DISTRIBUTION & LOGISTICS MANUFACTURING & OTHER INDUSTRIES Acorn Systems, Inc.
  43. 43. Key Takeaways  Net profit provides more value and insight to business performance than gross profit  Cost to Serve analysis delivers comprehensive, accurate, and actionable net profit details  Acorn’s capabilities provide a flexible, scalable, and automated solution to generate granular cost to serve based net profit results across all relevant business dimensions  Putting Acorn results in the hands of decision makers allows them to make decisions that can be transformative for a business and to measure success over timeAcorn Systems, Inc. 43
  44. 44. This slide deck is part of a recorded webinar. To view the FREE recording of this entire presentation and download the slide deck, go to www.senturus.com/recorded-webinars.php You will find this—and many other recorded webinars-- under the “IBM Cognos Office of Finance Solutions: TM1, EP, Controller, FSR”Acorn Systems, Inc. 44
  45. 45. Next Steps: Contact Us STEVEN RASCH VP PROFESSIONAL SERVICES ACORN SYSTEMS 800.982.2676 srasch@acornsys.com For more information: www.acornsys.com www.senturus.com GREG HERRERA CHIEF EXECUTIVE OFFICER SENTURUS 888.601.6010 gherrera@senturus.comAcorn Systems, Inc.
  46. 46. Contact Senturus Senturus, Inc www.senturus.com sales@senturus.com 888-601-6010Acorn Systems, Inc.
  47. 47. Acorn Systems, Inc.47 47

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