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Intro to Profitability & Cost Management

www.interrel.com

Disclaimer

• These slides represent the work and opinions of the presenter and do not constitute official positions of Oracle or any other organization.

• This material has not been peer reviewed and is presented here with the permission of the presenter.

• This material should not be reproduced without the written permission of interRel Consulting.

What is PCM?

Profitability & Cost Management Cloud Service (PCM)

• Do you currently run allocations?• Is this an easy process?

• Black box? Difficult to trace and understand?

• Manually intensive?

• Not able to do the allocations you would like because you don’t have a good solution?

Profitability & Cost Management Cloud Service (PCM)

• Are you as profitable as you could be?• What percentage of my customers, products, channels, etc. are driving most of my

profitability? Which ones are unprofitable?

• What proportion of resources to my customers, products, channels, etc. consume?

• What are my true costs to provide services or complete a business process?

• Can you answer these questions? How long will it take you to find the answers?

Profitability & Cost Management Cloud

• Supports simple to complex allocation requirements

• A user-driven profitability and cost management application

• Business users create, update and maintain cost allocation logic (unburden the GL and perform cost allocations here) and profitability models

• Simple interface to create allocation rules

• Full transparency of allocation logic and rules

• Comprehensive audit trail

• No tech required

• Important actionable intelligence

is possible• Who is my most profitable customer?

• What is my least profitable product?

The Solution! Oracle Profitability & Cost Management Cloud Service

PCM

Business Focused

Transparent

Cloud

No scripting

Fast

Simple to Complex

Allocations

Now part of 4 Main Business Processes

• Shift away from cloud services to 1 solution that supports 4 main business processes

• This does mean that except for legacy customers, the products will not be sold separately• What was a “product” is now just a “business process” inside Oracle EPM Cloud

1. Planning: Planning, Profitability

2. Financial Close: Financial Consolidation, Account Reconciliation, Tax Reporting

3. Narrative Reporting: Narrative Reporting

4. Enterprise Data Management: Enterprise Data Management

• https://www.oracle.com/applications/performance-management/products.html

New Names of EPM Products (“Business Processes”)

• PBCS/EPBCS–> Planning• Narrative Reporting –> Narrative Reporting

• ARCS –> Account Reconciliation

• FCCS –> Financial Consolidation and Close

• PCMCS –> Profitability and Cost Management

• TRCS –> Tax Reporting

• EDMCS –> Enterprise Data Management

Part of Oracle EPM Enterprise

ERPs Data Warehouses Unstructured Data Excel

• Custom Plan Types• Workforce• Projects• CapEx• Scenario Modeling• Financials• Freeform (Essbase)• Groovy

PLANNING

• Consolidation• Account Reconciliation• Task Management• Supplemental Data• Advanced Consolidation• Transaction Matching• Tax Reporting

FINANCIAL CLOSE

ENTERPRISEDATA

MANAGEMENT

Ad Hoc Management ReportsNarration Mobile

Profitability & Cost Management

EPM Enterprise Cloud

• You can create as MANY applications of EACH Business Process as you need.• 10 Planning, 2 Financial Consolidation & Close, 3 Tax Reporting, 5 Narrative Reporting, 2

Account Reconciliation, and 4 Profitability applications... no issues.

• Go for it... all included in the pricing for EPM Enterprise Cloud

• What, six months later you realize you need 5 more Planning and 2 more Narrative Reporting?

• Contact Oracle and they’ll give them to you... all still included in the base price of EPM Enterprise Cloud.

• Want Disaster Recovery environments... they are also included with same terms and conditions as the additional, old SKU for this service.

• All advanced/premium features are included in the EPM Enterprise Cloud• E.g. Groovy rules, advanced consolidations, transaction matching, disclosure management,

Intelligent Performance Management, Free Form Planning (Essbase)

What’s the price? How much does this cost?

PCM is built on same EPM Cloud Framework

• Similar / same tools for administration and end user

• Same file formats for building dims

• Same tools to load data (Data Management, Smart View)• Import / Export

• Same tools for backups and automation

• Underlying Essbase

• Smart View, FR, Narrative reporting

• Similar Dashboarding capabilities

• Coming soon – complete EPM Cloud Platform parity

Who Needs this? Everyone

• Product, customer, channel, profitability

• Management allocations

• IT Service costing & chargeback

• Shared services allocations

• Cost transparency

• Operational transfer pricing• Moving around revenues for tax advantage

What PCM Does Well

Visibility

Access to the right data

Business Ownership

Transparency

• Prebuilt analytics

• Culture of accountability

• Operational data outside of G/L

• Integration with the cloud

• Purpose built rule engine

• What if & scenario analysis

• Traceability & rule balancing

• Step by step insight

PCM UI

PCM Simplified User Interface (“SUI”) Home

• Tailored for end users • Dashboards

• Intelligence

• Reports

• Tools

• Academy

• One card for Admin• Application

• Rest of the admin tasks are under Navigator menu

• Recently accessed artifacts / favorite artifacts

Navigator Menu (hamburger | pancake)

• Navigator menu to get to admin and user tasks

• Definitely will be used by the Administrator

How Security Works in PCM

• What users can see and do is based on security

• Two levels of security• Access Control

• User is granted 1 of 4 predefined roles that control access to PCM features

• Role assignment

• Data Grants and Groups

• Admin can create native groups

• Users can be assigned to groups and/or data grants

• User is granted specific access to data using Data Grant (only see a specific set of data)

How Security Works

• 4 Roles• Service Administrator

• Define and manage users• Create and delete applications

• Power User• Define and execute data

and metadata loads• Define and execute rules

• User• Define reports and other

analytics• View but not edit or run rules

• Viewer• View only reports and

analytics

Allocation Rules - Create POVs

Steps to Create a Rule

Create the POV (or

select the POV if it already exists)

Create ruleset (or add rule to

existing rule set)

Define Description

Define Source

Define Destination

Define Driver Basis

Define Offset

Define Rule Context

Execute!

Point of View (“POV”)

• Data sets are associated with Points of View

• Supports having different drivers / assumptions across different periods, scenarios, or versions

• Can always go back and view allocations based on definitions at a prior time

Copy POV

• You can also copy the POV

• Choose the Source and Destination POV

• Choose to copy over rules (all rules are copied)

• Choose to copy over data• Input data

POV Status

• There are 3 Statuses for a POV:• Draft — Build or edit the application, and

generate dynamic reports.

• Published — View the application, and generate dynamic reports

• Archived— View the application and generate dynamic reports.

• The status can be changed back to Draft at any time.

• No calculations when a POV is in a Published or Archived status.

Global Context

• If all rules, or a majority of rules, use the same member, set and use Global Context

• Global context applies to ALL rules by default

Why Rule Sets?

• Rule sets group rules together

• Improves efficiency in rule execution

• Drivers or other necessary data can be created before subsequent rules are executed

Create a Rule Set

• Navigate to the Administer >> Rules section

• Define rule set name

• Description

• Sequence – what order should the rule set run

• Enabled – you can “turn off” and “turn on” rule sets

• Execution option: Serial, parallel, iterative (with # of iterations

• Use Global ContextRules

within rule

set

Good rule description is important!

• For running system reports and audit reports

Rule Definition - Source

• Define the intersection of the amount to be allocated

• Member selection to define members in each dimension

• Select all of the source elements to define the source value to allocate

• Could be a number of accounts, number of members to group the value

• ASO cube in the background which dynamically calculates to amount of the identified intersection

• Filter specific members are based on UDA or Attribute

• Options to split the allocation if you run into performance issues for the rule

Rule Definition - Destination

• Define the intersections of the amount to be allocated

• Where should the data “land”

• Member selection to define members in each dimension

• Define member to allocate “to” e.g. Total Products

• Though the final result will be loaded to level 0 products based on the driver basis

• Always allocates to level 0 members of the parents selected in member selection

Rule Definition – Driver Basis

• Driver basis

• You can use intersections in the database to define the driver basis

• “Square Feet” or “Units” or “Revenue”

• Member formula to calculate a driver though watch out for performance (consider custom calculation so the calculation is calc’d and stored)

• You can also upload allocation percentages and use those

Rule Definition - Offset

• Define the offset intersection

• Put the negative $ into a different location

• Do you want to take the $ out of the source?

• Source dollars put into destination (keeps it simpler)

• Source dollars go to zero

• Or alternate offset location

• Negative numbers to create the offset

• Once $ have been sent to Alternate Offset Location, you can no longer allocate

I’ll leave

offset

location

as Source

Save!

• Click the Save icon

• The rule number will be assigned when you execute the rule the first time

Copy Rule

• Copy Rule provides a quick way to copy a rule definition

• Then just update the required elements

• Speeds up rule creation when only a few selections change between rules.

What if we allocate based on a different driver?

• Can compare side by side…

Allocation based

on Sq FtAllocation based

on revenue

Run the Rules

▪ Navigate to the

Calculation screen

(Manage Calculations)

▪ Choose POV

▪ Run all rules, range of

rules, or specific rule

▪ Clear calculated data

(physical clear)

PCM Supports Custom Calculations as well

• You can build custom calculations through a similar UI

• E.g., Rates * Units, Avg Sal * Headcount

• Recommended whenever the calculation is used as a driver

• So that PCM only calculates once

• Will be much faster than building as a member formula and then referencing the member with the member formula

Rules Express Editing

• Perform actions on multiple rules at once (e.g. change driver assignment)

Rules Express Editing

With the Rules Express Editor, you can:

• Edit rules

• Members can be added or replaced

• Copy rules to a different rule set or a different POV

• Enable or disable multiple rules at one time

Rules Outline

• Displaying calculation rules as a hierarchy allows you to:

• Create a rule outline

• Quickly find rules

and rule sets with

in the hierarchy

• Quickly edit names,

descriptions, and

sequence values

for rules and rule sets

Did the Allocation work?

Job Library

• View calculation status

• Select any line and view some of the details

• Success is good

• Success with Warnings = nothing was allocated (no source data or driver data)

Capture Debug Scripts

• Option in the Manage Calculation screen to request that the Essbase commands issued to calculate each rule be written to files in File Explorer, one file per rule

• Provides quick access to Management Ledger calculation scripts for troubleshooting calculation issues

• Find the scripts in Application >> File Explorer

PCM Reports

PCM provides 5 reports:

• Program Documentation – Provides information about rule sets, rules and rule definitions. Any descriptions are also listed so including the driver basis in the description is recommended.

• Dimension Statistics – Number of dimension members, number of level 0 members, and number of hierarchy levels for each dimension in the current application.

• Rule Data Validation – Source and driver data targeted for each selected rule. If the intersection count is greater than 1000, only the first 100 intersections are displayed. If either Source Data or Driver Data is not selected, that portion of the report is blank.

• POV Statistics – View statistics for POV (new)

• Execution Statistics – Runtime statistics collected for the selected calculation job

following the end of the job.

Rules Balancing and Trace Allocations

▪ Where to analyze? Any of the supported EPM reporting and

analysis interfaces

Now ready to analyze

Profit Curve

Analysis Views

Financial Reporting

Smart View

PCM User interface

•Trace allocations, manage queries, system reports (Data Validation report)

Model View

• Model View – combination of dimension members that define a slice of the model

• Use models to focus on a slice of data / specific section of data

Rule Balancing

• View the high level in and outs for rule calculations

• Want to see net change of zero

• Verify that all of the $ that were supposed to go out, actually went out

• Total $ should still be the same

• Can customize this view and focus on members using Model Views

View the input amount (at

NoRule), allocation in and out for

a rule, net change (which should

be zero) and the ending balance is

the same I’ll select a model

view

Rule Balancing

• Rule Balancing Columns

• You can hide / show desired columns

Maybe we should get out of the Computer Services business?

• Everything balances

• So how do the numbers look?

• Who are the contributors?

• Who are the distractors?

Smart View

• Common Microsoft add-in for Oracle EPM solutions (both on premise and Cloud)

• Perform analysis and create highly formatted reports

• Free form ad hoc

• Create Excel formatted reports

• Often used by power users and analysts who like to work in the Excel interface

• Integrate Oracle EPM System data to Word, PowerPoint, Excel, and Outlook

Smart View Analysis

• View the input $, allocated in and out $ and the net balance $

Input data

Allocated

data to Sales

entities

based on Sq

Ft Allocated

data out of

source

entities

Net

Change

Ending

BalanceDriver

used for

allocation

Allocate In / Allocate Out

• Use these “ins and outs” to create journal entries by rule to load into other systems

See the impact of each allocation rule

• NoRule (input), R0001(rule one), R0002 (rule 2), …, Rule (final $)

Once we create the rest

of the rules, we can see

the impact of each rule

Zoom Out and View Across the Dimensions

• Leverage the hierarchies of Essbase

• Zoom in and out across dimensions

Trace Allocations in the UI

• Create a view, focus what you want to trace

• Drill in to see where the dollars went

• Change layout

• Some users may prefer this visualization over Excel

Traceability View

• Define the Trace Parameters• POV

• Model view (or slice of the data)

• Tracing dimension (dimension to zoom into)

• Trace Forward option

• Use generations – you can pick how far you want to zoom down (depends on how many members/gens)

Traceability

Embedded Analytics

Embedded Analytics – Visibility into PCM

• PCM provides a variety of built-in analytical features: • Analysis Views – the basis for dashboard visualizations, KPIs and Profit Curves

• Queries – Filtered analyses of the data

• Dashboards – Tell the story of profitability

• Financial Reporting – Highly Formatted Reporting

• Trace Reports – Trace the allocation backwards and forwards based on selections

• Rule Balancing Report – shows the ins/outs and balance amounts for the allocations.

• With all these embedded analytics, there is no need to go to external tools, but there are limits so a reporting cube helps.

Analysis Views

• Produces a simple table of data• One dim in the row and column

• Data slice

• Basis for dashboards and profit curves

• Accessed using the Intelligence card>>Analysis Views tab

PCM Queries

• UI to create saved queries

• Can use allocation rule set and rules definitions to define the members to be used in the Smart View query

• Launch query from Workspace UI and view results in Excel via Smart View

• Use queries to help clear data

Create a Query

• Under Reporting, navigate to Manage Queries

• Select Actions >> Create Query• Must be at least an Power User to create

queries

• For Description, enter Application and Name for the query

• Under Program Context, select whether to use global context, rule set context or rule

• Optionally check Use Program Context and then select the dimensions and members to use

• Click Finish

Run a Smart View Query

• Under Reporting >> Manage Queries

• Select the desired query

• Click Execute Query

• This will open up Excel and Smart View and display the query

Launch Queries from Rule Balancing Screen

• You can launch predefined query integrations from the ML Rule balancing screen

• Launch points are defined as hyperlinks

Dashboards

• Different than PBCS (may eventually be PBCS dashboards)

• Based on Analysis Views

KPI

• Score

• Rank

• What rank is my store?

• What quartile is my store?

Profit Curves – Overview

• Easy to understand visualization of a population of Profit objects• See the whole population at once

• See the distribution of winners and losers

• Enable a lay person to analyze profitability

Profit Curves – Category Analysis

• Now you can see which sales reps contribute the most to the profit for all customers.

• The Category Analysis provides more in-depth analysis options providing the user the opportunity to act upon the information

Profitability & Cost Management Dimensions

Dimensions

• PCM will create an ASO database in Essbase

• Each database has an outline

• Database outline provides the data structure for the model via dimensions

• Dimensions in the Essbase outline are hierarchical

• Data is stored at dimension intersections

• Members can include calculations via member formulas

Types of Management Ledger Dimensions

System dimensions

Balance

Rule

POV dimensions

Year

Period

Scenario

Version

Business dimensions

Product

Entity

Customer

Geography

Account

Attribute dimensions

Product type

Customer type

Any attribute about another

stored dimension

POV Dimension

• POV dimensions• Must have at least one

• Can have up to four (e.g. Year, Period, Scenario, Version)

Business Dimensions

• Dimensions that you will allocate and report on

• Good to create an “All XXX” or “Total XXX” member under the Dimension Header

• E.g., All Products, Total Customer

Alternate Hierarchies

• Alternate hierarchies are supported

• Useful for reporting

• Useful for allocations

• Create alternate rollups of grouped members for reference in rules

• PCM allocates to level 0 of parents so alternate roll ups can make creating rules easier when existing dimension structure does not allow for the parent/child relationship

In my example, I

grouped sales dpt

under one parent

and non sales dpt

under a different

parent

System Dimensions

• System Dimensions are created when the application is created and cannot be edited.

• While the user can enter any name for the Rule and Balance dimensions, it is recommended to use Rule and Balance so it is clear which dimensions everyone is talking about.

• Rule (dynamic hierarchy)

• Balance (dynamic hierarchy)

• Only load data to “NoRule” and “Input” members; all others are used for calculation purposes

Balance Dimension

• Users can add data to the Input member of Net Balance

• The remainder of the members reflect inputs and outputs determined by rule sets and rules

• Adjustments are the result of driver calculations

• Allocations are the result of rule allocations

• Offsets result from rule offset definitions

• Data held in intersections with these members is visible in the Rule Balancing screen along with ad hoc via Smart View and reporting in Financial Reporting

Rule Dimension

• 5000 Rule members are created to store the results of a rule’s calculation logic

• To view the rule name, you must view in the PCM UI• Current version does not put the rule name as the alias

• The issue right now is that a rule can vary across POV (the same rule number does not persist across the POV)

• Benefit of the current functionality – Great flexibility in the ability to change / update rules across cycles

• Consideration is that you can’t view the rule name in reports or analysis

• Also can’t group rules to view subtotals with out of the box functionality

• Workarounds discussed later until this functionality is supported

• Enhancement coming to view alias in Excel – Smart View

Dimension Management

• Dimensions can be manually maintained in the SUI

• Navigate to the Dimension Management card

• The dimension can be downloaded to Excel – the file can then be updated and uploaded using a different screen. (more later)

• Members can be added, deleted or moved (reparented)

• Member properties can be edited

• Good for one or two simple changes

Profitability & Cost Management Loading Data

Methods to Load Data into PCM

Data Management

(comes with subscription)

FDMEE

(requires separate licensing)

Essbase native format

Smart View Submit

Data Management

• Data integration tool that provides a single, systematic process for loading data from disparate systems into target analytical applications

• FDMEE “Lite” (Financial Data Quality Management Enterprise Edition)

• ETL for the business user – both data and metadata

• Provides visibility, traceability, integrity, and verification processes

• Mapping capabilities by end users

• Cloud targets and sources + File based

• Drill through

• Fully automated with EPM Automate

• Comes with your EPM Cloud subscription

Where Should you load data?

• Load to No Rule and Input members of Rule and Balance dimensions

How to Get Data out of PCM

Data Management

Smart View

Queries

• Export query results will put in File Explorer

Conclusion

Do you need PCM?

• Do you currently run allocations?• Is this a really difficult / confusing / frustrating/time consuming process?

• Black box? Difficult to trace and understand?

• Manually intensive?

• Not able to do the allocations you would like because you don’t have a good solution?

• Do you have difficulty answering questions like these?• What percentage of my customers, products, channels, etc. are driving most of

my profitability? Which ones are unprofitable?

• What proportion of resources to my customers, products, channels, etc. consume?

• What are my true costs to provide services or complete a business process?

Profitability & Cost Management Cloud

• Supports simple to complex allocation requirements

• A user-driven profitability and cost management application

• Business users create, update and maintain cost allocation logic (unburden the GL and perform cost allocations here) and profitability models

• Built-in rank and order, drill to details

• Full transparency of allocation logic and rules

• Comprehensive audit trail

• Important actionable intelligence

is possible• Who is my most profitable customer?

• What is my least profitable product?

Part of Oracle EPM Enterprise

ERPs Data Warehouses Unstructured Data Excel

• Custom Plan Types• Workforce• Projects• CapEx• Scenario Modeling• Financials• Freeform (Essbase)• Groovy

PLANNING

• Consolidation• Account Reconciliation• Task Management• Supplemental Data• Advanced Consolidation• Transaction Matching• Tax Reporting

FINANCIAL CLOSE

ENTERPRISEDATA

MANAGEMENT

Ad Hoc Management ReportsNarration Mobile

Profitability & Cost Management

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