DOAG 2012 Applications. Using a KPI driven approach

Transcription

1 DOAG 2012 Applications Optimizing Oracle E-Business Suite Using a KPI driven approach May 8, 2012

2 Agenda 1. Questions on C-Level 2. Example KPIs 3. Assessment of KPI Results 4. How to build KPIs

3 1. C- Level Questions on Business Processes 3

4 The importance of ERP to the business process Enterprise Resource Planning systems have become the backbone of business administration tasks Business processes are tightly aliened with the concepts and capabilities of the chosen ERP system in use. As much as we pretend it would be the other way round. So utilizing the ERP systems functions in an optimized fashion is a key success factor for corporations. Slide 4

5 What are the concerns of managment 0n ERP Examples of Questions that C-level executives ask concerning their ERP supported business process: I have my Financials and some Finance KPIs but, how are my (ERP based) business processes performing? how are my different entities / locations performing? are there hidden risks in my processes that might surface some day? how do other companies run their processes? Slide 5

6 How KPI`s can help managment KPIs calculated from business process / configuration data can: Provide an aggregated view just right for C-level discussions Indicate potential for improvement Support / weaken arguments Help to monitor improvements / objectives Highlight unidentified or underestimated risks During our audits we see that most companies have only implemented a rather basic use of KPIs. Slide 6

7 ERP process efficiency life cycle Stabilität und Efficiency Nutzenrealisierung Post implementation phase Roll-out Training of users Lower than expected ROI Inconsistent implementation / roll out Non harmonized processes Inefficient process an controls Sustaining process harmonization and realization of scale effects. Ongoing optimization and alignment of the harmonized business process Efficient use of ERP functionality Business control over the change management process. Disharmonizing Return to decentralized business processes Increasing use of custom processes and spreadsheets Increasing number of workarounds Lack of control over decentralized business processes SAP Potential Management Efficiency März 2012 Folie 7

8 Model for optimized business process management (BPM) Corporate & BPM Objectives Analyze Organization Business Control & Monitor Process Design Control Implement Implementation Slide 8

9 2. Examples of interesting KPIs 9

10 Example 1 - General Ledger Metric Potential Impact and Root Cause Number of Days taken to close a period after period end This KPI measures how promptly a period is closed after the month end, where the closing date is the date when the GL period was closed. The number of days taken to close the General Ledger can be impacted by the following: days taken to close the respective sub-ledger periods; number of manual journals booked; and lack of automation in closing activities (i.e., concurrent programs that must be manually initiated by the end user) ATVI Comparison to other clients Experience: 5 days 34 days 38 days Low ATVI High 10

11 Example 2 - Procure to Pay Metric Potential Impact and Root Cause Invoices on hold This KPI measures the number of invoices that are put on any kind of hold during the period as compared to total invoices approved during the period. There are various reasons for an invoice to be placed on hold, but the majority relate to exceeding the AP tolerances established during the matching process. In such instances, this can be an indication that the supplier is not sending the correct quantities or billing incorrectly. Additionally, it can indicate that there are manual errors when the invoice is being created. A high proportion of invoices on hold would impact the efficiency and timeliness of processing the transactions for payment. Experience: 1 % 14 % 47 % Low ATVI High 11

12 Example 3 - Procure to Pay Metric Potential Impact and Root Cause PTP - KPI 02-PO Approval Time This KPI measures the average time (in days) it takes for a PO to be approved after it has been created. This KPI gives an indication of the efficiency of the procurement process. If the PO is not approved, the system will prevent the PO from progressing in the procurement process, which in turn may impact the supply chain. A high proportion can be an indication that management has too stringent rules for PO approvals. For example: Low valuepos require approval; There are several layers of approval; or Limited individuals (e.g., small buyer group, one controller) have authority to approve, thereby creating backlog of POs. Experience: 1.6 days 7 days 38 days Low ATVI High 12

13 Example 4 - Order to Cash Metric Potential Impact and Root Cause Proportion of orders booked not using the price list This KPI measures the number of orders booked which do not utilize a price list or which differ from the price list as a percentage of total orders. This KPI focuses on the ability to override as well as on maintenance issues which may exist in the price lists. Specifically, if the price list ID is empty it might indicate that the company is not using the price list. The ability to override is controlled by the Enforce List Price configuration for each transaction type. If this configuration is disabled, it allows edits to the listed price on the sales order form. This can indicate a potential issue on the quality of the price list causing inefficiencies further down the process or potential financial losses. Experience: 15 % 82 % 90 % Low Average High ATVI 13

14 Example 5 - Order to Cash Metric Potential Impact and Root Cause Proportion of customers with a credit limit different from similar customers This KPI measures the number of customers with different credit limits than that defined in the assigned profile class as a percentage of total customers. The KPI gives a first indication of the consistency in the set up of the credit checks and the adherence to the company s credit policies. Note that credit checking dependencies include credit limits that must be set at 3 different levels: (1) customer profile class level; (2) customer profile level; and (3) order type. For any given customer, the credit check configuration will default to that of the customer profile class assigned. However, the credit check can be overridden at the customer level. ATVI Comparison to other clients 0 % % Experien Low High ce: High ATVI 14

15 Example 6 Inventory Metric Potential impact and root cause Average days from order to shipment This KPI gives management an insight into how long it is taking the organization to fulfil an order. This KPI will highlight how quickly the organization is able to fulfil customer sales orders on average. The KPI may be an indicator of potential inefficiencies in the order management and/or the inventory sub-processes (i.e., pick/pack process, back orders, etc.) 15

16 Example 7 - Inventory Metric Inventory organizations allowing negative balances This KPI gives management an insight into whether inventory organizations are allowed to have negative balances. Potential Impact and Root Cause This KPI will highlight the proportion of inventory organizations where the Allow Negative Balances configuration is enabled. Negative balances can be created if shipments are processed before receipts. A high KPI value indicates that the organization allows inventory items to become negative when there is not enough inventory on-hand. Experien 0 % 13 % 26 % ce: Low ATVI High 16

17 Example 8 - Fixed Assets Metric Potential Impact and Root Cause The number of assets where the automatically calculated depreciation has been manually overridden This KPI measures the number of assets where the depreciation expense has been overridden through use of the Oracle "Depreciation Override" functionality. Oracle provides an option for end-users to correct errors or update financial information for a single asset or a group of assets. Users have the ability to override depreciation information for an asset while adding it using the "Detail Additions" process. A high number of manual depreciation overrides could be an indication of process inefficiencies that require manual interventions. Experien 0 14 xx% Low ATVI High ce: 17

18 3. Assessment of KPI results 18

19 Business Process Managment model (BPM) Corporate & BPM objectives Analysis Organization Business Control & Monitor Process Design Control Implement Implement Slide 19

20 KPI is not in line with expectation what to do? Corporate & BPM Objectives KPI not as expected Analyse Issues with business transactions Newly identified risk Issue with system setup / business process design Caused by strategy Implement Control & Monitor Design Objectives Implement Assess controls Assess risk Management Assess business process / system configuration Assess strategy Control & Monitor Recheck effect of measures / monitor ongoing controls Slide 20

21 4. How to build KPIs 21

22 How to calculate KPIs in Oracle EBS KPIs can be calculated using different tools. Here is a selection of approaches: 4.1 Use Oracle Standard Reports and calculate manually 4.2 Use R12 Standard Dashboards 4.3 Use Oracle GRC Transaction Controls 4.4 Use Oracle Discoverer 4.5 Use Oracle BI 4.6 Use Custom Reports within EBS 4.7 Use Database scripts and external tools Slide 22

23 4.1 Calculate KPI with EBS standard reports 1 Example calculation invoice register on hold KPI KPI = # Invoices on hold / #total Invoices Slide 23

24 4.1 Calculate KPIs with standard reports 2 Example calculate invoice register on hold KPI Advantages: End User can calculate KPIs easy and on their own Great variation in all business areas Disadvantages: Time consuming Prone to errors Results not multi user accessible This approach is a solution for (ad hoc) one time analysis of interesting or critical topics. Slide 24

25 4.2 Calculate KPIs with EBS R12 dashboards Example Sourcing Management KPIs New in R12: 6 dashboards, 49 KPIs Slide 25

26 4.2 Calculate KPIs with EBS R12 dashboards Advantages: Out of the Box Mostly done real time Multi-User Capable Disadvantages: Not very flexible This approach should be the first choice to be utilized because it comes out of the box with every Oracle EBS R12 installation. Slide 26

27 4.3 Use Oracle Transaction Controls Governor The Oracle Transaction Controls Governor is a component of the Oracle Governance Risk and Compliance Controls Solutions package. Slide 27

28 4.3 Use Oracle Governor Transaction Controls Miscellaneous payments The share of Miscellaneous payments can be calculated from the number of all payments / Miscellaneous payments Advantage: You can choose from a library of controls and critical business objects. Slide 28

29 4.3 Use Oracle Governor Transaction Controls Advantages / Disadvantages Advantages: Efficient analysis of transactions Flexible filters for transactions Library of transaction objects objects can be custom-defined. GRC can do a lot more for you than just KPIs. Disadvantages: Cannot calculate KPIs directly Not multi-user capable when speaking of KPIs as they have to be calculated manually. This approach is the best solution for transactions that have been identified for monitoring, but also one-time manual KPI calculations are reasonable. Slide 29

30 4.4 Use of the Oracle Discoverer Advantages / Disadvantages Oracle Discoverer is a database tool that is integrated with spreadsheet programs. It contains a library of business objects, but is also capable of extracting data using SQL Code. Slide 30

31 4.4 Use of the Oracle Discoverer Advantages: Can calculate KPIs directly Fully flexible SQL code can be used Predefined objects are available Multi-user capable Disadvantages: High manual effort to set up KPI workbooks Can cause massive runtime on database of production environment This approach is a good solution for ad-hoc testing of KPIs, data mining and development of new KPIs. From its nature Oracle Discoverer is rather a key user / developer tool. Slide 31

32 4.5 Use of special BPM tools Tools like Oracle BI is the Business Intelligence (data warehouse) solution from Oracle, Hyperion Planning or Oracle Business Activity Monitoring (Oracle BAM) are available. The special tools provide featres like - multidimensional reporting, - dashboard presentation of KPIs or even - Simulation of Business processes. Data from multiple sources can be uploaded and reported seamlessly. Slide 32

33 4.5 Use special BPM tools Advantages / Disadvantages Advantages: Most professional solutions for KPI calculation and presentation High performance (fast) Multi user capable Flexible web reporting, dashboards etc... Disadvantages: Considerable high IT investment and operation cost High investment in configuration ( e.g. ETL Extraction Transformation Load process) BI is the superior solution for the ongoing monitoring of KPIs identified as being business critical, e.g. KPIs form Balanced Scorecards etc... Slide 33

34 4.6 Use Custom EBS Reports to calculate KPIs Of course Oracle reports can be programmed to calculate KPIs Advantages: Fully integrated in EBS Multi user capable Disadvantages: Programming is time consuming Risk of considerable runtime on the production system (less critical if executed on a clone...) Infrequently used solution. Slide 34

35 4.7 Use of SQL scripts and external analysis tools SQL Extraction of Oracle EBS source data is the most flexible but also a complex way of obtaining data and process KPIs requiring both sound technical as well as business know how. An additional analysis tool is needed. Solutions range from MS Access to special tools such as ACL or IDEA and up to custom built applications using large scale relational databases. Slide 35

36 4.7 Use SQL scripts and analysis tools Advantages / Disadvantages Advantages: - Fully flexible in analysing and formatting the content of reports - KPI calculation is independent of EBS sources system - No performance impact on production - Data extracted is frozen and can archived (good for audits ) Disadvantages: - Complex and time consuming to create - Not real-time - Data transfer - Data confidentially risks when using service providers other than auditors Slide 36

37 4.7 Use SQL plus scripts and Analysis tools Example: Utilization for Oracle EBS From our experience of Oracle EBS audits on a global level we have created a set of steadily growing KPIs (approx. 150 by now) over a variety of modules. Due to the need of being able to use the tool on any EBS instance in an SQL extraction / Analysis approach was chosen. Over last years, assignments have been carried out worldwide, including technical KPI calculation support in interpreting results support in creating continuous monitoring controls and reporting mechanisms Slide 37

38 If you stop getting better you stop being good Your Oracle EBS contacts in Germany Daniela Geretshuber Senior Manager Alexander Götz Manager PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft Bernhard-Wicki-Str Munich Phone Daniela.Geretshuber@de.pwc.com PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft Bernhard-Wicki-Str Munich Phone Alexander.Goetz@de.pwc.com 2012 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.