You’re likely familiar with the analogy about averages: ‘If my feet are in the fire and my head is in the fridge, on average, my body temperature is normal.’
‘Global’ views of performance take a broad view of all manner of risks, opportunities, emerging trends and anomalies. Taken independently, these elements hold the key to greater insight.
Look to drivers to improve forecasts
With forecasting increasingly determining operational decisions for businesses, an awareness of changes to the drivers behind the predictions must be constantly maintained.
The key drivers behind most financial forecasts are operational metrics that have a direct mathematical relationship with financial outcomes. Applying changes to those factors is a quick and easy way for FP&A to establish sensitivities and test alternative scenarios.
To gain full impact however, the rest of the business must also be attuned to the value of these drivers.
Real-world cost savings
Here’s an example of exactly how much value there can be in drilling into the drivers behind the numbers:
A retail chain employed facilities management business to carry out maintenance within their stores. The contract was calculated based on previous requirements: number of callouts, types of job, labour and parts required.
Several months into the contract, the facilities management company undertook a review of the work that it had been carrying out. It was largely as anticipated and there were no major issues. They could have just continued on as they were. However, with a focus on margin improvement and cost reduction they decided to take a closer look at the frequent/recurring jobs that involved expensive replacement parts.
On further investigation, it was revealed that there were a lot of washroom faults, almost always leading to a replacement tap. As they continued to explore the data set and drill down further, they could see that the same part was involved in every instance.
Identifying this pattern led to the realisation that there was a recurring fault with an automatic tap. The solution to the fault diagnosed? Replacement batteries.
Armed with this insight, maintenance engineers were able to build scheduled battery replacement into their normal visits. Delving into the detail behind the numbers drastically reduced the cost of parts and delivered a high six-figure margin benefit to the facilities management provider.
Let’s get granular
When the operational activity model behind the core forecast and MI is built on granular data, it becomes possible to drill down to reach valuable insight in just clicks. Working with a system reliant on a nest of spreadsheets blocks this capability.
IBM® Planning Analytics gives you the ability to create the models that drive your forecast from the most granular level of data. The information resides in your ERP system and is accessible from a TM1 cube using the drill-through functionality. This allows you to use the data as the root of your planning and analyse its source through Planning Analytics, without the necessity of loading it all.
With this software, your FP&A team will gain the access and functionality required to allow them to supply more valuable insights that will drive profitable decision making for your business. Get in touch today to take the first steps on your journey to a better informed future.