Profitability and Cost Management v19.08: Updates, Insight, & Impact

Oracle Cloud Service subscribers are used to monthly updates being applied to their Test and Production instances on the first and, respectively, third Friday of each month 

However, not all monthly updates are created equal. 

If you own a subscription to Profitability and Cost Management Cloud, you may have noticed a brand new menu with the latest update that occurred this past Friday, August 2ndMore importantly, the updates in the latest version of PCM are not only on the surface.  

Here is a list of all the announced updates as well as some other insightful findings and their potential impact: 

  1. Custom Calculations Bug fixed
  2. New Model Menu
  3. Designer menu – 2 in 1!
  4. Increased transparency during rule build
  5. Integrated POV Manager
  6. Increased flexibility with Model and Data POV
  7. Launch multiple POV allocations with one click
  8. Embedded search capability in the Execution Control menu
  9. Easy access to Job Library
  10. Recreate instance with all file clear

1.  Custom Calculations Bug Fixed

If you were holding off on applying PCM patches because of reasons pertaining to Custom Calculations issues in prior updates, then this is the update you have been waiting for!  Early testing of the updates in PCM v19.08 indicates that bugs found in past versions in relation to complex custom scripting have been solved.

*Caution:  Each Custom Calculation is unique, and thorough testing is crucial before the scheduled v19.08 update is pushed to the Production instance. 

All software updates should be tested using a data set that can be easily compared with results from a prior version of the software.

Due to several changes to the Essbase database, users may notice differences in the reported values in Execution statistics reports, but the resulting data values should be the same as they were before the latest update was applied. When Test instance calculations results indicate that the cells updated differ compared to Production results for the same rule, users should take it one step further and validate the data values.

2.  New Model Menu

Rule build and maintenance tasks can now be performed in the new “Models” menu.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 1

The new Models menu is aimed at simplifying the way we manage Profitability and Cost Management applications Model data – Rulesets and Rules. All administrative tasks are grouped for a more streamlined interaction with PCM – from building rules to executing them and, finally, monitoring jobs – a simplified menu that reflects a real-life workflow. This GUI update will enhance the user experience as there is no more need to jump between different sections of the menu in order to perform end to end activities.

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3.  Designer Menu:  2 in 1!

Within the Designer tile there are two tabs covering functionality that were previously accessed via two separate menus:

  • the pre 19.08 Rules menu –called Waterfall Setup in the Designer menu
  • the pre 19.08 Calculation Express Editor menu – called Mass Edit in the Designer menu

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 3

Combining the previous two menus is a beneficial move as it groups logical actions within one location.

Users can set up new rules in the Waterfall Setup tab and can perform mass changes such as replace or add selections in multiple rules in the Mass Edit tab.

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4.1  Increased Transparency During Rule Build

Prior to the 19.08 update, in order to check who was the author of a rule, date and time the rule was created as well as last updates, users would have to exit the Rules menu and use the information in the Calculation Rules menu instead. That is no longer the case in the new 19.08 Designer menu. Every rule now displays all this information immediately as it is selected.

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There are also updates to the GUI for the two types of rules in PCM.

4.2.  Standard Allocation Rules

The pre-19.08 Management Ledger Rule editor menu for standard allocations is straightforward and easy to use.

There is a tab for each section, indicating from left to right the proper steps for setting up your model allocations.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 6

Who would have thought it could get better?

Well, in v19.08 it did.

The new display combines the Source and Destination tabs into one. This adds to the ease of use as well as transparency of rule setup.  In one look users can now check the core setup of each rule.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 7

The […] button on the right side of each row/ dimension selection has 3 menu options:

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 8Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 9

  • Users can type in multiple member source selections. Member name validation is not dynamic; it is performed only when saving contents. The menu does not lend itself to bulk copy and paste from a text editor – each record will have to be copied on its unique row.
  • Calculation segmentation – this was a feature that was present in prior versions of PCM. The advice here is to utilize this feature only when requested to do so by Oracle Support, when dealing with large applications. As per the Oracle Admin Guide for PCM, “it activates a way of calculating specific dimensions and levels to enhance scalability with very large models”.
  • Clear [Dimension] Selections – the previous menu’s “X” button (see below) would enable users to remove member selections, one at a time.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 10

The clear selections menu option with the latest PCM release enables users to remove all selections with one click.

4.3.  Custom Calculations

Custom calculations have a similar enhancement as the one in standard allocation rules. The Rule menu, available with pre 19.08 versions of PCM, had two separate tabs, one for the Target set of members and a second one for the custom formula:

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In the 19.08 version, the Target and Formula are now collapsed into one  menu.

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The new displays for both standard allocation rules as well as custom calculations add clarity and ease of use at the same time, potentially decreasing development and troubleshooting time.

4.4.  Wishlist for Future Designer Menu

If I could choose one feature from the pre 19.08 Rules menu that we could layer in on top of the 19.08 Designer menu, it would be the Text Editor.

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A simple feature that is used heavily not just during development, but also during troubleshooting and maintenance.  This feature is, unfortunately, not available in the On-Premises version and it is not part of the Designer menu screen either.

The benefit of this feature is that users can copy information from a text editor or .xls and apply mass updates to a rule for all the dimensions in the Source/Destination/Target screens in one action.

The format of the Text entry is restricted, as each dimension member selection must be typed on a separate line and must include a reference of the dimension that it belongs to.

“Dimension Name”, ”Member Name”

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The format restrictions have not impacted the amount of times users prefer Text Entry to any other type of rule editing menu, especially when they are familiar with the model and the metadata naming conventions.

One other feature that I found useful especially during development or even during initiatives involving structure reorgs, is the selection panel that displays the entire hierarchy for each dimension.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 15

This panel does not appear to exist in the new Designer menu, which means that the user must be familiar with member names or must know all the layers of a dimension. That type of familiarity with metadata comes with time and, as things often change, the user may be constrained to stay constantly up to date with every new modification, as it pertains to updates to the allocation model.

The member selection search box that appears in 19.08 is an improvement, as it is fast and dynamic. However, when multiple selections are required and there is not much familiarity with the hierarchy naming convention, having the entire picture available in one panel is beneficial.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 16

5.  Integrated POV Manager

The POV Manager has been collapsed under the Execution Control menu which ensures a more streamlined management and maintenance.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 17

Users can now create a new POV via the plus sign button.

All other options remain as they were prior to the 19.08 update with one exception.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 18Users were able to manage and update a global context in relation to a POV in the pre 19.08 Rules menu, but this information was displayed alongside the Rulesets and Rules for that POV.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 19

Changing the Global context Dimensions may impact the entire POV set of Rules. Therefore, the configuration of Global context alongside with the POV manager is a logical menu association, part of the 19.08 update.

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6.  Increased Flexibility with Model and Data POV

Profitability and Cost Management applications have always had features that enabled fast spin-off of new “What-If” analysis as well as testing different allocation logic rules on the same POV. Oracle has now taken this existing capability to the next level, by enabling users to leverage any Model POV against any Data POV.

Model POV vs Data POVs:

  • The Model POV represents the reference POV that contains the allocation rulesets and rules.
  • The Data POV represents the POV that contains the data values which must be allocated.

In prior versions of PCM, users had to keep Model and Data POVs aligned. If there was a need to test a new set of rules on a data slice, users had to copy the desired rules in the Data POV intersection to be able to launch allocations.

With the 19.08 update that is no longer the case.

The control over which POV is the Model POV is available in the Run Express Calculation menu.

Users can now point to any Reference POV model and run the respective rules onto any other Data POV.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 21

This “run-time association” is not forcing a rule copy, as it would have in prior 19.08 versions.

Because of this new capability, we could potentially have as single set of rules that could be referenced for all our POV’s, without having to copy them across each Data POV every time we would want the allocations to run.

There is one optional parameter that can be called via EPM Automate in order to leverage this Model POV/Data POV reference capability in automated jobs:

epmautomate runcalc APPLICATION_NAME POV_NAME [DATA_POV_NAME] PARAMETER=VALUE [comment=”comment”] stringDelimiter=”DELIMITER

The [Data POV Name] parameter, when specified, enables this pivoting capability between Model and Data POV. If not specified, the automation will assume that the Data POV is the same as the Model POV.

7.  Launch Multiple POV Allocations with One Click

The new 19.08 menu enables users to launch multiple allocations for different POVs at the same time, while also leveraging the functionality of a reference POV described in the previous section of this blog. Through simple check boxes users can select one or many POVs to run allocations.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 22

The 19.08 update Execution Control panel will indicate whether a POV already contains its own rulesets and rules (Model data), so the users can decide if they want to leverage the existing Model associated with Data POV or a distinct Model altogether.

If a reference Model POV is used instead of the Data POV corresponding rules, the Execution statistics report will record that point-in-time reference.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 23

If users select multiple Data POVs to run at the same time, it is important to mention that if a Model POV is selected as reference, it will be applied to all the Data POVs selected to be calculated, whether these Data POVs have Model information (Rulesets and Rules) of their own or not.

8.  Embedded Search Capability in the Execution Control Menu

When launching a single allocation rule, either during development or troubleshooting, the Calculation menu in versions prior 19.08 would have constrained users to scroll through the mass of rules until they found the rule they needed to launch. In larger models, this situation would soon become frustrating.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 24

With the new 19.08 update, users have the possibility of performing a fast search by simply typing portions of the rule name. A dynamic filter is applied and only the rules with that specific string will become available in the drop-down selection.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 25

9.  Easy Access to Job Library

The Job Library is the location of most PCM related logs (except for the Cloud Data Management and Migration logs). With the 19.08 Model menu, it is easier to access it because it shares the same area as the Run Express Calculation menu. The details on the job library will include the reference POV that was used when executing allocations.

Alex Mlynarzek - PCM v19.08 - 8-5-19 - Image 26

10.  Recreate Instance with All File Clear

The Recreate command within EPM Automate enables users to start from a fresh new environment by deleting the existing application and performing a reset on the instance. This month we have an additional parameter that can be leveraged in order to wipe out any existing artifacts, such as backups and other files, that may accumulate and take up significant space over time.

The data storage allowance from Profitability and Cost Management Cloud subscription was communicated back in 2017 to be of 150 G/instance. This is not a hard limit; going over it won’t grind a service subscription to a halt, but over time Oracle may request clients to update their subscription to reflect an increased storage requirement.

*Caution: if you cannot launch some of the EPM Automate commands in your version of this software, you may be running on a prior month release. Upgrade your EPMAutomate utility through the epmautomate upgrade command to align your version of the automation software with the latest PCM version and access all the latest features and parameters added to the library.

Release Calendar for PCM Updates

On the 1st Friday of the month all Test instance will be updated to the current months’ release level, and on the 3rd Friday of the month the same update activity will occur in the Production instance of either PCM or Enterprise Cloud subscriptions.

If for any reason the testing of the 19.08 patch should indicate there are issues, there is a timeframe of reaction when administrators may request to postpone the rollout of the patch to their Production Instance, until the issues uncovered are fixed.

The deadline for such a request is the Weds of the week when the upgrade is scheduled to be applied to the Production environment. In the case of the August Production instance update, that deadline would be on Weds, August 14th. Such Service Request must contain the details of the POD as well as the business reason why the patch update is requested to be delayed.

Conclusion

There are many exciting new updates in 19.08 – from new interfaces aimed at user experience enhancement to backend optimization and new functionality. The Profitability and Cost Management Cloud is being constantly refined based on client and partner feedback, which is why it is so important to become involved in the Oracle community via the Customer Cloud Connect website.

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Customer Cloud Connect has become the new space for engaging with Oracle Product Management as well as other members of the community, whether partners or clients.

Create an account today and rate existing Enhancement Ideas if you believe they are beneficial to your user base. The more positive votes, the faster that feature will make its way to your Cloud subscription, based on Oracle’s prioritization list criteria.

For comments, questions or suggestions for future topics, please reach out to us at infosolutions@alithya.comSubscribe to receive notifications about new posts about Cloud updates and other Oracle Cloud Services such as Planning and Budgeting, Financial Consolidation, Account Reconciliation, and Enterprise Data Management.  Follow Alithya on social media for the latest information about EPM, ERP, and Analytics solutions to meet your business needs.

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Out-of-the-Box Features: Profitability and Cost Management Cloud Service (PCMCS) – Intelligence and Dashboarding: Traceability

Traceability is the buzz word in any regulated industry. Being able to prove the numbers is crucial to all businesses, but it can be very time consuming and complex for companies that operate across multiple and diverse lines of business with a large pool of Channels, Services, Customers or Products. Shared Services implementations require a clear understanding of the flow of costs.

Where is this cost coming from?

Why have I been charged so much more this month for the same service compared to last month ?

These questions should be easy to answer. Unfortunately, not all profitability analysis technologies are able to support a quick turnaround for providing the required level of detail.

PCMCS has more than one option to easily provide much-needed answers.

The Rule Balancing report is one of numerous out-of-the-box (OOTB) features included with an Oracle Cloud Service subscription able to support data traceability and transparency. For more details about the type of information the report provides and to learn the ease with which it can be set up for your application, review this comprehensive blog post.

Besides Rule Balancing reports, PCMCS OOTB features support transparency within allocations and/or profitability models with Traceability maps.

The focus of the current post is how to access, build, and use Traceability maps.

The order in which I am covering the PCMCS OOTB features is directly related to the Intelligence menu options available in PCMCS.  As a recap, the 6 menu options are listed below:

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 1  1.  Analysis Views (How to create them, customize them and use them here)

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 2  2.  Scatter Analysis (Setup and configuration covered here)

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 3  3.  Profit Curves (Usage and features covered here)

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 4  4.  Traceability

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 5  5.  Queries

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 6  6.  Key Performance Indicators

The contents of this blog are based on the standard Bikes (BkML30) demo application, so you can follow the step-by-step details without having to go through an app setup from scratch. You can load and deploy this application directly from your PCMCS Instance through a couple of clicks via the Application menu using the + / Create button.

Traceability – Intro

The traceability maps, whether in PCMCS or in on-premise HPCM, allow users to graphically visualize the allocation flow. A chosen business segment can be traced through the allocation steps, either backwards or forwards, starting from a predefined point. Images  make up the map of a data point either flowing into the selection of members chosen by an end user to troubleshoot or flowing out of that selection into subsequent allocation steps.

Alex Mlynarzek - Traceability - 5-21-19 - Image 1

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Traceability is a great tool for troubleshooting specific intersections of detailed data such as base level accounts against a specific department. However, when there is a need to identify patterns or troubleshoot allocation results at a higher level, the Standard Profitability (the first on-premise version of the Profitability module) Traceability maps are not geared to handle such requests. In order to perform a high-level analysis in Standard Profitability models, users would have to revert to Smart View or Financial Reports.

Being able to trace data at a summarized level of detail is the key difference between traceability in Management Ledger applications and traceability in Standard Profitability. Management Ledger allows end users to select the level within the hierarchy where they desire to launch or generate traceability, whether base level or otherwise.

Traceability – Setup

The starting point of any traceability map in Management Ledger is Model Views.  If you are interested in learning how to build and use Model Views, spend a few minutes reviewing this prior post.

List of steps necessary to launch a traceability report in Management Ledger applications:

  1. Select a valid Point Of View (POV). The POV must contain data in order to display any traceability results.
  2. Choose a prebuilt Model View – example: IT Support Activities.
  3. Select a tracing dimension which will represent the detail that is the focus of your analysis (Accounts, Departments, Entities, Business Units, Segments, etc). The selected tracing dimension determines the focus or scope of your analysis and will be the one dimension that is displayed at base level detail or any other generation within the hierarchy.
  4. Trace Forward and Use Generation Selection boxes are selected by default.  Not selecting “Trace Forward” allows users to perform a “Trace Backward” action; in other words, figure out how the model arrived at a data value for a selected intersection, rather than how a data value was allocated out from that intersection to other recipienAlex Mlynarzek - Traceability - 5-21-19 - Image 3

A report with the “Use Generation Selection” filter disabled will display the data at the base level for the Trace Dimension (in this example, Entity).

Note: If a message is received indicating the Flash Player version is not up-to-date, check that pop-ups are enabled on the page to allow the download of the required update.

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If the traceability report does not generate any results, check that the allocation rules were successfully completed for the referenced POV. Alternatively, if the POV calculated is successful, but data is not displaying on the Trace Screen, check that the application variables are correctly setup for Current Year, Period, and Scenario. Also ensure the Account dimension maps are specified in the Dimension Settings screen.

Traceability – Display Options and Filters

Traceability screens have 5 display options:

  1. Vertical (Top Down)
  2. Horizontal (Left to Right)
  3. Tree
  4. Radial
  5. Circle

Within the traceability analysis, users can focus on a single rule. The tracing dimension in the previous example is Entity. The tracing dimension is the focus of the traceability reports – following how data was allocated into or out of a base level Entity.

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To isolate a specific rule and separate it in a standalone diagram, click Shift+Enter or select the graphical option on the top of the Rule ID box.

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End users have the choice of displaying the aliases/descriptions of the Entities rather than the code member names. If aliases have not been uploaded in the metadata of the application, then the report will still reference the member name codes, regardless of this choice.

The following traceability report will display how operating expenses are reallocated /redistributed from each support entity (like IT, Facilities, IT, etc.) to the production entities using predefined driver configurations referenced in the Rule box.

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Select the “Trace Forward” filter and keep constant all other prior selections in the initial traceability screen to display IT Support Activity charge out.

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The “forward tracing” of IT allocations represents how data is allocated out to consuming departments such as Finance, Marketing, Outside Sales, Assembly, etc.  Remember the focus of the trace screen depends on the “Tracing dimension” selected. In this example, Entity was the tracing dimension.

The top box, R0009, shows us the Rule Name relevant for IT allocations, the ruleset reference, the Driver used to allocate data to Targets – in this case : Desktop Laptop Users, regardless of Activity performed (NoActivity reference) as well as the amount / dollar value of the allocation : Allocation Out 1.338.000.

Users have the flexibility to allocate data partially (to allocate only a % of the total value instead of 100%). That is what the Contribution % reference in the R0009 box represents. In this rule, the administrator/rule designer decided to fully allocate the IT cost to the consuming department instead of allocating it partially. Therefore, the 100% reference is displayed.

In the case of the Bikes ML (Management Ledger) application, the Entity dimension has 4 generations. When talking about generations, the larger number, in this case number 4, represents the lowest level of detail. Generation 0 represents the Dimension name; Generation 1 represents the first set of children; Generation 2 represents the Children of Children, etc.

Below is a radial display of the contribution charge out at base Entity level when no generation selection was made prior to launching the traceability report:

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We can see in this diagram how much each Target Department was charged for their IT bill.  The contribution from the IT department to each target is displayed as a %.

Change the generation reference from 4 to 3. The higher the number of the generation, the more summarized the detail. The change of Generation reference will result in a summarization of the members of the Entity dimension to one level higher than seen previously.

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Notice how there is no longer an Entity breakdown at base level as we had in the previous screen when Generation 4 was selected, and the contribution percentages have been summarized to display the contribution % at a node level.

In situations where a dimension has many levels within the hierarchies or an increased volume of base level members, the generation selection proves useful as it allows users to group data sets and display them in the same diagram without compromising the level of detail.

Traceability – Customization

As mentioned at the beginning of this post, PCMCS comes with several features to support traceability and troubleshooting, one of these features being the Rule Balancing report. In situations where the traceability maps are insufficient to support a meaningful conversation regarding bill out values, and a deeper dive into an individual rule is necessary, the Rule Balancing report covers such a request.

While the traceability report has evolved in comparison to the Standard Profitability model, its usage is limited to situations where there is a need to troubleshoot specific data points while also having a visual representation as support.

The most common alternative to graphical traceability reports are ad hoc reports in Smart View, either built from scratch or launched via the Rule Balancing report (described in detail in a previous post).

Conclusion on OOTB features: Traceability

Business segment profitability analysis represents the analysis of operations and profitability of individual segments (e.g. Lines of Business, Products, Channels, Customers, Services) within a company. Business segment reporting requires all costs to be divided into one of the two categories:  direct /traceable costs or indirect/nontraceable costs.

In PCMCS, all costs are transparent and fully traceable. An indirect cost value can easily be traced throughout the flow of the allocation model all the way down to the business segment being analyzed. The indirect allocated volume can be explained through step-by-step analysis, high level traceability maps, and OOTB reports listing out the rules impacting the distribution of such cost.

Using a combination of Model Views, Rule Balancing reports combined with Traceability analysis and Smart View ad hoc retrievals, there should be no doubt regarding the source of a data value within PCMCS. Metric data validation – situations where the intersections for each metric are customized to such extent that building a Rule Balancing report or an individual Model View is not efficient nor effective – is mostly performed via Smart View.

In a nutshell, traceability provides significant benefits:

  • users can trace both revenue and cost based on predefined model views.
  • traceability can flow forward or backward from a starting point.
  • users can review the final contribution % (driver details are not displayed on this screen).
  • users can toggle between different display options and focus on specific rules for focused analysis.

Subscribe to our mailing list to receive updates for new blog posts related to PCMCS Queries, KPIs, Model Validation, System Reports, Data Integration using Cloud Data Management, as well as the OOTB Application Backup and Restore functionality.

Is there a PCMCS-related topic that you would like to see covered in more depth?  Email us at infoSolutions@alithya.com.

Out-of-the-Box Features: Profitability and Cost Management Cloud Service (PCMCS) – Intelligence and Dashboarding: Profit Curves

Welcome back to this series of blog posts to cover out-of-the-box (OOTB) features of Profitability and Cost management Cloud Service (PCMCS). There is a need within the Oracle Cloud client community to discover what can be achieved with the tools provided when subscribing to one or more Oracle Cloud Services. A lack of awareness of the features included with your subscription is an unmeasured cost and a missed opportunity to gain much needed insight without further spend.

PCMCS applications – whether built for Fully Allocated P&L Solutions, Transfer Pricing, Shared Services Allocations or Customer/Product Profitability – have OOTB reporting capabilities available via the Intelligence menu that offer insight into allocation models with reduced effort. Here, we’ll explore how to set up, configure, and use such features and fully leverage the functionality that is included in the Oracle Cloud subscription cost.

The order in which I am covering the OOTB features is directly related to the Intelligence menu options available in PCMCS.  The 6 menu options are:

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 1  1.  Analysis Views (learn how to create, customize, and use them here)

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 2  2.  Scatter Analysis (discover how to set up and configure them here)

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 3  3.  Profit Curves (this blog post focuses on Profit Curves)

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 4  4.  Traceability

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 5  5.  Queries

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 6  6.  Key Performance Indicators

The content of this blog is based on the standard Bikes (BkML30) demo application, so you can follow the step-by-step information without having to go through an app setup from scratch. You can load and deploy this application directly from your PCMCS instance through a couple of clicks via the Application menu using the + / Create button.

 

Profit Curves – What Are They?

If you are looking for a graphical representation for the concentration of your profit by either Customer, Products, Channels, or Funds, look no further than the Profit Curves section in PCMCS. Profit Curves, also referred to as Whale Curves, are used to identify which cluster of Customers, Channels, or Products generate the most profit. Profit Curves display a graphical representation of the relationship between economic profit and the quantity of output sold.

The details of the profit or net income split by unit/service/customer displayed in a Profit Curve identify issues with:

  • expansion of a production line
  • breadth of services that may have a negative impact on profit
  • onerous clients consuming numerous resources without justifying the cost for the profit gained from their engagement
  • potential costing issues of “over” or “under” costing products (for example, overburdening a product or product line inappropriately);  a cost study should be performed to determine the appropriate allocation
  • pricing

Information illustrated with a Profit Curve can be enlightening and help to put the focus on specific customers, products, or channels where the greatest profit attention is needed, indicating situations where a few products, services, or clients create enough profit to maintain the rest of the company’s offering. Profit Curves are key to strategic decision making, especially when dealing with competing projects and limited resources.

During one of my recent PCMCS implementations, a Profit Curve proved valuable when the client’s staple product, advocated as being its best and most profitable, was discovered to be the least profitable after the implementation of an accurate cost allocation methodology in PCM!

The easy-to-follow Profit Curve provides the foundational insight needed to rapidly shift gears across product lines, ensuring alignment of management decisions backed up by real information.

 

Building a Profit Curve

There are several Profit Curves available in the Demo application BksML30. In order to build a Profit Curve, there must be a corresponding Analysis View that can be leveraged as the basis for data selection. See a step-by-step guide on how to build an Analysis View here.

Analysis Views can contain multiple references to Measures and/or Accounts; however, the Profit Curve using the Views analyzes and displays only one measure at a time.  Users can choose to define names for the X and Y axis to add clarity to the Profit Curve information consumers.

Alex Mlynarzek - Profit Curves - 4-18-19 - Image 1.png

Here is an example of a Profit Curve:

Alex Mlynarzek - Profit Curves - 4-18-19 - Image 2

The curve displays a listing of Net Income generated by Customer.

From a Quarter-to-Date perspective (the Period selected at the top of the View), this Profit Curve indicates that all customers are profitable.  That may raise questions about whether or not the overhead is allocated appropriately or an even spread is used, thus skewing the results.

Note: Data in the BksML30 model at the time this Profit Curve was generated was calculated only for January, confirming the Profit Curve display, as the profit by customer distribution was evened out at Quarter-to-Date level.

The details of each customer/product/channel/segment and how much net income each is generating can be reviewed in the Category Analysis section. From a cost management and process improvement point of view, the right side is the most important.  This side generally represents customers/products/channels with a negative profit or that cost the company money.  While these customers/products/channels can’t always be eliminated, they can be watched and reviewed for pricing changes.

Using a PCMCS Profit Curve

There are options to filter data by the POV dimension, Period, or by metrics tied to Customers. For example, we can exclude from the analysis any Customers with Operating Expenses that are considered marginal. After defining the required filters, we can refresh the Profit Curve and review the newly generated pie charts.  Filters can be added to all available metrics and can be stacked up to generate any custom report.

Below is an example of the same “All Customers” Profit curve, limited to January and with a selection of all Customers who had a Net Income smaller than 1 positive unit (USD or the currency defined in the PCM model) thereby highlighting Customers creating losses.

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In the Details section of the Profit Curve, there is a count of 886 customers with a Net Income smaller than 1.

Alex Mlynarzek - Profit Curves - 4-18-19 - Image 4100% of the customers analyzed based on the specified criteria are unprofitable. The “Actual Profit” in this Details section can be translated into “Actual Loss” as the total accumulated value across the 886 customers is US$ -1,148,670.

If there are doubts regarding the data intersection for the remaining dimensions in the PCM model such as Product or Entity, we can analyze related information through the configuration icon located next to the “Add Filter” menu. These selections are predefined in the Analysis View that was used during the creation of the Profit Curve, and you will not be able to modify them unless you modify the underlying View.

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If questions are raised during the analysis on the Profit Curve screen and a list of details by Customer is requested, we have the option to launch a report from the “Analysis Links” menu under the Category section.

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A report in the following format will be generated to display the Customer detail records along with all the other settings defined in the Analysis View.

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This report can be exported in .xls format (“Export to Excel” option), and it represents a base level data dump report, in column format, containing multiple generations and references to attribute dimensions.

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Note: When launching this report, users must check that the parameters have transitioned correctly from the previous screen. The Period parameter, which is saved to be Quarter-to-Date on the original Analysis View used in the Profit Curve diagram, will override any other selection made during run time analysis. If there is a need to revert to a specific month before launching the Export to Excel, users will have to make this update on the Filter /POV area and perform a data Refresh.

We can make changes to the Analysis View to add further details (for example, Cost of Goods).

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For the 886 customers that are not profitable, we can dive deeper into their Cost of Goods data, Operating Expenses, or analyze whether or not the products sold are so heavily discounted that they no longer generate a margin.

 

Pie Charts Related to PCM Profit Curves

 

We can further analyze the resulting Profit Curve data by using the available predefined categories tied to the Attribute dimensions available in the PCMCS application, in the underlying Analysis View displayed in the adjacent Pie Chart.

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The available categories to display the Pie Chart data for the Profit Curve chosen are the following:

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When selecting the Region category/attribute, we learn that the Southeast area contains 26,07% of all the unprofitable customers.

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If we change the Focus of the Category to be on Top 10% most unprofitable customers by Amount vs. All Customers/Number of Customers, the following information is displayed:

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The Pie Chart reveals that the Southeast region has the highest number of unprofitable customers both by Number of Customers as well as by Total Amount/Loss.

When adding a filter based on Customer Generation 3 which distinguishes between Department Stores and Specialty Retailers, it looks like 87.64% of the Top 10% most unprofitable customers are from Department Stores.

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A look at the 4th generation in the Customer dimension where we can analyze the split of the losses at Customer level indicates that one store is responsible with 65.17% of all losses within the top 10% most unprofitable Customers.

Alex Mlynarzek - Profit Curves - 4-18-19 - Image 16The Pie Chart is the only artifact that is refreshed based on the selections of the Category Analysis menu while the Profit Curve remains constant based on the selections in the POV and filter criteria.

While all users of PCMCS can generate/launch Profit Curve reports and export their associated Analysis Views, in order to create and set up a Profit Curve report, the PCMCS administrator must update the requesting user’s permissions. As with all Intelligence screens within PCMCS, the Viewer role allows the use of these artifacts, not its creation or setup.

Concluding Thoughts About OOTB Features: Profit Curves

If you have been following the posts in this blog series, you’ve become aware of the dashboarding opportunities at your disposal with a PCM subscription. The listing of PCMCS OOTB features is a good starting point for comparing any other profitability and cost management tools on the market, regardless of vendor and technology employed.

Creating insightful dashboards is now at the tips of end users’ fingers, no longer involving complex requirements gathering processes and iterating between different display options. PCMCS users have the ability to build and customize their own dashboards. As a result, IT staff is no longer burdened with reporting requests or artifact migration between environments.

Subscribe to our mailing list for updates on the next blog post covering Traceability, Queries, and KPIs. Don’t think the PCMCS OOTB features blog series will stop at the Intelligence menu options! There is more to come on Model Validation, System Reports used for maintenance and troubleshooting, Integration with Cloud Data Management, and the Application Backup and Restore functionality. All this and more will be covered in future blog posts, so watch this space for updates.  If there is a PCMCS-related topic that you would like to see covered in more depth, email us at infosolutions@alithya.com.

Out-of-the-Box Features: Profitability and Cost Management Cloud Service (PCMCS) – Intelligence and Dashboarding: Analysis Views and Scatter Analysis

PCMCS Out-of-the-Box (OOTB) Features:  2. Intelligence and Dashboarding – Analysis Views and Scatter Analysis

Two teams of consultants with similar amounts of experience and prestige guarantee that they can perform an application implementation to the highest quality: one at a higher cost, but shorter timeframe; and the other at a lower cost, but in a longer timeframe?  All other considerations being equal, should I save money, or should I save time?

A few days ago, I released my first blog post on PCMCS, covering Rule Balancing reports usage and customization. This post builds on that first post to cover intelligence capabilities, some of which are only available in the Cloud version of the PCM software.

There are 6 menu options when accessing the Intelligence menu within PCMCS.

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 1  1.  Analysis Views

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 2  2.  Scatter Analysis

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 3  3.  Profit Curves

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 4  4.  Traceability

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 5  5.  Queries

Alex Mlynarzek - Analysis Views and Scatter Analysis - 2-28-19 - Image 6  6.  Key Performance Indicators

This post covers the first two menu options to explain how to set up Analysis Views and how to use Scatter Analysis.

Analysis Views

Analysis Views are the first set of reports available to end users within the PCMCS user interface.

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These views represent a way to predefine and save intersections of members for future review.  The selections within Analysis Views are open to all dimensions within the PCMCS application at various levels within the hierarchies. This is the first step you need to take towards building or defining a dashboard for your PCMCS application.

If you cannot create or edit an analysis view, then you need to reach out to your PCMCS administrator in order to review and adjust your security settings.

The example Analysis Views for this post are based on the “Demo Bikes” application that can be deployed with a few clicks in your PCMCS instance BksML30.

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A data slice is a combination of rows and columns along with the page selection, which, in this case, is the Period dimension.

Any dimension that is not specified in any of the 3 areas (row, column, page) will be read at top level and will be displayed in the settings menu.

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The Add Filter section allows you to filter the columns based on specific numerical values. In this case, the columns are represented by the Product dimension selections.

To create an analysis view, click on the plus (+) sign on the main menu. The three tabs displayed will allow you to define a name and description as well as the setup for row and column dimensions. You cannot select more than a dimension for either rows or columns.

Within the Row dimension selection, you can leverage different formulas applicable to the hierarchies within PCM such as Children of member, Member and children, Level 0 descendants, etc.

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Columns do not have options for member formulas beyond the usage of User preferences.

The row dimension will allow you to display further information such as generation or level details. For example, for the Product dimension, we can display the generation 3 and 4 information alongside the level 0 members, allowing us to expand our analysis to different product categories, or types.

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Selecting new members within the Analysis Views will not impact the original data definition. If you choose to display data for any month other than the one that was setup and saved in the Analysis view, you can do so because the Page parameter is open to end user modifications. If; however, you want to update and store a selection change within the analysis view, you must perform such update via the Edit menu instead of simply selecting a new parameter on the screen in view mode.

You may need to utilize the concept of period ranges when using Analysis Views in order to dynamically reference specific members of your Period dimension.

Defining a current period for the application is mandatory in order to be able to create formulas dependent on time. This action is available via the Application menu by selecting the Edit application option and navigating to the tab called Dimension settings. Here is where you can define the current Period and the Current Year for your PCMCS application.

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These settings will be applied when using the “Single…” or “Current” selection options within Analysis Views. Single (-1) Level 0 selection represents, in this case, the month of May, since the current Period selection for the PCMCS application is June. The Single (-1) Level 1 selections return Q1, since June is in Q2.

Scatter Analysis

Scatter Analysis graphs will compare one member’s values against another member’s values. The two members selected must be within the same dimension. Your PCMCS Demo application may not have any sample Scatter Analysis graphs. However, you can create one by leveraging the Analysis Views at your disposal.

You can launch Analysis Views from within Scatter graphs.

Note that saved Scatter Analysis cannot be reused or referenced in dashboards. You should use this section to create graphs for ad-hoc use outside of the dashboarding capability.

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If you need to include Scatter Analysis within your dashboards, you will have a corresponding menu item that allows you to create dashboards within the list of available items.

You can select an existing Analysis view, but you must reselect your X-axis and Y-axis dimension references.

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Conclusion:  PCMCS Intelligence – Analysis Views and Scatter Analysis

While there are many alternative reporting solutions to use in conjunction with PCMCS applications, assuming that both time and money are of essence in any project implementation, it is safe to conclude that using the PCMCS OOTB reporting features would be cost effective as well as efficient. The Intelligence screens shared in this post are included in the PCMCS subscription cost, and any end user of a PCMCS application with the right level of access can take charge and build the desired reports, saving end users in a location accessible to their peers while spending no time in iterations of reporting requirements and data validations.

The PCMCS OOTB reporting features support not only troubleshooting, but also detailed analysis and reporting within one screen.  Such capabilities should not be ignored as they will surely add meaningful insight into finance teams’ day-to-day use of PCMCS.

If you need advice and guidance on how to leverage the PCMCS reporting capabilities for existing or future applications, reach out to our team of PCMCS experts at infosolutions@alithya.com.

The remaining intelligence menus will be covered in subsequent posts over the next few weeks. If you are interested in receiving notifications of such posts, subscribe to notifications.

Out-of-the-Box Features: Profitability and Cost Management Cloud Service (PCMCS) – Rule Balancing Reports

PCMCS Out-of-the-Box (OOTB) Features:  1. Rule Balancing Reports

The other day, I was thinking about the times I used to study Finance, and specifically about a course regarding Interest and how it represents the value of Time. What is the cost, or value, of one’s time? – is it high, resulting in a higher interest rate per period, or is it low, resulting in a low interest rate per period? How much time am I willing to spend working in order to get that new car? How much time do I have before that competitor will outrun me and snatch that market share from me?

This was how I started thinking about various out-of-the-box features (OOTB). Such features are often key in deciding whether to acquire a software/service/product because the one resource that we constantly complain about not having enough of is “time.”

You are now reading the first blog post on OOTB features in PCMCS covering one of the most used Reports for data analysis as well as troubleshooting profitability calculation results. At the end of this blog post, you should know what Balancing reports are, where to find them, how to use them, and also how to further expand them with minimal time and effort invested.

What are Rule Balancing Reports?

Rule Balancing reports provide quick insight into the validity of the application results. These reports are powerful OOTB artifacts that can be further configured to cater to any custom application requirements in order to support validation of calculation results as well as contribution analysis and traceability.

The PCMCS OOTB Rule balancing report is initially based on a Default Model View with a standard selection of upper level members for each dimension. Starting from this Default Model View, the administrators or users of the PCMCS applications can perform a deep dive analysis on more granular intersections and configure detailed reports for a ruleset or a group of rulesets they choose to investigate.

The Default Rule Balancing report is available as soon as the application has been deployed, and it can be accessed via the Main Navigator menu found under the Manage section.

Alex Mlynarzek - PCM Rule Balancing - 2-7-19 - Image 1I will be using the default BikesML30 application to demonstrate the capabilities of the Rule Balancing reports. If you have loaded your sample application and cannot see any results in the Rule Balancing reports, check that you ran your end-to-end calculations for any given POV from the Manage Calculation Menu. The POV I have chosen for this demonstration is FY16, January, Actual Scenario.

As you open the Rule Balancing menu, the Default Model View is the only view available when you initially set up your application and your allocation rules. Any other Rule Validation reports that you see within the Demo application besides the Default Model View have been built and configured outside of the out-of-the-box list of features.

What are PCMCS Model Views?

A Model View represents a predefined data slice within the PCMCS application; consider the model views as a set of selections of members for each dimension that displays only the relevant data points for a required intersection.

Rule Balancing Report Example

After running the entire set of allocation rules within the Demo BksML30 application, the Rule Balancing report should look like this:

Alex Mlynarzek - PCM Rule Balancing - 2-7-19 - Image 2

The description of each rule selected will be displayed along with the rule number. The rules will be displayed in the order that they were launched following the user-defined sequencing, regardless of the actual Rule Number/Rule ID that has been assigned.

  • The “Input” column enables users to confirm that what was loaded into the application matches the expected values received from the source system.
  • The Allocation In and Allocation Out columns validate the allocations performed by the application from both a balance perspective (Allocation In should be equal and opposite to Allocation Out) and a numeric one.  The balance aspect is particularly of interest when allocations are executed with custom calculation rules.  In these cases, two separate rules are typically required, one for the “credit out” and one for the “debit in.”  As such, there is a greater risk that the formulas for the outbound and inbound values will not produce amounts equal and opposite in total, thereby causing an undesired imbalance.  In these situations, the Allocation In and Allocation Out values are shown on two separate rows, and they quickly illustrate to the user the success of their calculations.

Rule Balancing and Smart View Ad Hoc Reports

Any highlighted data point/data value in the Balancing screen will allow you to further investigate the allocation step through a Smart View ad hoc report. These hyperlinks represent pre-built/pre-defined queries that point directly to the Essbase database, allowing you to further expand the analysis of a selected data point.

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When you click on the highlighted number, a Smart View link will be downloaded to your workstation.

As an example, you can see how the detail for Net Change looks like for the Custom calculation rule R0001 – Utilities Expense Adjustment in a Linked report in Smart View.

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The column headers for the Rule Balancing report will list the relevant Balance dimension members. If there are members that are not populated, these will be automatically filtered out of the view. You can choose to display them by selecting View -> Columns and tagging the members you would like to display on your report – whether they have data or not.

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For further information on what each of these Balance dimension members represent, check out my blog post on Demystifying the Balance dimension in PCMCS.

You can view and edit the model view definition in the collapsed area between the POV and the Balancing report.

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The Input data on this customized Model View is pertinent only to Operating Expenses rather than the entire pool of data. This is the reason that the total USD value may be different from data displayed on the Default Model View report.

You can perform ad hoc edits to the Model View as you are using it, but none of the newly made selections will be stored. If you want to apply permanent changes to a specific Model View selection, you will have to edit the Model View in the corresponding menu.

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Your Model Views can be defined in the same order of operations as your allocations, or you can choose to create Model Views that are more detailed and dive deeper into a custom grouping of rules, regardless of the ruleset to which they might belong. The only dimensions displayed in your Model View selection are the Business dimensions. POV, Balance, Rule, and Attribute dimensions are not represented and therefore are not open for selection. The data points you define in the Model view will apply to all relevant rules IDs that generated the new cells.

Enhancing and Customizing Your Rule Balancing Reports

In the Demo BikesML30 application, there are several standard Rule Balancing reports that are split by Ruleset while others are named “Trace.” The Trace Model views are built in order to support point troubleshooting of allocation areas that are either complex or open to high variation during each run.

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If you want to use the Rule Balancing report values outside of the ad hoc capacity, you can export the report into XLS, but remember that such an export will not represent a Smart View report – it will simply be a listing of the information presented on the Rule Balancing screen, as some members displayed here do not have a direct equivalent in the application (Running Remainder, Running Balance). This export option can be found in the Actions menu, export to Excel, or by selecting the button in the below screen capture.

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A new workbook is downloaded called RuleBalance, and the entire set of data displayed on your screen will be available in XLS.

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PCMCS Rule Balancing Drawbacks

Rule Balancing does not allow filtering based on Attributes, UDAs, or Names.

Rule Balancing hyperlinks open SmartView tabs called Linked View, and any new selections of links within the Rule Balancing report will overwrite the contents of the existing tab. If you start developing a report by using Rule Balancing, remember to always rename the tab in case you want to kick off another report for a secondary data point within the same workbook.

Common Issues When Using Rule Balancing Reports

“Rule Balancing Report Links Don’t Work”

Your workstation must have Smart View installed before using the hyperlink feature within PCMCS. The latest Smart View version is available for download through the Navigator main menu under the Installations section.  For more guidance on generic EPM product patching, read the blog post Patch Today! Don’t Delay!

When selecting a hyperlink in the Rule Balancing report, you should be able to see that a download has started. As you click on the downloaded content, a new Excel tab will open, and you will be prompted to enter your Cloud credentials in order to have access to the requested data point intersections. If you do not have Excel open at the time you are accessing the downloaded content, the prompt to enter your Cloud credentials may not appear on the screen.

“I Can’t See Any Data in the PCMCS Rule Balancing Report.”

If data is not displayed on the screen, you are looking at one of the following situations:

  1. There is no data loaded and/or calculated for the POV at the intersections you have defined in the Rule Balancing report. Check your job console to see if such tasks have been triggered and completed successfully.
  2. Your security setup is restricting you from seeing any data values. Reach out to your administrator to adjust data grants or application access.
  3. (This used to happen occasionally during on-premise implementations) If your Business dimensions are tagged as Label Only, check that the first child contains values. You may be able to see data at base level intersections within your application, yet the Rule Balancing report shows no vales due to the Dimension Type, Member Storage, or Aggregation operators you have defined in the metadata.

“I Can’t Create a PCMCS Model View.”

This restriction is based on provisioning. Reach out to your PCMCS Administrator for assistance with your profile or settings.

Rule Balancing Wrap Up

Rule Balancing reports are easy to set up and use.  They retrieve data quickly, are accessible to all application users through the same menu, and they should be the first stop during a model run to quickly identify if there were any issues with data allocations.

Because Rule Balancing is a fast reporting tool with a predefined template OOTB, it is one of the commonly used troubleshooting reports for PCMCS, which can be leveraged for quick balance checks. It is also a mechanism for quick report building at detailed Rule level, a faster alternative to reading the Rule definition and manually replicating the intersections in a Smart View report.   Because these reports are system generated and their hyperlinks are based on application and rules set-up, there is no room for manual errors when building validations.

Save precious time by leveraging the PCMCS OOTB functionality. The next post in this series covers Intelligence screens – Analysis Views and Scatter Analysis.  If you have further questions on the usage of Balancing Reports within PCMCS, please reach out to our team of PCMCS experts at infosolutions@alithya.com.

PCM Micro-Costing, a Framework for Detailed Profitability and Costing

Oracle’s Profitability and Cost Management Cloud Service (PCMCS) provides a powerful service for allocating General Ledger profits and costs.  Recently, we worked with a banking industry client to provide a model that calculates profitability at a Product/Channel level while maintaining Account level detail.  We accomplished this through a framework we refer to as Micro-Costing where detailed profits and costs are calculated in a database using rates developed at the summary level in PCMCS.  Alithya began development of this framework in 2016 to meet a functional gap in PCMCS and provide a common framework that can be used either on-premise or in the Cloud.

To highlight the capabilities of Micro-Costing, I will use the solution deployed at our banking client as a specific example.  The following table describes the two layers where profits and costs are provided:

PCM Micro-Costing, a Framework for Detailed Profitability and Costing - Image 1

 Definitions:

  • Product – a loan or deposit offering. Examples of a loan are an auto loan or credit card; examples of a deposit are a savings account or a checking account.
  • Origination Channel – where the account was originated.
  • Service Channel – where the financial or transactional cost or profit is occurring or assigned to.
  • Customer – a legal entity responsible for accounts; for example, a person with both a home loan and a savings account.
  • Customer Account – a product that is assigned to a customer.
  • Financial Costs and Profits – the cost or profit of servicing a loan or deposit for a customer; for example, interest paid on a savings account.
  • Transactional Costs and Profits – the cost or profit of interacting with a customer; for example, the cost of an ATM transaction.

A simple way of thinking about the client’s business model:

  • Origination channels offer Products
  • Products are assigned to Customers as Customer Accounts
  • Customer Accounts are used by Customers through Service Channels

The generation of an Account level profit or cost is a C = A*B calculation where

  • A is the driver
  • B is the rate of a driven value
  • C is the driven value (profit or cost)

An example is:

ATM Expense = ATM Transaction Count * ATM Expense Rate

Micro-Costing Diagrams

Data Model

This summarizes the data model deployed.

PCM Micro-Costing, a Framework for Detailed Profitability and Costing - Image 2

STAGING – Contains transient data.

OPERATIONAL DATA STORE (ODS) – Persists the operational data with minimal transformation.  Dimensional integrity is not enforced, but validation jobs are available for validating stored data regarding rules and dimensional integrity.

WAREHOUSE-STAR – Persists the drivers, the rates, and the calculated profits and costs at the Customer Account level.  The Driver Lookup and Driven Value Lookup functions are used to define the drivers and driven values so that the addition of a driver or driven value is a configuration activity for an administrator rather than a coding activity.

Data Integration

A high-level summary of the data flows as deployed:

PCM Micro-Costing, a Framework for Detailed Profitability and Costing - Image 3

The source data is broken down into 3 types:

  1. General Ledger
  2. Operational Data
  3. Metadata

Data Integration uses interim flat files to maintain flexibility regarding the source data by establishing an API via the flat files without requiring knowledge of the source systems.  This allows for the introduction of source data that comes from 3rd parties not available for automated extraction from the source.

The operational data includes both Customer Account financial information and transactional activities or fees.  Product and Channel references are provided along with this information:

  • 1 million+ Customer Accounts
  • Approximately 6 million transactions per month

Some transactional drivers represent an activity that cannot be associated with a specific Customer Account; for example, a new loan application.  Proxy Customer Accounts for each product are generated to provide a place for these activities.

Additionally, although not graphically displayed in the above diagram, Branch level drivers are directly fed into the PCM Model, examples of which are Branch square footage and number of branch employees.  These drivers were used for non-Customer Account PCM costs and profits.

All Batch processing is built using SQL Server Integration Services.  This is based upon an agreement with the client regarding the preferred tool sets with the database selected being SQL Server.  Framework is transferable to other integration tools and databases including Hadoop framework, and in-house solutioning by Alithya was performed in preparation for use of the Micro-Costing framework with larger clients.

The data integration is as follows:

  1. Set POV
  2. Update metadata and stage
  3. Stage financial and transactional information
  4. Validate staged data and reprocess as necessary
  5. Load staged data to ODS and then to Star
  6. Upload PCMCS with GL and drivers
  7. Process allocations in PCMCS
  8. Download rates
  9. Run A*B calculations for each Customer Account and populate profit and cost table

Key Design Principles

The following design principles were focused on during development of the Micro-Costing framework.  These principles facilitate an easy-to-use and easy-to-maintain solution as deployed for our client.

  • Dimensional synchronization between the Micro-Costing warehouse and PCM
  • Validation checks as close to the original data as possible
  • Configurable drivers and driven values

Dimensional Synchronization

All dimensional mapping must occur prior to the warehouse star schema.  It is not possible to perform the Micro-Costing A*B calculations to derive profits and costs detail otherwise.  This has an impact on any deployment that uses FDMEE or Cloud Data Manager as they cannot perform additional mappings during upload to the cube.

Dimensional Synchronization includes a Point of View: Year, Period, Scenario, and Version to allow for loading multiple sets of drivers during a month, and for transfer of ‘what-if’ rates back to the Customer Account level, if desired.

Validation Checks

Validation kick-outs and checks occur as early in the data integration process as possible, with a “simple” validation during staging and a “complex” validation during generation of the fact information in the warehouse.  This allows the administrator to catch quality issues with a minimum amount of overall process duration occurring.  The data integration process is broken into a series of steps that allows for validation review and then re-running a step prior to moving on to the next step.  This principle held up in deployment, ensuring that time wasn’t wasted running later processes with invalid data, the result being an improved overall process and a significant reduction in the number of days required to produce profit and cost analysis for a given month.   A lesson learned during the initial roll-out was that our client had not previously required a rigorous validation of the drivers at the Customer Account level and had to develop new techniques for validating the source information to ensure accuracy.

Configurable Driver and Driven Values

A key feature of Oracle’s PCM applications is configurability, and the Micro-Costing framework is built to provide an easy-to-maintain solution that allows for rapid addition of drivers and driven values without the administrator having to manually update the tables and views required to manage the transformation and persistence of data.  This was accomplished by defining the drivers and driven values in tables and providing stored procedures for maintaining the tables and views.

The process for adding a new driver and driven value is very straightforward:

  1. Backup the database and the PCM cube.
  2. Update the source feeds to include the new activity or fee.
  3. Update the activity to Driver Lookup and Driven Value Lookup tables with the new values.  *Note: The driven value record references the driver for the A*B calculation.
  4. Execute the “Update Costing Tables and Views” stored procedure. *Note: removing a driver or driven value does not modify the tables.
  5. Update HPCM Account dimension for the new driver and driven value.
  6. Update HPCM rules to use the new driver and allocate expenses to the new driven value, and calculate the rate for the new driven value.
  7. Run the entire data integration process for the POV, and review results.

Key Benefits

The successful deployment of the solution provides the following key business benefits:

  • An improved ability to provide Product/Channel level costs and profits.
  • Reduced monthly cycle time and effort. The prior data integration process was disjointed and required a large amount of effort to produce results.
  • Drill-through capability to Customer Account level drivers, profits, and costs allows for root cause analysis of Channel and Product Costs.
  • Aggregation along other dimensional paths. Starting at the Customer Account level allows for aggregation along Customer attributes such as zip-code or credit score, providing new insights and enhanced executive decision making.  A follow-on project to use the Customer Account level data in OAC is currently being assessed.

Additionally, the following benefits to the administrative team are realized:

  • Model flexibility. The configuration of an additional driver and driven value in Micro-Costing takes fewer than 15 minutes.
  • Operational Data Store (ODS) and Warehouse. This allows for future projects to use a common curated source of information.  This was a pot sweetener for our client who was dissatisfied with its prior warehouse, but needed a business reason to refresh.  The prior warehouse lacked the following items that were addressed in the new ODS and warehouse:
    • Explicit mappings such as Activity Code to Driver Code that are controlled by the business
    • 3rd party data from partners and industry sources
    • Consolidation of financial and transactional information into Customer Account level facts
    • Hashing of Personally Identifiable Information (PII) for account security
  • Easy troubleshooting, validation, and auditing capabilities with PCM. Errors or mismatches in profit or cost at the Product/Channel level can be reduced to either rule definition mistakes or driver data entry mistakes. Finding out where the issue is and correcting it with a few clicks has a positive impact on the overall analysis and maintenance effort.

Final Thoughts

Alithya has developed a Micro-Costing framework that allows an integrated view of profits and costs at both a summary and detailed level.  This framework is successfully deployed at a banking industry client to provide a superior solution.

Framework is deployable either on-premise or in the Cloud and is available for other industries such as:

  • Patient encounters in Healthcare
  • Claims in Insurance
  • SKUs in Retail
  • Subcomponents in Manufacturing

…or anywhere the allocations occur at a summary level with drivers aggregated from a detail level.

 

Demystify the Balance Dimension in Profitability and Cost Management

Management Ledger models, whether Hyperion Profitability and Cost Management (HPCM) or Profitability and Cost Management Cloud Service (PCMCS), have been around for a few years, but I still receive emails asking for help with figuring out where the results are coming from. This request is often related to a lack of understanding of the Balance dimension. Here are some key pieces of information regarding this system dimension, how it works, how it should be used when defining allocations and integration jobs, and how to leverage it to troubleshoot your allocations.

Before we have a look at each member within this dimension, let’s go over some basic rules that govern the creation of an HPCM or PCMCS Management Ledger (ML) application:

  1. All HPCM or PCMCS ML applications must contain just one dimension named Balance
  2. Members and their properties cannot be edited or removed.
  3. You don’t need to import a file in order to load/setup the Balance dimension; members are created automatically when deploying an application for the first time.
  4. You can choose to rename the Balance dimension (translate it into another language, for example) when you first set up the application in PCMCS.

For the most part, the Balance dimension members are quite easy to follow and understand, but familiarity with usage guidelines helps to avoid issues during development and supports troubleshooting.

Demystifying the Balance Dimension in PCM - Image 1

  • Input — Used to store data input/pre-allocated data sets, whether these are pool or driver data sets. Data is generally loaded against this member in combination with the NoRule member. Input can be populated through custom calculations, but it is generally advised to keep it dedicated to valid data loads/input rather than for storing calculated or allocated results.
  • Adjustment In —Adjustment In can be used for manual adjustments to the Input data prior to running allocations. In this case, the Adjustment In data will be loaded against the NoRule member. Any manually submitted data on the Adjustment member against a Rule ID member may be eliminated during the subsequent data loads and calculations. Adjustment In can also be used during custom calculations to store intermediary values or calculated driver data.
  • Adjustment Out —Same usage as for Adjustment In, but with a negative data value.
  • Allocation In — This member will be populated against the Destination or Target intersection for the allocation rule.
  • Allocation Out —This member will be populated against the Source intersection of the allocation rule and the corresponding Rule ID member, or against a predefined “Offset” intersection that is custom defined for a given rule.
  • Allocation Offset Amount — Displays an amount that further reduces an Allocation In member, if one was used in addition to the Allocation Out. I have provided an example of how this member is populated and used in a lower section of this post.
  • Net Change — represents the total change for a given intersection, regardless of alternate offset actions.
  • Net Balance – sum of Input (initial data loaded) and any Net Changes made to the same intersection.
  • Remainder — Displays the difference between Allocation In and Allocation Out plus Allocation Offset Amount, if any.
  • Balance — The amount resulting when adjustments, allocations, and offsets are considered.

Rules assign funds to destinations based on the way you have defined the allocation logic (member selections, sequencing, concurrency, etc.). “Allocations in” and “allocations out” are being generated upon executing the calculations of the Profitability model. Each pair of adjustments and allocations (the “in” and the “out”) should result in a zero sum in order to balance the transaction. The Input member is affected by each adjustment and allocation. The difference between what was taken from Input and what remains at the end of an allocation will be accounted for in the Remainder.

The Remainder member is the source of your allocations, not the Net Balance member, as most would think.  Remainder takes into consideration alternate offsets and ensures we do not perform a double booking or a double allocation of the same data source, regardless of where the offset was applied.

To further explain the Balance dimension usage, I have used an example from the Bikes default application BksML30, which can be deployed into PCMCS through a few clicks.

The original application had only one adjustment Rule populating the Adjustment In member. I have copied that rule and reused it to demonstrate the same usage for the Adjustment Out member. Remember the adjustment out aggregation operator is still +, so if you want to offset data sets, you must use the appropriate signage for your data; in other words, negate the result either via a multiplication with -1 or by simply adding a – to the formula.

The new ruleset contents will look like this:

Demystifying the Balance Dimension in PCM - Image 2

Our initial data set is loaded on the Input/No Rule combination for the two accounts – Rent and Utilities – on the intersection with Corporate Entity.

The data adjustments are stored against Adjustment In and Adjustment Out.

Demystifying the Balance Dimension in PCM - Image 3

In order to further illustrate how to correctly follow the allocation process, I split the original Reassignment rule into 2 rules, each dedicated to its own account. I also updated the metadata by adding two new Account siblings to Rent and Utilities as offsets for each account.

Alternate offsets are simply intersections of members where you would like to store the offset data point, if it should differ from the source of the allocation.

The Remainder member demonstration is connected to the usage of alternate offsets, and before we go into the details of the numerical example, I would like to list out a few rules for setting up alternate offsets:

  • Alternate offsets are available for selection only in standard allocation rules. For Custom calculations, your Offset custom calc would have to be pointed to the appropriate “alternate” target.
  • All dimensions, including the ones predefined in the rule context, are repeated in the Offset screen as soon as you select “Alternate Offset Location.” You must select a single base level member for at least one dimension.
  • There is no “Same As Source” (SAS) option for offsets. The dimensions that must be offset on the Source intersections can be left blank in the Offset screen selections.
  • If each source member selection has its own offset, you will have to split the rule up into as many granular rules as needed in order to cover the individual offset selection. For example, if you have 6 accounts, each with its own offset account equivalent, you will have to create 6 standard allocation rules to create the individual offset selection for each account.

Going back to the numerical example and the usage of the Offset tab, in the update rule I have selected the below member intersections:

Demystifying the Balance Dimension in PCM - Image 4

The Source account was Rent, target is “Same as Source” (SAS), and the alternate offset account is FACOffset_Rent.

After the rules are executed, we will see the results below; focus on the Allocation Offset Amount member and the Allocation Out Member.

Even though the offset was applied to an alternate account for both Rent and Utilities, the allocation engine correctly identifies the Remainder of these two accounts as being 0.

  1. The first step behind the scenes is for the allocation to correctly distribute the data to the target intersections.
  2. The second step is to perform the offset on the intersection specified by the user, if different from the source intersection.
  3. The third step is to copy the Allocation Out value onto the Source Intersection members, on allocation Offset Amount member. This final step is performed via a custom calculation embedded in the PCMCS generated scripts which ensures there will be no double counting of pool data.

So even though we “moved” data from the Rent account, Corporate Entity, to other Entities, on the same target Account, the offset was performed on an alternate member. This allows us to create a report with Rent (Input), Rent (Allocation In) and FACOffset_Rent (Allocation out).

This is not a typical example of how alternate offsets are used from a functional standpoint, but it helps explain the mechanics behind the scenes. This alternate offset option is mostly used in cases where a Bill Out account and a Chargeback account will differ and allows users to trace which portion of a chargeback account is coming from different source accounts.

The final goal of an allocation is to generate a Remainder member with a value of 0. This ensures the total allocation of a pool data set, whether this was loaded or received from prior allocation steps. If the Remainder member has a positive value, then it is indicating that you have not fully utilized your pool data. If the Remainder member has a negative value, then you have overutilized your pool data which may be, in some cases, intentional.

Demystifying the Balance Dimension in PCM - Image 5

In situations where you will not give access to the PCMCS ML application to users who need to understand the various components of a data point flowing through the allocation steps, due to licensing costs or other considerations, the usage of alternate offsets throughout your allocation flow might be helpful.

When talking about reporting out of PCMCS ML, our clients always emphasize simplicity, and we often get requests to remove the Rule and Balance dimensions from final reporting solutions, to cancel the noise and give finance users solely the core information. In such situations, the usage of alternate offsets has proved beneficial as these finance users can still follow the flow and components of a cost without having to deal with the rule by rule detail. If further investigation is necessary, this can be pursued within the PCMCS ML model itself rather than in the external reporting solution.

If you need further help with figuring out the purpose and usage of the Balance dimension within PCMCS, email us at infosolutions@alithya.com. Our PCM Center of Excellence team is ready to share leading practices and industry-specific solutions that accelerate your ROI and expand the capabilities of your chosen profitability software.

A Cloud vs. On-Premise Comparison for Profitability: All You Need to Know

In a previous blog post, the history of Hyperion Profitability and Cost Management (HPCM) was discussed along with which modules made it to the Cloud. If you are after a more clear-cut comparison between Cloud and on-premise, the below table should fit the bill. Tables generally cannot provide all the needed context, yet they are, at times, the best starting point to understand the benefits and capabilities of one solution compared to another.  The below PCMCS vs. HPCM table is not exhaustive, and if you have questions on any of the items covered, email us and we will provide further details.

PCMCS 12-11 Image 1

Choosing between on-premise and Cloud depends on which factors are the most significant barring the overall licensing cost.

Allocations and data assignments cannot have “If” statements attached to them in the on-premise version of the software – a feature fundamental to supporting Tax transfer pricing capabilities.

The cross-dimension mapping is a functionality that is not available in HPCM. This mapping ensures the assignment of data sets to the same ID/name across multiple dimensions by using the “Same as Source but Different Dimension” option within PCMCS to support intercompany activities. This feature alone, or the lack of it, may significantly impact the design of an application and the overall complexity of allocation flows.

Features available in the Cloud but not yet released in on-premise solutions could tip the scale to favor the Cloud option when all other aspects surrounding a Cloud implementation no longer appear to be as pressing. Out-of-the-box content such as overnight backups, full application, and data restores that are at the business users’ fingertips – not to mention the reporting and dashboarding included in the Cloud version – are all differentiators of a product that enables business users to control their allocation process and methodology from its inception.

While there may be exceptions to the trend where on-premise solutions can have advantages (modules not available in the Cloud, for example) and, therefore, represent the best option at a given moment in time, the reality is that the future is being developed in the Cloud and for the Cloud, and at some point the shift will most likely no longer be an option, but a necessity.

If you need help making a decision with an existing implementation or you would like more details about HPCM vs. PCMCS to make a better informed decision, email us at infosolutions@alithya.com. Our PCM Center of Excellence team is ready to share leading practices and industry-specific solutions that accelerate the ROI and expand the capabilities of your chosen software.

Worry No More! Say Goodbye to Pain and Frustration when Submitting Service or Enhancement Requests with Oracle for PCMCS

While nobody likes submitting Service Requests (SR) on the Oracle support site, this is a necessary task that we must get comfortable with, whether our applications are on-premise or in the Cloud.  After 12 years of consulting, I can say that I have seen or pursued many wrong ways of submitting an SR which, in turn, yields results along similar lines – a lot of back-and-forth emailing with Oracle’s support staff, personal frustration, misinformation, and most importantly – time wasted on all sides.

Worry no more!  Here is a list of things you can do to avoid further pain and frustration when submitting Service Requests or Enhancement Requests with Oracle for Profitability and Cost Management Cloud Service (PCMCS).

  1. Where do I start when submitting SRs and ERs for PCMCS?

You can still use the generic Oracle Support website to open either an SR or an Enhancement Request (ER) with Oracle for Cloud applications, but the right way to do this is to first gain access to the Oracle Cloud Support website which looks slightly different and has a couple of new fields to complete. The email associated with the Oracle account should be the same email that has access to specific Cloud subscriptions.

Standard Oracle Support website

PCMCS Image 1

Cloud Support website

PCMCS Image 2

  1. Provide feedback

Login in to the Cloud application for which you want to create the SR or ER, and once you are logged in to PCMCS, navigate to your user name (top right) and select “Provide Feedback.” A new screen will appear enabling you to highlight the area of concern to provide context for the reason you are submitting the SR or ER.

Provide details around the area of concern. This gives context to the issue at hand and creates a reference for future troubleshooting. For example, if the issue is related to one specific Rule, ensure that the last screen open before you click on Provide Feedback is on the rule itself, or open to the job library listing the execution of the rule. You will only be able to highlight areas on the last screen open before launching the “Provide Feedback” screen.  The details you provide here will not automatically be copied into your SR. If you want to describe the issue in detail within this section, you can copy the same text within the SR itself – save it locally before submitting the feedback.

  1. Options for your feedback.

After you submit your feedback, a new panel will come up and will contain the following 3 sections:

  1. Environment: a listing of your Browser, Platform, Version, Locale, Resolution, Time zone, Cookies enabled (Y/N), URL of the instance, and the User Agent. You do not have to fill in anything in this section. All information is filled in for you.
  2. Plugins: a listing of enabled plugins, if any. You do not have to fill in anything in this section. All information is filled in for you.
  3. Confirm Application snapshot submission: this is the only section where you must provide input.

PCMCS Image 5You have a choice of Yes / No – depending on how comfortable you feel about Oracle using your daily maintenance snapshot for regression testing in upcoming releases. Giving Oracle access to your maintenance snapshots means you are agreeing to them using the model and any related data for their testing going forward. If your hierarchy structures and data are not sensitive, then you may choose to select “Yes.”  My personal preference is to select “No” and provide the static/current moment in time archived snapshot within the SR . When the SR is closed, the contents of said snapshot will be archived and not used for further regression testing.

  1. Generate a Diagnostic Report (UDR) ID

When clicking the “Submit” button on this screen, a unique alphanumeric reference is generated. This reference will be required when submitting an SR or ER on the Oracle Cloud Support website. Write down or, preferably, copy and save this UDR string of characters on your workstation in a txt file.

  1. Log in to the Oracle Cloud Support website and proceed with opening a new Cloud SR/ER.

Select the “Create Service Request” button on the lower left-hand side of your screen.

PCMCS Image 6

Select “Service Type” from the drop-down list of available Cloud services to which your user has access.

PCMCS Image 7

Once you have selected “Oracle Hyperion Profitability and Cost Management Cloud Service,” a listing of all available instances will be displayed in the new “Service Name” section:

PCMCS Image 8

Make sure you select the appropriate “Service Name” with the instance where you generated the related UDR (see previous steps).

Add “Problem Type” and select based on the type closest to your issue:

PCMCS Image 9

The above choices will not trigger related content or a list of options – this is merely to ensure that the ticket goes to the appropriate team during the investigation process.

In the “Problem Summary” section, reference the Cloud product for which you are creating the SR or ER. This will be the subject of your ticket, and it will help administer and keep track of multiple tickets at the same time.

  1. Attach all System Reports available for your PCMCS app.

To avoid multiple back and forth email exchanges with the Oracle Support staff, provide them with all the available information. Here is a current list of all available reports for troubleshooting PCMCS applications.

  1. Execution statistics for the last model / allocation execution connected to the SR – if SR is related to calc performance, calc troubleshooting or rule setup. (PDF or XLS format preferable)
  2. Program Documentation (with details; not with aliases) (XLS or PDF format preferable)
  3. Dimension Statistics (PDF format preferable)
  4. POV Statistics (PDF or XLS format preferable)

All these reports can be generated from PCMCS – Navigator menu – System reports.

PCMCS Image 10

  1. Attach the Diagnostic report

From the “Navigator” Menu, select “Application,” click on the drop-down in “Actions” and select “Export Supplemental Diagnostics.” This report is very useful to the development team troubleshooting your issue.

PCMCS Image 11

When selecting this report, a new job will be launched that can take anywhere between a couple of minutes to 20+ minutes, depending on the size of your application and the amount of logging involved.

An archive of the diagnostics reports will be generated in the File Explorer within the Application menu.  Some of the reports in this archive will be a repeat of the other reports mentioned in the previous step, but if you provide all this information simultaneously, the redundancy should not cause any issues. If you are not open to launching such process in your environment during business hours, and yet you still want to submit the SR in a timely fashion, you can skip this step and provide this report only upon request from Oracle Support staff.

  1. Error description

If you can replicate the error, capture each step via screenshots and save them in a Word doc. The earlier the support staff understands what you are dealing with, the faster the entire troubleshooting process will be completed.

Refer to menu options precisely as what they are called within PCMCS.

For example, to submit an SR or ER related to the Calculation Rules menu, refer to it as Calculation Rules – Rules Express Editing, as both names appear in the PCMCS menu.

PCMCS Image 12

  1. Establish the SR level appropriately.

There are 4 options to choose from, and you should choose based on urgency as well as level of importance.

PCMCS Image 13

Choose severity 1 and 2 only when applicable. You may be inclined to select such severity options so that your issue is resolved quickly, but use your own criteria to distinguish between something that is really a show stopper and something that is not. Time is of the essence for both you and the Oracle Development team.

When choosing severity 1, you will open your calendar for potential phone calls that can occur at any time, regardless of your time zone.

  1. My request is really an ER, not an SR.

If your SR is an Enhancement Request, provide a lot of supporting detail in the “Business Justification” section. Not doing so will delay the Enhancement Request submission by up to 2 weeks. If further business justification is requested, respond promptly to make things move along and ensure that your request makes it to the next patch release sooner rather than later.

Once an Enhancement Request is recorded, your SR will be updated with the ER ID (which will differ from the SR ID originally assigned the moment you submitted the ticket).  The original SR will be closed, and you can open a new SR quoting the ER ID 48 hours after the moment your request was accepted. The Support staff will confirm whether the ER will make it in the next monthly patch release.

  1. Bedside manners for SR/ER submitters.

Try to reduce the number of communications within the SR. Taking the above steps will get you closer to achieving a near-perfect SR submission. Be mindful about how to communicate efficiently. The higher the amount of back-and-forth communication, the more difficult it will be for the development team to follow the conversation trail and ensure efficient troubleshooting.

Whether you are a service provider or a PCMCS administrator who inherited an application at the end of a project implementation, we all tap the same Oracle Support resources which are, as are most things, finite. The more efficient your SR/ER submission is, the faster these resources provide a response with accurate and detailed troubleshooting steps. For any time-sensitive issues or further escalation, leverage your Oracle representative and your implementation partner. Their existing relationship with Oracle Product Management will help direct your query to the right resources and ensure your SR is not stuck because of lack of clarity regarding which team should own it. This will ensure that your SR/ER is fast-tracked to the appropriate team and given the right level of attention. For any critical issues you encounter with PCMCS or other Cloud subscriptions where there is no solution in sight, reach out to Alithya at infosolutions@alithya.com so that our team can provide a fast end effective assessment.

Full Circle Planning, Cost Management, & Profitability in the Manufacturing Industry

This post corresponds to the webinar “Full Circle Planning, Cost Management & Profitability in the Manufacturing Industry.” You can access the recording here.

As we are all aware, today’s manufacturing industry faces multiple ongoing challenges, including:

  • Changing customer/consumer demands
  • Shrinking operating margins
  • Ever-changing compliance and regulatory pressures
  • Increasingly globalizing economy
  • Lowered availability and visibility of detailed information

Now more than ever, manufacturers’ focus is not just on growth, but, more specifically, on profitable growth.

 

Managing Profitable Growth

When it comes to profitable growth and insight into profitability, the first place to start is the consolidated P&L.

But while the P&L offers information on profitable growth, it does not help manage profitable growth. The financial P&L provides limited insight into costs, profits and their underlying drivers, from the perspective of their lines of business, products, customers, markets and channels. Cost bases are imperfect and are limited to legacy standard costing and unstructured cost extracts. Results lack a matching of costs and revenue to manage margins at the same strategic view as revenue.

 

The Need to Focus on Strategic P&Ls

To address and contend with these challenges, we recommend a greater focus on more strategic P&Ls for the manufacturing industry.

Strategic P&Ls provide insight into both direct costs and indirect costs.

  • Direct Costs include costs directly associated with:
    • The making of a product or delivery of a service
    • Parts for the product
    • Labor for Service Delivery
    • Costs directly attributed to the selling to a customer or client
    • Shipping and handling expenses
    • Customer processing expenses
  • Indirect Costs include costs that are not directly attributable to the making of a product, delivery of a service, or the selling to a customer:
    • Operating costs (e.g., Call Center, Distribution)
    • Selling costs (e.g., Sales & Marketing)
    • Investment costs (e.g., R&D, Initiatives)
    • G&A costs (e.g., IT, HR, Finance, Admin)
    • Finance charges for Cost of Capital Employed

Measurement of indirect costs in particular can be difficult.

 

What Would A Solution for the Manufacturing Industry Look Like?

With all of this in mind, it’s important to look at the big picture when determining what manufacturers can do to attain strategic P&Ls and overcome their challenges?

The ideal solution for the manufacturing industry would:

  • Design, support and evolve to an integrated financial process
  • Leverage operating metrics and key assumptions to:
    • Link business drivers behind financial performance
    • Modify drivers and assumptions to plan future performance and attain strategic P&Ls
    • Drive accountability to Lines of Business
  • Offer a consistent and transparent framework to support indirect cost attribution
  • Use integrated applications and tools to support and adapt to changing business processes
  • Provide robust reporting to business for transparency into causal factors

A true full-circle planning, costing and reporting solution that aligns and adapts to an integrated financial process includes the following:

  • Driver-based revenue planning and departmental expenses leveraging the actual financial data, operational metrics
  • Integrated costing capabilities that can allocate indirect expenses to lines of business by leveraging the same actuals, plans and drivers used in the planning process
  • Robust and real-time reporting to surface strategic P&Ls by Customer, Product and other Lines of Business

 

Some Solutions are Ineffective and Unsustainable

Our team at Ranzal has seen many manufacturers attempt to piece together a solution using various combinations of spreadsheets, ERP, custom and packaged applications.

Typically, spreadsheets are the most common ingredient given their flexibility and accessibility. But spreadsheets tend to be error-prone, highly manual/labor-intensive and prone also to risk regarding controls and governance. We’ve also seen customizing the ERP as a common solution-oriented approach, but this can be too expensive, overly IT-centric and can also be somewhat of a “black box.” And lastly, custom applications are slow to adapt, can promote high effort and cost and also function like a “black box.”

 

Oracle’s EPM as the Foundation for Full-Circle Planning

We recommend Oracle EPM’s packaged applications to be the foundation to configuring the right full-circle planning, costing and reporting solution that avoids the constraints and risks other avenues bring on.

The specific Oracle EPM offerings that support a full-circle planning, costing and reporting solution involve:

  • Planning & Budgeting Cloud Service (PBCS)
    • Best-in class solution for financial planning, budgeting and forecasting
    • Align top-down and bottom-up processes
    • Consistency of assumptions, calculations and methodologies
    • And many more features here
  • Profitability & Cost Management Cloud Service (PCMCS)
    • Computes Profitability for Units, Segments and Services
    • Pre-Built Framework for profitability modeling: Dimensions, Support for Multiple Cost Allocation methodologies, Validation reporting
    • Graphical Interactive Traceability Maps & Dashboards
    • Measures, Allocates and Assigns Cost and Revenues via User-defined Rules
    • And many more features here
  • Tightly integrated with the Oracle EPM Cloud
    • Consistent Administration with EPM Cloud Offerings
    • Shared Reporting Tools like Financial Reports & Smart View for Office
    • Proven Technology Stack

We believe a comprehensive solution focused on a “Technology Trio” of Integrated Business Analytics, or the convergence of: EPM, BI and BD solutions. Experience and results have shown us that this combination provides the tools and answers needed for improved business performance, increased innovation, better vision, and increased business value.

For more information or to request a demo, email us. Be sure to ask about our complimentary one-day Profitability and Cost Management assessment and how the newly-released Oracle Profitability and Cost Management Cloud Service (PCMCS) can help modernize your solution.