Accelytics Analysis Reveals FP&A Silos and Process Inconsistencies for Global Chemical Manufacturer
Accelytics offers a free Technology and Process Analysis (TPA) help clients determine how to optimize their supply chain, sales and financial planning processes to gain a competitive advantage, improve the bottom line and run more efficiently. In this article, we will summarize a recent analysis done for a leading, global chemical manufacturer with a focus on FP&A processes.
This client is a leading global manufacturer of specialty chemicals and performance materials. The company operates in over 20 countries with over 4,500 employees.
The chemical manufacturer was using several systems and programs, such as JDA and Oracle, for data housing and processes. Although the company was using best practices with some of their financial forecasting processes, they ran into many problems with inconsistencies, manual processes and collaboration.
Many of the company’s financial processes were done using Excel, requiring significant, recurring manual effort to populate templates and manage accuracy. The collaboration between business units was limited and they each had their own siloed forecasting process.
As a global company, the client was seeking a solution to improve financial accuracy, collaborate across the business units and merge systems into one solution.
Within a two-week time frame, two expert consultants from Accelytics worked closely with the company to perform a Technology and Process Analysis. The analysis covered an in-depth look at each functional area, including Revenue Planning, Fixed Cost, Direct & Indirect STA, Working Capital and Cash Flow and Data and Reporting.
The analysis also covered process optimization, technology review, implementation roadmap and real-value ROI. With the TPA, Accelytics delivered visibility into key areas of opportunity and suggested a new approach to improve processes and gain a competitive advantage.
By holding workshops with key members of each business unit and functional area, Accelytics gained an understanding of the current financial processes and technology functions at the chemical manufacturer. Once we had this information, we used APQC, internal databases and Accelytics’ knowledgebase to benchmark their processes against the competition. This helps us to determine the highest impact areas of improvement and where the competition is excelling.
Revenue & Variable Cost Processes – Operating at 13% below competition
- Data source for volume forecast is different across the business units. Best practice is to have one number used by the entire organization.
- Business units are planning at different levels of the hierarchy, making it difficult to roll up for Balance Sheet and Cash Flow at the legal entity level.
- Each business has a siloed planning process and a heavy reliance on Excel. The ability to plan scenarios, troubleshoot errors, and validate data is difficult.
- All businesses to forecast at Customer/Item/Ship-From level. This level of detail will be a steppingstone to getting the legal entity data required for rolling up the Balance Sheet and Cash Flow at this level.
- Contract pricing is at the Item level of detail. For the most accurate picture, forecasts should allow for entering this key driver at this level.
- Recommending a single demand forecast locked for all businesses on a specific business day. Best practice is to have one number used by the entire organization.
- Consume a common JDA demand plan and allow for adjustments in the forecasting tool. Using the same baseline allows you to tie and understand variables better.
Fixed Cost, Direct & Indirect STA Processes – Operating at 29% below competition
- STA is currently forecasted at the business unit level, which does not provide visibility to accounts.
- Forecasting Indirect STA is very time-consuming and doesn't allow for alignment with best practices, which is forecasting at a functional account level, at a minimum.
- Fixed costs and other operating expenses are forecasted manually using Budget, run-rates, or manual adjustments vs a system forecasting automatically using predetermined logic.
- Forecasting tool to automatically calculate the STA forecast by functional account and department/groups of departments using predetermined logic with an area for entering adjustments (if needed). This aligns with best practice of forecasting at a functional account level, at a minimum, for an improved view of cost drivers.
Working Capital & Cash Flow Processes – Operating at 20% below competition
- Cash Flow is completed at the highest level by Corporate Planning. Treasury undergoes a manual process requesting receipts & disbursements from Sites for a legal entity/local currency view.
- The process is fragmented, in that Sites are not asked to forecast the entire Balance Sheet, just a few key items.
- In a stable operating environment, forecast accuracy is considered acceptable, however, the process lacks ability to accurately predict/control cash flows in uncertain times.
- No ability to do scenario planning.
- Implementing the proposed solution for Forecast Level (i.e. forecasting revenue and variable cost at the lowest level) will be a steppingstone to build a Cash Flow Statement by legal entity, driven off the P&L and Balance Sheet.
- Solution will house the drivers for enabling the calculation of key areas like AR, AP, and Inventory. Proposed solution addresses the most significant cash inflows and outflows related to operating activities of the business, as well as capital investment and other significant non-P&L related Balance Sheet changes.
Data & Reporting Processes – Operating at 20% below competition
- P&L and business reporting only. Balance Sheet and Cash Flow only at the highest level of the organization, with limited variance reporting.
- Tax is building their own legal entity forecast from the bottom-up in order to calculate tax. Best practice is to have Tax maintain rates, and tax expense to be calculated automatically.
- Siloed Excel-based processes requiring significant recurring manual effort to populate (templates).
- Ability to see aggregated numbers quickly, but access to details remains a manual exercise (email-based).
- Consistency and good adherence to master data values.
Proposed Solutions :
- Be able to report out different financial planning KPIs that will reconcile actual performance, as well as, enable scenario planning across the entire FP&A landscape, identify methods and recommend ways to streamline both inbound and outbound data integration.
- Tax needs to receive a usable forecast completed at the legal entity level in local currency (including adjustments). Implementing the proposed solution for Forecast Level will provide the data required to calculate a tax forecast.
- Solution should include ability to eliminate Inter-company activity which is currently done manually. This will ensure entity level forecasts are accurate, and therefore entity level tax provision forecasts.
Accelytics determined Anaplan to be the most effective technology solution for the chemical manufacturer’s goals. There will be 4 key planning tools to drive the FP&A Planning process in Anaplan: Data Hub, Revenue & VC, FC, Direct & Indirect STA, Reporting.
The first implementation phase will last around 5 – 6 months (at least 21-weeks) to complete the FP&A solution. The second phase will include a supply chain planning model for a complete connected planning project across the company.
After using the client data and analyzing each use case, Accelytics determined the ROI to be $750K.
With this implementation, the company can go from being a Standardized Company to an Integrated Organization on the maturity scale and begin the digital transformation to a connected organization. This implementation sets the company up for success now and in the future as they grow.
With the TPA, clients not only receive a software solution, but expert analysis and strategy for planning activities that will give the company a competitive advantage, but also significant ROI.
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