Profitability Management

The Importance of Cost and Profitability Reporting

Common Profitability Challenges

  • Unable to identify which customers / channels / sectors / products are truly profitable
  • Unable to easily calculate true “cost to serve”
  • Unable to identify true profitability drivers within the business
  • Manual allocations of overheads are time consuming and difficult to trace-back
  • Allocations of shared services / head office costs are un-equitable
  • Unable to understand what is driving our shared services costs
  • Cannot identify where to cut costs without adversely impacting customer service

Stakeholder Vision

  • Understand what drives costs
  • Know exactly where profit is made
  • Optimise resources
  • Keep shared services aligned
  • Flexible solution which is owned and managed by Finance
  • Future proofed scalable solution
  • Profitability information in a timely manner to enable informed business direction decisions to be made

What is SAP PCM? (Profitability and Cost Management)

  • An in-memory solution which calculates allocations in real time.
  • Stand alone – does not use NetWeaver or HANA, but can be interfaced into BW using FIM / Data Services / DB Connect
  • Can be simple allocations through to Activity Based Costing methodology, dependent on the level of data available.
  • Is highly scalable and can manage high volumes of data
  • Quick “what if analysis” can be performed
  • Integration with other EPM applications
  • Owned by Finance rather than IT

Positioning of PCM with other SAP applications

PCM positioning with SAP

Uses of SAP PCM

  • Reduces month end performance impact of allocations within SAP ECC (eg CO-PA / CCA assessment cycles)
  • Can perform simple allocations through to complex waterfall type allocations utilising either simple rules or more complicated activity based costing methodologies.
  • Suitable for  (examples only):
    • Service Industry (shared service cost allocations)
    • Retail (shared service costs, head office cost allocations, store profitability)
    • Banking (branch profitability, product profitability, allocation of head office / shared service costs)
    • Manufacturing (cost to serve allocations, shared service cost allocations, channel, product , customer profitability)
    • Public sector (shared service cost allocations, facilities cost allocations)

Solution Architecture

PCM Solution Architecture