Profitability Analytics For The Paper Industry
Business analytics for strategy development and continuous improvements
The international multi-billion dollar wholesaler of paper products had grown primarily through acquisitions. Multiple ERP-systems and different reporting structures/principles made it hard to compare different markets and to make the right analyses that were needed to develop a new corporate strategi for growth and profitability. Questions such as “Which are the factors that are driving the profitability?”, “What is the real, comparable, profitability for different products, markets or customers?”, “What’s the impact on revenues and profitability from discounts and incentives?” were very hard to answer let alone to follow up.
The firm decided to use Profitability Navigator and Establish after a comprehensive evaluation process of the tools offered on the market and a plentitude of consulting firms. The final deciding factor was the high level of flexibility and adaptivity needed for the specific situation.
A good preparation work from the client meant that the desired dimensions and analysis structure were identified and the work could initially focus on available data sources and what formulas and algorithms to use to best model the activity based costs.
To align the different reporting structures and ERP-systems Establish developed transformation tables. When all markets later were transferred to the same ERP-system the tables facilitated the implementation.
Two major challenges were the result validation and the data quality. To make the results usable and relevant they had to be owned by the markets, which demands that the markets can validate the results. Validation reports comparing ingredients of the results with familiar data paired with training made this possible.
The shifting quality and reliability of the data is a challenge that was met with cleansing filters in the Profitability Navigator and the possibility to use different algorithms depending on what data is available and reliable.
A big and complex component in the profitability analysis that has added a lot of value is the module for handling of incentives and discounts both to customers and to suppliers.
The Profitability Navigator was introduced in Sharepoint as a tool for the executive management and the board for strategy development and to improve their understanding of the profitability drivers. The controllers and local markets use the Excel-version that allows more detailed and customized analysis of details in their respective business.