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```					                                Jaros

KPI Design and Implementation
by
Paul Scheibal
KPI Design and Implementation - Agenda

o   Introductions
o   KPI Example – Working Capital
o   KPI Design and Implementation
o   KPI Demonstration
o   Q&A
KPI Example – Working Capital

KPI Example – Working Capital
KPI Example – Working Capital

Working Capital Performance KPI’s

• Important in most businesses
• Can get off most Income Statements
and Balance Sheets
• Published standards for WC numbers
by industry
• Dell Corporation knows WC
KPI’s in More Detail

Working Capital Performance KPI’s

• CCC (Cash Conversion Cycle)

• AR - Open Receivables
• AR - Credit Sales
• AR - DSO (Days Sales Outstanding)

• AP - Open Payables
• AP - Spend or COGS
• AP - DPO (Days Purchasing Outstanding)

•   INV - Cost of Goods Sold
•   INV - Inventory Value
•   INV - Inventory Turns
•   INV - DIO (Days Inventory Outstanding)
KPI - Accounts Receivable

Working Capital Math 101 - AR

DSO = Accounts Receivables / (Credit Sales / 365)

The lower the number the better. For example, If your DSO is
40, then the average number of days it takes to collect on
receivables is 40 days. That means your financing your
customer’s cash for 40 days.
KPI - Accounts Payable

Working Capital Math 101 - AP

DPO = Accounts Payables / (COGS / 365)

The higher the number the better. For example, If your DPO is
40, then the average number of days it takes to pay a bill is 40
days. That means your vendor is financing your cash for 40 days.
KPI - Inventory

Working Capital Math 101 - Inventory

Inventory Turns = Yearly COGS / Period End Inventory Value

The higher the number the better. Companies calculate COGS
differently. Some annualize COGS or use rolling 12 months.

DIO = 365 / Inventory Turns

Tells how long items sit in inventory. Lower is better.
KPI – Cash Conversion Cycle

Working Capital Math 101

CCC = DSO + DIO – DPO

The smaller the number the better. Negative
CCC means you sell something to a customer
and get the cash for the sale before you have
to pay your vendors. Each industry has published
CCC numbers to be used as benchmarks

CCC highlights how well a company manages its
supply chain.

Dell has always been very good at this.
KPI Example – WC - Cash Cycle

Inventory

Accounts                        Accounts
Payable           CCC           Receivable

Cash
KPI Design and Implementation

KPI Design and Implementation
Reporting / Dashboards / KPI’s / Strategy
Reporting / Dashboards

Drill Path

KPI Data Model

FSG Data Model

General Ledger / Sub Ledger Data Model

Transactional Data Model
FSG – What Management Knows as Truth

• Row Sets (Rows) - Dimension
• Set of Accounts (GL Balances)
• Calculation
• Period - Dimension
• Budget or Actual - Dimension
• Set of Books – Dimension

• Column Sets – Metric Value
Breakdown of Inventory KPIs

WC – Inventory Turns, DIO

Cost of Goods Sold                         Inventory Value

Sub-Ledger                                   Sub-Ledger
General Ledger                               General Ledger
Transactions                                 Transactions

GL Balances    MTL Material Transactions     GL Balances      On Hand Quantities
GL Headers     MTL Transaction Accounts      GL Headers       Item Costs
GL Lines                                     GL Lines
KPI Model – Single Table

KPI Column
PERIOD_VALUE
PERIOD_TYPE
KPI_CLASS
KPI_NAME
KPI_ACTUAL_VALUE
KPI_PLANNED_VALUE
KPI_PERCENT_ATTAINMENT
KPI_DRILL_ATTRIBUTE1 - 10
KPI Model – Single Table

PERIOD_VALUE   PERIOD_TYPE        KPI_CLASS                KPI_NAME              KPI_ACTUAL_VALUE   KPI_PLANNED_VALUE
Backlog             Booked (not Shipped)           923.97818
Accounts Payable             Open AP \$                8477.77635
Accounts Receivable           Open AR \$                 42192.567
Accounts Receivable     Open AR (61+ Days Old)          42192.567
2-Feb         PERIOD      FSG - Income Statement          Net Sales             21720780.55          22000000
2-Apr         PERIOD      FSG - Income Statement          Net Sales             22976749.3           22000000
2-Jan         PERIOD      FSG - Income Statement          Net Sales             20787848.45          22000000
2-Mar         PERIOD      FSG - Income Statement          Net Sales             23600349.64          22000000
2-May         PERIOD      FSG - Income Statement          Net Sales             26189956.35          22000000
2-Feb         PERIOD      FSG - Income Statement     Cost of Goods Sold         11573221.78          12000000
2-Apr         PERIOD      FSG - Income Statement     Cost of Goods Sold         16577141.16          12000000
2-Jan         PERIOD      FSG - Income Statement     Cost of Goods Sold         12860329.29          12000000
2-May         PERIOD      FSG - Income Statement     Cost of Goods Sold         16818850.31          12000000
2-Mar         PERIOD      FSG - Income Statement     Cost of Goods Sold         16297571.77          12000000
2-Apr         PERIOD      FSG - Income Statement     Operating Expenses         5954034.54            6000000
2-Feb         PERIOD      FSG - Income Statement     Operating Expenses         11140687.59           6000000
2-Mar         PERIOD      FSG - Income Statement     Operating Expenses         6605636.04            6000000
2-Jan         PERIOD      FSG - Income Statement     Operating Expenses          5582273.31           6000000
2-May         PERIOD      FSG - Income Statement     Operating Expenses          5439291.01           6000000
Backlog             Expected Ship \$            923.97818
Backlog          Entered (Not Booked)           10.196
Accounts Payable      Open AP (Due in 30 days)      8477.77635
Inventory KPI Drill Path

Period, KPI Class,             WC – Inventory Turns, DIO KPIs
KPI Name                              FSG / non-FSG

Period, Account Structure,
Set of Books                      General Ledger Fact Table

Inventory COGS                 Inventory Value                  Inventory Turns
Details                        Details                          Details

Sub-Ledger and Transactional Details

Period, Account Structure, Set of Books, Item,
Inventory Org, Operation Unit, Transaction Type, ….
KPI Model – Benefits

•   Simple Approach
•   KPI’s in Multiple Dashboards
•   Single Version of the Truth
•   Have underlying Drill Details
•   Self Documenting
KPI Demonstration

KPI Demonstration
Main Dashboard with KPIs

Click
here
Drill to AR Aging Summary

Click
Here
Drill to Open Receivables Summary

Drill To AR Invoice Details
KPI Design and Implementation – Q & A

Q&A

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 views: 1 posted: 11/23/2011 language: English pages: 24