Best Practice in Corporate Performance Management at DHL Express: Gain an INSIGHT into Yield and How It Drives Analytics

Transcription

1 Best Practice in Corporate Performance Management at DHL Express: Gain an INSIGHT into Yield and How It Drives Analytics Graeme Aitken, VP Business Controlling, DHL Express Americas

2 THE HISTORY OF DHL 1969 Armstrong, Aldrin & Collins make the moon a little closer - by landing on it; Dalsey, Hillblom, Lynn start a shipping service from San Francisco to Hawaii..and make the world a little smaller; DHL designs first package tracking system First to guarantee next day delivery between EU & Middle East DHL introduces Easyship for PC Deutsche Post acquires other 75% of DHL DHL opens new $175M North Asia Hub in Shanghai DHL is 40! years old & 85,000 customers DHL establishes the first Express Logistics Center Deutsche Post acquires 25% of DHL, providing investment for a new fleet 30th anniversary global market share for international air express of >40% CFO Corporate Performance Management Conference 2013 DHL Express Page 2

3 DHL FACTS AND FIGURES 40 YEARS LATER, THE RAW DATA IS IMPRESSIVE. 120,000 destinations served in 220 countries and territories; >100,000 employees (DP DHL is one of world s biggest employers); >4500 facilities; >32,000 vehicles; Guaranteed access to ~250 aircraft worldwide; >1,700 individual flights per workday; 3 state of the art global Quality Control Centers (QCC) monitoring shipments 24/7/365; The Logistics Company for the World CFO Corporate Performance Management Conference 2013 DHL Express Page 3

4 THE CHALLENGE: ACTIVITY BASED MANAGEMENT (ABM) IN DHL In a highly competitive industry which spans the globe, accurate and timely data is key to competitive advantage! DHL collects, and customers demand, lots of real-time data on every shipment as it travels the world DHL has built ABC models since the early 1990s and many commercial tools around them Despite enhancements over time, limitations remained Limitations no reconciliation to financial results outdated and subjective data typically 1-2 years old costing based on standards creates limitations for meaningful analysis no useful distinction between fixed and variable costs creation of a cost-plus pricing culture CFO Corporate Performance Management Conference 2013 DHL Express Page 4

5 INSIGHT THE AIMS DHL is in a transaction based service industry the costing challenge is very different to manufacturing DHL customers are never standard! Consistency of a single, worldwide costing system reconciling to the global P&L Improved pricing management with up-to-date & accurate cost data. Enhanced capability for profitability improvement INSIGHT Activity Based Costing Streamlined and effective cost management with detailed drilldown capability Cost effective & flexible upgrades to methodology and infrastructure on a central platform with operational rule-based algorithm Eliminate expenditure savings on legacy via reduction in databases, data duplication, maintenance, run and development; Sustainable solution: Perfect enabler for many new (future) initiatives CFO Corporate Performance Management Conference 2013 DHL Express Page 5

6 INSIGHT THE ARCHITECTURE Existing Systems Operational Scan Database Billing Records General Ledger Country Specific Reference Data INSIGHT User Interface Pre- Processing FAIL Validation PASS Teradata Value Analyzer (TVA) Calculation Engine IBM Cognos Post- Processing & Validation FAIL PASS INSIGHT Data Warehouse NON-STOP ITERATIVE SCHEDULING DURING KEY WORKDAYS CFO Corporate Performance Management Conference 2013 DHL Express Page 6

7 INSIGHT DIFFERENT LEVELS OF COMPLEXITY For larger countries, INSIGHT is scalable (increased accuracy): multiple facilities and detailed general ledgers; more cost granularity, e.g. on-site couriers, dedicated trucks; more resources available to maintain the system; For smaller countries, INSIGHT is plug & play, with no user interaction required. It uses fewer costing rules, but unlike legacy apps, costs reconcile and data is reliable and timely; REGULAR Direct link to central P&L and limited detail; Fewer, but automated costing rules; No country interactions; CUSTOM Interface to local GL allows greater cost granularity; Results at facility level, e.g. Sydney v Melbourne; 3rd party dbases; Non-standard services/ customer info directly linked; Local country maintenance of reference data required v standard version; CFO Corporate Performance Management Conference 2013 DHL Express Page 7

8 INSIGHT CURRENT STATUS AND 2013 PRIORITIES INSIGHT in full production since January 2011 Sunset of legacy systems COMPLETE Top 20 countries upgraded to custom version Data is in ACTIVE use by certain functions 2013 closer to the business UPWARD SPIRAL OF DATA QUALITY Issue Fixed Issue Fixed Data Issue maximum data quality platform for cost management enhancing pricing & yield management Data Quality Data Issue CFO Corporate Performance Management Conference 2013 DHL Express Page 8

9 INSIGHT WHAT DO WE USE IT FOR? Provides revenue, cost and profitability info for every shipment passing through the DHL network Profitability Reporting Margin Management Customer Compliance Enabler for ABM Beyond Ops INSIGHT INSIGHT Activity Based Costing Carbon Accounting Cost Management Operational Benchmarking Tradelane Control perfect enabler for many initiatives none are new, but all can be more effective. CFO Corporate Performance Management Conference 2013 DHL Express Page 9

10 Business Development INSIGHT KEY LESSONS LEARNED Be Patient Don t over-commit requirements or timelines and don t promise vague benefits. INSIGHT business case promised ONLY hard saving on run/upgrade versus legacy - no fantasy claim of theoretical commercial benefit; Get Board Level Sponsorship Ensure there is a motivated and engaged board level sponsor/champion; Link Project to Business Ensure buy-in of all functions and ensure business is closely involved in development, meeting regularly in person; Stay Realistic Consult, but take hard decisions on design it may not please everyone. Avoid overengineering to achieve perfection. Needs expert overseeing system architecture. Change Management Big bang deployment worked for DHL, with a culture change to restrict access/use of costing data. Prepare for change management; No Exceptions Be brutal with sunset of legacy applications; Post Some Quick-Wins Post-deployment, get some tangible quick-win successes to the board level; Don t Rush System stability & accuracy is not instant takes time to get high-levels of accuracy & performance. Protect the reputation/integrity of the system until achieved. CFO Corporate Performance Management Conference 2013 DHL Express Page 10

11 INSIGHT EVOLUTION OF THE BUSINESS RETURNS Proactive Business Analytics One Version Of The Truth Capacity Analysis Fixed, Variable, Target Costs Planning & Forecasting What If? Simulation Predictive Analytics Action NOT Analysis Ongoing focus on active use of the data to drive decision-making and profitable growth. Reactive Business Reporting Accurate reporting of cost/profitability at country, customer, product, tradelane level and begin improvement actions. Faster and better decision making Work Processes & Efficiency Infrastructure Reduce workload and non-value added activities & analysis >7,000 man days removed from costing function. Sunset legacy applications complete. > 0.5M cost saving. CFO Corporate Performance Management Conference 2013 DHL Express Page 11

12 REALIZING THE BUSINESS BENEFIT 1 RED/YELLOW CARDS Definition Business that is trading below variable cost Revised pricing offer to achieve a positive VM or/and Action Internal cost review to increase efficiency Business with too low profitability and/or an unattractive profile Revised pricing offer to increase margin or/and Process review to reduce costs (on either side) CFO Corporate Performance Management Conference 2013 DHL Express Page 12

13 REALIZING THE BUSINESS BENEFIT 2 CAPITAL INVESTMENT Before undertaking capital expenditure decisions, cost and profitability impact is a key consideration, to ensure scarce resources are allocated correctly Rebalance the volumes and yields on existing aircraft to maximize current asset returns Investment in additional aircraft to expand uplift capability. Understand speed of payback, risks and opportunities. Ability to forecast/simulate for profitable growth CFO Corporate Performance Management Conference 2013 DHL Express Page 13

14 FINALLY - BEYOND INSIGHT BICC & EDW INSIGHT proved that globalization of a fragmented system was (a) even possible and (b) cost effective Other non-standard applications become obvious targets for centralization and streamlining Cross-functional BICC established in 2010 to ensure global alignment of BI investment decisions and development effort Multi-phase EDW program is in progress to create a global management database across all key functions Level 1 Unaware Total lack of awareness Spreadsheet and information anarchy One-off report requests Level 2 Tactical No business sponsor, IT executive in charge Limited users Data inconsistency and stovepiped systems Level 3 Focused Successful focus on a specific business need Funding from business units on a project-by project basis BICC in place Specific set of users is realizing value Level 4 Strategic Business objectives drive BI and performance management strategies Deploy an enterprise metrics framework Governance policies are defined and enforced Establish a balanced portfolio of standards Level 5 Pervasive Information is trusted across the company Use of BI is extended to suppliers, customers and business partners Analytics are inserted into and around the business process Source for Maturity Model only: Gartner CFO Corporate Performance Management Conference 2013 DHL Express Page 14

15 THANK YOU FOR LISTENING CFO Corporate Performance Management Conference 2013 DHL Express Page 15