In-Memory Technology to Achieve Customer Profitability Calculation, Reporting and Analysis

PCS Consulting utilizes In-Memory technology to calculate, report and analyze customer profitability at the transaction costing detail, on-demand as-needed, without storing results data.

The "Large Data" Design Challenge

To calculate, analyze and understand the components of customer profitability for a large courier company with hundreds of thousands of customers and hundreds of millions of monthly service activity transactions requires an excessive amount of results data storage (e.g. 500 million to a billion records each month) and calculation capacity to accomplish with traditional activity-based costing technology.  With traditional data base tools and activity-based costing applications, predetermined aggregations of activity transactions and customer groupings would need to be made.  The problem with this approach is, which customers to group together, at what level, and for what reasons is not easy to determine.  Not all customers or products in each predetermined group have the same costs, and as the business changes and/or the analysis need changes, major effort is required to re-architect the costing and reporting logic to reflect the changes.  For large consumer retail companies, and those not so large, the past approach of aggregated customers and products is not acceptable, and the large amount of data storage and calculation capacity to calculate, store and report on the vast volume of calculated results is not feasible.  This was the conclusion for our client.

In-Memory Solution

The requirement was to avoid the problems of  pre-determined aggregated customer profitability and the excessively large results data storage alternative.  In addition, we needed to provide greater visibility into both the source of costs and provide flexible stratification analysis of costs, revenue and profitability across many dimensions and attributes.  PCS Consulting architected a design that leverages the strengths of two solutions; the SAP Profitability & Cost Management (PCM) activity-based costing software with the power and the “in-memory” calculations and dashboard analysis capabilities of the QlikView software from QlikTech.

The SAP PCM application is used to model and calculate all of the costs of the organization down to the activity transaction driver costs for each activity driver, responsibility center and line item combination.  Detail activity driver transaction records are aggregated to the responsibility center / activity driver level and the volume loaded into PCM as activity driver volumes.  This results in a relatively small activity driver rates table. 

The activity driver rates table is loaded into QlikView, the in-memory reporting and analysis application already being used by the company.  The QlikView application applies the PCM activity driver rates to each matching activity driver transaction record loaded each month.  QlikView compresses these files with a 10 to 1 compression ratio then multiplies the activity driver rates (activity driver cost by resource center by line item) by each activity driver transaction record to arrive at the individual activity transaction driver costs.  As the end user chooses the customers, products, etc. to view, the rate times volume calculations are performed on-demand.

Using the QlikView application, dashboard views are created to provide the end users the ability to view cost and profitability information at almost any level of detail.  The most common views (85%) are pre-calculated with aggregates and stored within QlikView files for instant results by end users.  More in-depth views, drilling down to lower levels of detail from the resource cost or down to specific transaction volume detail level, are calculated on-demand as-needed, within a few seconds.

Benefits

The result of combining the strengths of the Activity-Based Costing functionality of the SAP Profitability & Cost Management (PCM) application with the In-Memory calculation and analysis capabilities of the QlikView application provides significant advantages:

  • Eliminates the need to aggregate customers, products, etc, (cost objects),
  • Significantly reduces the data results storage required,
  • Profitability information provided is more accurate,
  • More dynamically reflects change over time without requiring redesign,
  • Provides a more transparent view of costs and sources of them,
  • logical and defensible costing methodology, as users can drill down to see what is driving the costs and profit calculations
  • Increased ability to analyze and answer "why" not just "what"

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