Many organizations are finding that the traditional approach to annual budgeting doesn’t provide the agility needed to adjust strategies and reallocate resources considering changing business conditions. In response, they are rethinking their approaches to planning, implementing rolling forecast and other techniques to dynamically plan and adapt to changes in the global economy, regional demand and other forces.
This was the focus of a recent webinar featuring Matthijs Schot, Financial Planning & Analysis Manager at OneStream customer A.P. Moller-Maersk. The webinar was hosted by 1Company, a digital forum and think tank for Finance executives based in Sweden.
A Complex, Networked Business Model
A.P. Moller - Maersk (Maersk) is an integrated transport and logistics company with multiple brands and is a global leader in container shipping and ports. Including a stand-alone Energy division, the company generated over $30B in revenue in 2017, and employs roughly 88,000 employees across operations in 130 countries. The Transport & Logistics division consists of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry. It operates 640 ships, via 73 ports around the world with a highly networked business model.
Prior to 2010, the company’s planning process included strategy and capital allocation, 12-month + 4- year budgeting at the legal entity level, and operational target-setting. Full year estimates were performed quarterly, and business review meetings focused on actuals and the full-year estimate.
Maersk found there were several issues with its existing planning process. The budget process had conflicting purposes: mixing 3 different processes into one aggressive target setting, resource allocations and creating a realistic forecast. As the process was done once a year it was slow to adapt to changing business conditions, the bottom-up forecasting process was very demanding, and there was too much focus on the current fiscal year, not enough on longer-term planning. This structure also didn’t provide the structure needed to make investment decisions.
Rethinking the Planning Process
In rethinking the planning process, Maersk wanted to increase visibility into the future, but most importantly improve agility to adapt to the changing environment, enhance control, and simplify the process by eliminating unnecessary details. The new process they designed had several key components:
- Quarterly Rolling Forecast: looking 5 quarters out at the Business Unit (BU) level, on about 35 key input accounts
- Strategy and Business Plan: 5-year strategy and business forecast at BU level, which included board-approved investments and dynamic allocation of capital
- Target Setting: 1-year basis, with 2 financial KPIs, and 3-4 KPIs per BU, featuring aggressive targets used for compensation purposes
The new process accommodated the different business and management models used throughout Maersk, such as centralized top-down planning at Maersk Lines and bottom-up planning at APM Terminals. These decentralized models feed into one consolidated model.
The new process yielded several benefits to Maersk, including:
- Simplification using aggregated data
- Improved visibility into operations
- Performance discussions 30% backward/70% forward-looking
- Agile decision-making
- Better, more informed targeting
- Dynamic capital allocation
- Increased autonomy and ownership by BUs
Migrating to OneStream
Maersk had been using Oracle Hyperion Financial Management (HFM) for reporting and planning and was running into a number of issues. Upgrades were long and costly, performance was poor given the level of customization, and the system was fragmented with multiple instances deployed to support the planning and reporting requirements of corporate vs. the various business units.
Maersk evaluated several alternatives and selected OneStream based on its ability to unify actuals reporting with planning and forecasting, lower total cost of ownership (TCO) compared to Hyperion, and faster processing capabilities. Other key features include strong process control, advanced dashboarding and reporting, the ability to extend their investment with XF MarketPlace solutions, and advanced allocation capabilities.
Some of the key capabilities of OneStream that Maersk is taking advantage of include:
- Extensible Dimensionality – supporting corporate and BU requirements in a single system
- Easy Upgrades – like an iPhone, fast and easy
- Automation of cash flow reporting and dynamic balance sheets
- Integrated Financial Data Quality – specifically the staging of data and validation prior to loading the financial model
- Drill down and drill through to ERP systems
- Allocations of top-level adjustments across the reporting hierarchy
- Sandbox for what-if analysis and modeling
In summary, Matthijs Schot commented that moving from annual budgets to rolling forecasts has a number of Finance and business advantages. He also noted that moving to rolling forecasts is a major change project that should not be taken lightly. And to support a more dynamic planning process having the right software tool, that has the required flexibility, and provides enhanced visibility into the data for both corporate and business unit staff is critical.
To learn more, watch and listen to the webinar replay here:
John O’Rourke is Vice President of Product Marketing at OneStream Software. With a background in accounting and finance, John has over 30 years of experience in the software industry, including 20 years of experience in product marketing at Hyperion Solutions, Oracle and Host Analytics. He has worked with many customers and partners on financial reporting and planning initiatives and has spoken and written on many topics in corporate performance management. John has also held positions in strategic marketing and product marketing at Dun & Bradstreet Software, Kenan Systems and Decisyon. Find me on: