Operating Expense Analytics

Business Analytics the way we do it

Control and Reduce Enhancing Margins and Gaining Competitive Advantage Operating Expenses and The business environment has seen drastic changes in recent times, with increasing Gain Competitive competition, complex tax regulations and more rigid compliance norms designated by the government all having detrimental impact on companies’ bottom lines. This has Advantage Over Peers led to such corporations turning their attention to lowering operating costs within their by: decentralized operations through strategic analytics. • Acquiring visibility at a Today, the businesses that substantially outperform the competition are five times transactional level across more likely to use analytics strategically in comparison to underperformers. business units • Curbing financial leakage Controlling Operating Expenses: Typical Challenges for • Ensuring policy and the CFO contract compliance • Equipping line managers with tools to assume • A lack of holistic reporting across expense category level(s) and BUs ownership of their costs • Huge data sets with no tools for their analysis • Information failing to reach line managers for change implementation Studies show that a 1% • Scarce financial resources in both the short- and long-term decrease in operating expenses can increase profitability by up to ten times more than corresponding increase in revenue. Our Offer Capgemini’s Analytics solution provides a holistic service with actionable insights at a transactional level. As a result our clients gains granular visibility of each dollar of expense incurred by the organization and will be able to identify cost saving opportunities with effective multidimensional drill down analysis. This, in turn, allows effective prioritization of action areas.

Capgemini Value Proposition

Value Chain Actionable insight generation Capgemini Advantages Reduce and control operating Prescriptive analytics expense Access to scarce, high quality Increase compliance analytics resources and proven methodology enabling limited Predict expenses for client involvement and expedited Analytics Predictive analytics forecasting and budgeting implementation

Ensures an enterprise-wide approach to data management Visualization Improved visibility and analytics Reporting Key metrics and trends KPIs, metrics, performance, Enhanced process excellence impacting operating and effectiveness of trends, correlations expense decision making Data Preparation Indexed, organized Data prepared Reduction in internal costs through for analysis and optimized data leveraging the Center of Excellence Data Extraction platform Access to structured and Containers and feeds unstructured expense data: of heterogeneous data travel, telephone, utility bills Ability to handle huge data sets

Methodology and Approach

Income and Loss Statement Our focus area is operating expense categories with high flexibility of Sales control such as travel, utilities, office supplies, telephone, maintenance and Less Cost of Goods Sold repair, freight and logistics, power and fuel, and postage to identify easy Gross Proﬁt cost reduction opportunities. Operating Expense Sales & Marketing Typical Reasons for High Expense in Certain Categories: Research & Developement General & Administrative Travel Salaries and wages • Last minute booking Insurance • Booking through agents Depreciation • Failure to use company-approved hotels Commission Rent Telephone Travel • High usage per person Utilities • Non-compliance with office policy Ofce Supplies • Numerous service providers Telephone Maintenance and Repair Logistics Freight and Logistics • Under-utilization of truck capacity Power & Fuel • Non-optimal route Postage Total Operating expense Operating Income Less: Non Operating Expense Income (Loss) Before Taxes Key Service Highlights Deliverables As a strategic partner, Capgemini leverages its Analytics tools to enable companies • Limited client involvement to improve visibility of underlying activities that perpetuate their operating expense • Holistic reporting and and provide line managers with actionable insights to instill ownership cost behavior analytics within their teams: • Detailed, consistent, • Increase policy compliance by employee timely view of expenses • Enhance contract compliance by supplier • Visualization through • Decrease transaction costs Dashboard Sample Dashboard Sample • Root cause analysis This is a Sample of the OCM How many events? Scorecard. Exact model Were the cost effective? common web portal • Decrease expense through to be worked out once KPIs, Were they as per policy? Analysis, data sources, Is it within budget? Score weights are nalized Was the alternate way • Actionable insights for improved negotiation considered ?

reducing expense and Intra Europe Travel booked % Out of Policy Hotel Spend as per Policy A control within 14 days 1% 18% 20% 17% 16% increasing compliance 15% dashboard 14% 14% 15% 15% Spend Q1,Q2 2012% of in Policy 10% 10% 47.0 48.0 47.0 47.0 42.0 5% Spend Q1,Q2 2012% Out of Policy 41.0 37.0 41.0 44.0 accompanies our 35.0 40.0 39.0 • Easy access to relevant 30.0 0% January March May July Spend Q1,Q2 2012% Unknown 84% insights to improve Spend Q12012 Spend Q2 2012 Spend Q2 2012 information O11 N11 D11 J12 F12 M12A12 M12 J12 J12 A12 S12 O12 the visibility of % Out of Policy Quaterly % Spend Vs Policy Split by Booking Type Mobile Bills above Printed Pages In Count your company’s policy limit

Color BW operating expense by volume by value Online 84.0 67.0 71.0 69.0 73.0 65.0 65.0 68.0 61.0 63.0 59.0 50.0 58.0 6.5 6.6 situation. 134 80.0 221 74.0 76.0 193 72.0 73.0 75.0 4.2 4.6 71.0 70.0 4.1 248 223 69.0 68.0 68.0 3.9 113 3.1 3.1 184 247 60.0 2.5 60.0 106 225 104 58.0 2.0 221 1.7 1.7 240

0.3 903 738 1097 768 530 566 963 414 1247 474 687 1271 537

O11 N11 D11 J12 F12 M12 A12 M12 J12 J12 A12 S12 O12 O11 N11 D11 J12 F12 M12 A12 M12 J12 J12 A12 S12 O12 O11 N11 D11 J12 F12 M12 A12 M12 J12 J12 A12 S12 O12 Success Stories Outcome: Helped Leading CPG company Reduce T&E Expense Analytics and Construction Their Operating Expense by 8% of Centralized Web Portal Executed for Leading European Paper Company Challenges Faced by the Client: • Limited alignment across teams on inputs or outputs Challenges: • Suboptimal use of scarce financial resources • Limited visibility of T&E expense across different • No “common approach” - risk of inaccurate/duplicated EMEA regions data • Frequently exceeding budget and absence of proactive tool • Information continuously failing to reach line manager level and analytics for tracking.

Approach and Solution Approach and Solution • Analysis of operating expenses like travel, telephone, • Drill down of travel expenses into: cars, lodging, business stationary, conference, logistics, based on non- conferences, business meals, travel agency fees, fuel financial data. etc., across EMEA regions to help identify outliers/high • Analysts provided actionable insights: expense areas –– Top employees and teams driving policy noncompliance • Visibility of actual vs. budgeted expense on a monthly basis and high expense across various categories for each category across regions to identify variances –– Existence of expenses with scope for reduction in • Profiling of T&E expense by employee for monthly expenses particular BUs and actual vs. budgeted expense to drive policy compliance –– Savings achieved by using video conference vs. traveling to other locations Major CPG Company Benefits from Reduced –– Savings lost due to policy noncompliance (e.g. staying in Logistics Costs, Reversing Previous Stagnation a hotel above budget, last minute bookings) –– Comparison of team average spend with overall Approach and Solution average spend • Capgemini identified the following key levers: (1) buy smart; (2) source locally (3) optimize resources; (4) increase utilization; (5) avoid waste (6) travel less • Reduced logistics costs achieved through: improved truck utilization, transition from buffer movements, optimum regionalization, cross border movement avoidance, and direct dispatch push. Business Analytics the way we do it

The Capgemini Experience Analytical Tools and Our teams are led by senior practitioners and are recognized as specialists Capabilities in their respective fields. The Operating Expense Analytics team has a strong analytical background comprising MBAs, finance graduates, Masters • Huge data sets handled by our SQL in Statistics, with experience in strategy, consulting and finance. data warehouses • Efficiently analyzed using statistical Our clients get lasting value because we engage directly and meaningfully with tools like stakeholders at each level of the enterprise – from boardroom to shop floor and warehouse.

Our Other Analytics Offerings • Visualization-focused business Revenue Assurance Expense Analytics intelligence Analytics to help reduce to reduce leakage wastage and from order improve to cash margin process

For more details contact: Terry Sandiford [email protected]

Working Control About Capital Analytics Analytics Capgemini to help improve to help reduce Cash Flow business risk With more than 125,000 people in 44 countries, Capgemini is one The key components of the CFO Analytics solution include: of the world’s foremost providers Revenue Assurance Analytics: of consulting, technology and outsourcing services. The Group • Improved customer query to order conversion reported 2012 global revenues of • Enhanced credit and collection performance EUR 10.3 billion. • Reduced billing leakage and more sell-ons Together with its clients, Expenses and Payables Analytics: Capgemini creates and delivers • Recovery of erroneous or duplicate payments business and technology solutions • Increased compliance with procurement policy that fit their needs and drive the • Informed views of global spend results they want.

Control Analytics: A deeply multicultural organization, Capgemini has developed its own • Dynamic real-time monitoring of key controls way of working, the Collaborative • Predictive leading indicators to prevent failures Business Experience™, and draws • Lower cost of better, broader risk mitigation on Rightshore®, its worldwide Working Capital Analytics: delivery model. • Optimized treasury performance Learn more about us at • Reduced write off of stock and bad debt www.capgemini.com • Effective use of discounts and promotions