Outokumpu - boosting profitability management

Cost transparency and a clear outlook on profitability

In 2007 a vertical profitability system project (VPS) was launched at Outokumpu. The goal was to make the vertical profitability of the entire production chain transparent - covering every step of the way from raw material to the end customer. With VPS, Outokumpu could move from concentrating on local transfer prices to considering actual costs accumulated in the entire production chain.

Outokumpu's VPS project included a number of initiatives: modelling of unit costs (cost drivers), information consolidation, carrying out reports, change management, training and finally moving from project stage to day to day business operations.

Affecto was in charge of both creating Outokumpu's VPS reporting environment and implementing the reporting practises. With VPS, Outokumpu is now able to obtain detailed insight of not only unit profitability, but also the profitability of individual customers and products, and get an across-the-board picture of how the overall profitability of the supply chain is developing.

First, cost models and invoice data are entered into the system, after which users can efficiently utilise this data to create a range of reports and analyses. Outokumpu analysts and managers are given access to information through the company intranet depending on their needs and can thus make full use of the data in their decision making processes.

Ease of use

Outokumpu's requests for their VPS were all but simple. The company needed a versatile range of reporting tools and, moreover, information analyses needed to be set up to accommodate the needs of professionals examining the data from various different perspectives. According to Outokumpu's VPS Expert Antti Saarela, ease of use was a top priority.

Information analyses from various points of view were enabled by creating an intuitive user interface layer. To support accounting standards, an online documentation system was developed, which allows the end user to see how each key figure or measure has been calculated.

Longsighted development work

With VPS, Outokumpu decision makers have access to wide-ranging business information. They are fully aware of vertical profitability figures and can make use of detailed data regarding the profitability of, for example, different business units, geographical locations, product groups and customers.

"Now, information is created to support decision making. Hence we are able to identify the most profitable products or other best business options," says Saarela.

Once the VPS project stage was concluded in the beginning of 2009, a Vertical Profitability Office, VPO, was set up with the task of stabilizing and further developing the system and expanding its use through training, change management and leadership. In the future Outokumpu intends to make VPO a permanent part of its financial management organisation and keep developing the system based on user feedback.

Affecto was in charge of developing Outokumpu's VPS system's reporting environment using Cognos Business Intelligence tools, and implementing the reporting system in cooperation with Outokumpu experts, August Associates and Astrada.

The solution

Vertical Profitability System, VPS. Affecto was responsible for both the development of Outokumpu's VPS reporting environment - using Cognos Business Intelligence tools - and implementing the reporting system.

Benefits

Across-the-board, detailed business information:
- Profitability figures of the entire order-delivery chain
- Information of the profitability of different units, customers and products