One of Oracle’s more recent product offerings in the Enterprise Performance Management Suite is known as HPCM or Hyperion Profitability and Cost Management. This blog post will provide a high-level overview of HPCM from both a functional and technical point of view. The hope is that using the information within, the reader can see if and where HPCM could fit into their organization. This is the first post of a series about HPCM, where future posts will dive into more granular details.
…”Profitability and Cost Management (PCM)” is rather self-defining. It is in a company’s best interest to collect and analyze their profitability and cost data in an accurate and timely manner so that the company can make informed business decisions based on that data. If management of a retail corporation were presented with a dashboard depicting the profitability of their locations, they could better focus their attention on turning around stores that are less profitable and learning from the stores which are more profitable. Perhaps a manufacturing company has received a directive from their board that they need to increase margins. At the fear of losing customers they decide raising prices is not the answer, but rather they should lower costs. To have a tool at their disposal to help them identify that one of their suppliers of raw material has a higher cost than the others would immediately put them on a path to success.
All of the above are perfect use cases for HPCM. Especially today in a business environment of constant economic pressure, it is more important than ever for an organization to have insight into this valuable information. Those companies will be better equipped to take action and excel in their industry while their competitors may fall behind.
Some questions immediately surface: What makes HPCM different than Activity-Based Costing (ABC) or Time-Based Costing (TBC) or other methods that are available to manage profitability? The answer may vary by personal opinion and experience but two things are clearly different:
– Oracle’s HPCM software is the best of all worlds. It supports ABC, TBC, and other custom costing methods.
– Profitability and Cost Management has always been an important tool but the current economic times only stress the importance of lean operations.
Companies that are already equipped with and actively using a PCM solution (Oracle’s or any other) or companies who are implementing such a solution now or in the near future, will certainly come out ahead and continue to keep a competitive advantage in their industry.
…Why Oracle’s HPCM software? Oracle has leveraged the best of its technologies in the architecture of this product. HPCM shares a build similar to Hyperion Planning where the application meta data is stored in a relational database and then leverages Essbase for data storage and calculation. For those of you more familiar with Essbase, HPCM leverages a Block Storage application to process the allocations and later transfers that data to an Aggregate Storage application to perform the aggregation of the data for reporting. This is a strategy that has long been manually implemented by consultants which Oracle has now recognized and built as native functionality in HPCM. Additionally, HPCM uses a relational database component to house the assignments, drivers, and other model information making it easy to load, update, and review. Additionally in the latest release (220.127.116.11), Oracle has introduced “Detailed Profitability” which leverages a relational database to store and calculate data for customers whose dimensionality is more robust shall we say. By leveraging the relational database, Essbase limitations, particularly in the BSO world, are no more.
Oracle’s Hyperion Profitability and Cost Management software provides a business with the ability to put profitability and cost analysis back in the hands of the users. Once deployed, HPCM requires no custom coding to update or process. The user chooses the source and target of an allocation as well as the method by which to allocate and with the click of a button, HPCM will generate the calculation code on the back end. HPCM will calculate an allocation from GL to Departments, from Departments to Activities, from Activities to Products, and then directly back to the GL, providing actionable insight galore. When an HPCM solution is properly designed and deployed, the use is truly just about as simple as described above.
We hope that this brief introduction to Profitability and Cost Management has sparked some interest and we will continue this Series of blog posts diving into the intricacies of the product soon!
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