Jaguar Land Rover (JLR) has overhauled and integrated its financial planning systems to gain process efficiencies and provide more accurate forecasts for the business.
With the lead time involved in designing and manufacturing its luxury vehicles, the automotive company's business plan relies on it being able to plan effectively what and how many vehicles to make, and which markets to allocate the vehicles to, to satisfy demand.
The company is also under increased pressure to provide better financial plans because of the current strong sales performance of its two brands. In the first six months of 2013, it sold 14 percent more vehicles than in the same period last year.
‘A painful mess’
However, JLR was dogged by financial planning, budgeting and forecasting problems. The problems stemmed from Tata Motors’ 2008 acquisition of the Jaguar and Land Rover businesses from Ford, which involved the transfer of more than 1,500 legacy – many Microsoft Excel-based - systems into the JLR business.
Two years ago, JLR therefore began an initiative to integrate its planning and forecasting processes for sales volumes by market and model, with its financial planning and forecasting processes. The work was underpinned by Oracle applications Hyperion Planning and Hyperion Financial Management.
Adrian Cadman, corporate finance controller for JLR, told the UK Oracle User Group's Apps 13 conference in London that one of the first things the company did was decide to focus on producing four “really accurate forecasts” instead of the 12 “not very accurate” forecasts that it was doing each year.
One of the challenges JLR faced in 2011 was that it was receiving data from the 200 markets it operates in, in the form of spreadsheets.
“It was just a mess, a real, painful mess,” said Cadman.
“Ultimately, what we wanted to do was bring it all into one, global source of data that people could access and utilise. That was a challenge.”
The company's business plan was also too static, Cadman said. “As soon as I got the business plan signed off things changed, a new vehicle was coming.
“I needed something that could make our planning process more alive, living and breathing as our business changed and developed.”
The 'living' business plan
Before the systems overhaul, Cadman said that it would take many months for JLR to do a gap analysis of the market, plan what it would produce, get this approved and predict how many of the vehicles it would sell.
“This process would take in the region of nine months, 15 man years of effort. [It was] too long [and we were] not getting anything value-added,” he said.
The legacy systems included Hyperion Enterprise for quarterly statutory reporting, and Excel and Access solution for monthly management reporting and Excel for financial budgeting and planning. There were also feeds coming in from multiple, legacy ERP solutions, sand ystems inherited from JLR's previous owner Ford.
The first critical step to turning this around was to get an Oracle Hyperion Enterprise Performance Management (EMP) roadmap for the integrated planning and reporting. To avoid a drastic and sudden change to the business, Cadman said he needed to implement a “stepping stone” change process, which he did with the aid of consultantcy PricewaterhouseCooper (PwC).
The technical work started with the implementation of actuals reporting in Hyperion Financial Management, which went live in November 2011, according to plan. This was data that cannot be questioned, therefore setting a reliable baseline for the business.
HFM also represented a business, not just IT change,
“I got the CFO [chief financial officer] to do a video. It was a clear message for everyone in the business to get on board with it [to say] 'this is how the business is changing,” said Cadman.
JLR then used Hyperion Planning to set up 'EMFasis', which is able to understand volume by market and by car line, which helps to produce more accurate forecasts.
This system has been up and running since December 2012, going from design to live in just six months. Now, JLR is in the process of developing 'Insight', which is also based on Hyperion Planning.
Insight hopes to address a problem whereby the company was making inaccurate, four-year profit forecasts – predicting overnight drops in profits – because it was just looking at past data, and not taking current performance into consideration.
Once live in December 2013, JLR hopes to be able to use Insight to provide a rolling view of its full income statement for 36 months, including the current year. However, initially it is just focusing on providing an accurate 12-month forecast.
The next thing to go live will be the 'Business Plan' in Hyperion Planning in 2014. This will be JLR's full-life business plan for seven years. The first three years is fixed, with products under development, after which the plan is more flexible and open to change.
Although Cadman's work has not finished, he believes JLR can already celebrate a number of successes.
It now has an integrated application for statutory and management reporting, with a single view of data. It has achieved process efficiencies, and consolidated budget and forecast functions on one platform. Moreover, it has achieved good knowledge transfer to the JLR IT team, which was previously lacking.
The next stage of work is to have integrated business planning. Cadman's ambition is to have a single version of the truth, better control and to reduce the time for inputting data.
In order to achieve its successes, however, JLR had to overcome challenges around integration – of data and of people.
“We were very siloed. The siloed mentality was very strong. We needed to shift the business, culture and behaviour,” said Cadman.
One of the things that helped the integration was the EMFasis system, which integrated JLR's global sales, marketing and finance teams. It also standardised the method of collecting and calculating data.
Furthermore, PwC consultants were brought in, and applied its Joint Application Design methodology to engage the business.
“Initially, we stuck with the silos to make them feel special. As we moved through the JAD, we started to bring the groups together,” said PwC's Mark Robertson.
Nonetheless, Cadman said that changing behaviour is an ongoing process.
“[Continuing challenges include] establishing new behaviours – to stop the over-promising and under-delivering. [And], educating all users to exploit the new process and system,” he said.
Despite these complications, however, Cadman was proud to say. “We delivered to time, cost and quality.”