case study : gross margin management system

client : ScottishPower Energy Management Limited (SPEML)

SPEML is the energy management business of ScottishPower plc, one of the largest vertically integrated utilities in the UK. ScottishPower's business incorporates power (electricity), gas, coal, biofuels, emissions and renewables together with affinity partner business.

 

Gross margins* were calculated by reference to over 140 complex spreadsheets and resulted in various structural problems in the the business' ability to calculate gross margins in a timely fashion, minimised the ability of the business to maximise its margins and complicated the ability to integrate additional generation or transmission assets.

background

approach

We assessed the initial gross margin information available to provide an initial project scope, which evolved into a detailed scope from which a business case was developed. Gross margin data was decomposed into margin based Data Process Maps (DPM), analysing the processes and calculations involved in generating accounting transactions from source data and providing a level of understanding of the business from which combined Business and Functional Requirement Specifications (BFRS) were developed.

 

An ITT was produced including margin level BFRS and DPMs together with accounting, platform, architectural and non-functional requirements as a basis for selecting a Systems Integrator. The integrator was engaged to undertake a design phase to produce a detailed Functional Requirement Specification to support the solution build. Future business processes were developed and agreed and which feed directly into the automated end-to-end solution.

benefits delivered

This solution provides informed margin analysis and facilitates decision making such that the business is able to maximise its Gross Margins by stream across the client's retail and wholesale business in a seamless end-to-end solution. "What-If" functionality enables the business to model revenue and cost changes, assessing the effect on margins before implementing the change.

The system is designed on a "plug and play" basis whereby future margin streams can be incorporated with minimal disruption by defining data sources, calculation paths, inter-stream transactions and General Ledger postings. Furthermore it improves the efficiency of operations, minimises the risk of error and enhances audit assurance through the imposition of strict SOx controls around the margins processes.

T

focal points ...

• vertically integrated utility

 

• retail and wholesale gross margins

 

• electricity, gas, coal

 

• biofuels, emissions, renewables

 

• accommodates inter-stream transactions

 

• 140 complex spreadsheets eliminated

 

• “plug and play” solution implemented

 

• supports “What if” sensitivity analysis

 

• supports product margin modelling

 

• solution integrated with General Ledger

 

• solution integrated with 148 data feeds

 

• finance staff time rationalised

 

• SOx compliant

 

• audit control environment implemented

* Accounting calculation : the difference

  between Revenue and direct Cost of

  Sales

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