Stockland builds on firm foundations with a new forecasting model

A faster, easier planning process delivers a full return on investment within three months

Published on 06-Mar-2012

Validated on 07 Oct 2013

"The comprehensive scenario modelling capabilities of IBM Cognos TM1 give us an important advantage [that] puts us in a stronger position to deal with changing economic circumstances and make better strategic decisions." - Steven Bennett, Business Process Improvement Manager, Stockland

Customer:
Stockland

Industry:
Property & Casualty

Deployment country:
Australia

Solution:
BA - Business Analytics, Business Integration, Business Performance Transformation, Information Integration, BA - Performance Management, Optimizing IT

Overview

Stockland is Australia’s largest diversified property group, actively managing a portfolio of assets including residential communities, retirement living, shopping centres, offices and industrial assets. This mixed-use model puts the company in a good position to have a positive impact on the communities in which it operates. Whether it is providing a shopping centre that meets the needs of the local community, building parks for residential communities or contributing to programs that improve the wellbeing of tenants, Stockland is focused on developing thriving communities.

Business need:
In the residential development business, where construction projects can take several years – or even decades – to complete, it is vital to be able to plan ahead. Companies like Stockland need the ability to create long-term forecasts that not only cover the most likely scenario, but also provide contingency plans for different economic situations. However, Stockland’s existing planning processes relied on manual data entry, which made forecasting a laborious and time-intensive process.

Solution:
Stockland worked with a local IBM Business Partner, to develop a new forecasting solution based on IBM® Cognos® TM1® software. The solution integrates with the company’s feasibility system and draws data into the forecasting model automatically, eliminating the need for re-keying.

Results:
Eliminates hundreds of hours of manual work; as a result, the solution has delivered a full return on investment within three months. Reduces the time taken to input forecasting data by more than 99 percent – from three days per project to just 30 seconds. Enables Stockland to increase the number of long-term forecasting cycles by 100 percent, moving from a half-yearly to a quarterly process.

Benefits:
Replaces three separate planning models with a single tool, increasing the consistency of data and increasing confidence in its ability to support decision-making.

Case Study

Stockland is Australia’s largest diversified property group, actively managing a portfolio of assets including residential communities, retirement living, shopping centres, offices and industrial assets. This mixed-use model puts the company in a good position to have a positive impact on the communities in which it operates. Whether it is providing a shopping centre that meets the needs of the local community, building parks for residential communities or contributing to programs that improve the wellbeing of tenants, Stockland is focused on developing thriving communities.

Stockland’s residential development division is a leader in its sector. It is currently working on community development projects that encompass more than 90,000 individual lots, with a total end value of approximately AU$ 24.2 billion.

The need for long-term planning
Residential development projects are a long-term investment: creating and building residential communities can take years or even decades. As a result, it is vital for Stockland’s residential development team to plan its finances carefully in order to maintain cash flow and ensure profitability for each project. To keep the business aligned with changing economic conditions, Stockland performs regular long-term forecasts that provide a basis for strategic decision-making and guide the company’s future direction.

Steven Bennett, Business Process Improvement Manager at Stockland, comments: “Until recently, we had a solution that we called ‘4caster’, which we used every six months to generate our long-term forecasts. It was quite an advanced solution at the time we implemented it, and it cost us several million dollars – but as time went by, we realised that technology had moved on.

Reducing manual workload
4caster was not integrated with Stockland’s other systems, which meant that users had to re-key data into it. This could take between one and three days per project – and with as many as 80 projects running concurrently, this meant a significant amount of time spent on very low-level manual work. There was always a risk of human error at the data entry stage, which could potentially affect the final result. Finally, calculating the results was an overnight batch job, so if something was wrong with the forecast, the Stockland team had to wait another 24 hours to re-run the process.

“Because the creation of forecasts was so laborious, we were limited in what we could achieve in terms of scenario modeling,” adds Steven Bennett. “This was one area where we saw a lot of potential; if we could create a new solution that could easily run multiple scenarios, we would be better equipped to manage risk and to plan for a wider range of economic situations – and therefore guide the business more effectively in response to changing circumstances.”

Harnessing IBM Cognos TM1
Stockland was already using IBM Cognos TM1 as a planning and forecasting tool in several areas of its business, and the residential development team was keen to harness the software as the basis for its new solution.

“We had a lot of experience with IBM Cognos TM1 already in-house, and we knew how powerful it is as an analytical engine,” says Steven Bennett. “By extending our investment in TM1, we were able to create a new rest-of-life forecasting solution very cost-efficiently – in fact, it cost about 95 percent less than the old 4caster system!”

Innovative project management
The Stockland team consulted a local IBM Business Partner that had a long history of successful analytics projects at Stockland. Together, Stockland and the Business Partner drew up a list of business requirements, a project timeline, and a cost estimate. The team then proposed the solution to the Finance General Manager of Stockland’s residential development division, Jodi Swinburne, and quickly obtained approval to proceed.

“At Stockland, we have quite an innovative approach to development projects,” explains Steven Bennett. “If a project is relatively low-cost, as this one was, the project team is given a lot of freedom to manage it. In this case, it was an excellent approach because we were able to meet the core requirements very quickly and spend the rest of the project adding even more functionality. As a result, we built a solution that delivers a lot more than we promised, and the users are absolutely delighted. Moreover, we finished a day ahead of the deadline and exactly on budget.”

He adds: “One of the big advantages of working with IBM software is that the Business Partner ecosystem is so strong. As a result, it was relatively easy to find the right people with the right technical and business skills to help us deliver the project successfully.”

Integration and automation reduce manual workload
The most notable feature of the new solution is that it is fully integrated with Stockland’s other systems, which means that it can automatically import data into its forecasting model with no need for manual intervention or data entry. This has transformed the nature of the company’s forecasting process, as Steven Bennett explains:

“Instead of spending days re-keying data from one system to another and then waiting for an overnight batch process, we can generate a new forecast in about 30 seconds. This has had a profound effect on the way we handle long-term forecasting at Stockland. For a start, we now update our long-term forecasts on a quarterly basis instead of every six months, which gives us a better ‘sense check’ to confirm that our plans are on course.

“Equally, we’re much more confident in the data: we used to have three separate models, and with error-prone manual data entry, they would sometimes give us three slightly different results. Now we just have one model and the data flows into it automatically, so everyone gets the same, correct answer.

“Above all, though, the time and cost savings are dramatic. By eliminating hundreds of hours of manual data entry, we achieved a return on investment during the very first forecasting cycle: within about three months, the project had paid for itself. In addition, our finance team is now adding much more value to the business, because instead of just crunching numbers, they’re able to spend much more time actually analysing the forecasts and working closely with the business to make better operational decisions.

Highly detailed scenario planning
In terms of scenario planning, the solution is also a major success.

“With our old solution, we used to be able to create a maximum of three different scenarios per project, so we could only do a general best-case, worst-case and most-likely scenario, for example,” says Steven Bennett. “Now we can do 20 scenarios for each project, and assess the financial returns for a variety of different development scenarios.”

For example, two of the most important factors in residential development are sales rates and escalation rates – the annual percentage change in real estate prices. Stockland can now run scenarios with a range of different sales rates and escalation rates and model the effect on its business at a detailed level; for instance, within a few hours, Stockland can model the impact of a one percent increase or decrease in sales prices over its entire 90,000 lot development pipeline, which spans decades.

Steven Bennett concludes: “The comprehensive scenario modelling capabilities of IBM Cognos TM1 give us an important advantage, because we can develop financial plans for a much wider range of development planning scenarios and economic situations. This puts us in a stronger position to deal with changing economic circumstances and make better strategic decisions – ultimately helping us to ensure that our residential development projects can be completed successfully and profitably.”

About IBM Business Analytics
IBM Business Analytics software delivers actionable insights decision-makers need to achieve better business performance. IBM offers a comprehensive, unified portfolio of business intelligence, predictive and advanced analytics, financial performance and strategy management, governance, risk and compliance and analytic applications.

With IBM software, companies can spot trends, patterns and anomalies, compare “what if” scenarios, predict potential threats and opportunities, identify and manage key business risks, and plan, budget and forecast resources. With these deep analytic capabilities, our customers around the world can better understand, anticipate and shape business outcomes. For more information on Business Analytics please visit: www.ibm.com/analytics

Products and services used

IBM products and services that were used in this case study.

Software:
Cognos TM1

Legal Information

© Copyright IBM Corporation 2012 Australian Head Office IBM Australia Ltd Level 13 IBM Centre 601 Pacific Highway St Leonards NSW 2065. Produced in Australia March 2012 IBM, the IBM logo, ibm.com, Cognos and TM1 are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide. A current list of other IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml. Other company, product or service names may be trademarks, or service marks of others. References in this publication to IBM products, programs or services do not imply that IBM intends to make these available in all countries in which IBM operates. Any reference to an IBM product, program or service is not intended to imply that only IBM’s product, program or service may be used. Any functionally equivalent product, program or service may be used instead. All customer examples cited represent how some customers have used IBM products and the results they may have achieved. Actual environmental costs and performance characteristics will vary depending on individual customer configurations and conditions. IBM hardware products are manufactured from new parts, or new and used parts. In some cases, the hardware product may not be new and may have been previously installed. Regardless, IBM warranty terms apply. This publication is for general guidance only. Photographs may show design models.