ATK enhances consolidations, budgeting and forecasting

Managing a highly diversified enterprise more effectively through business analytics

Published on 24-Jan-2012

Validated on 08 Jul 2013

"Our business analytics platform is now an integral part of our business... The more we deliver to the business, the greater its demand for analytics becomes, so we’ll continue to work with IBM and ProRes to develop new ways to measure performance and enhance efficiency." - Mike Varecka, Director of Finance, Performance Management Program, ATK

Customer:
ATK

Industry:
Aerospace & Defense

Deployment country:
United States

Solution:
BA - Business Analytics, BA - Business Intelligence, BA - Performance Management, Big Data & Analytics, Big Data & Analytics: Transform processes, Optimizing IT

IBM Business Partner:
ProRes Group

Overview

ATK is a global, diversified, industrial company that develops and manufactures highly engineered materials and products that support mission-critical applications for defense, aerospace, security and sporting customers. The company is headquartered in Arlington, Virginia, and employs approximately 18,000 people at more than 60 facilities across 22 states, Puerto Rico and other countries. The company also has representatives in more than 50 countries worldwide. It achieved annual sales revenues of $4.8 billion in 2011.

Business need:
With a product portfolio ranging from small-caliber ammunition to rocket boosters for the United States space program, ATK comprises a diverse set of business units, each with its own highly specialized business model. This resulted in complex processes to set budgets for each unit and forecast the profitability of their contracts. Performing corporate-wide financial consolidations was also a complex process.

Solution:
ATK enhanced its business analytics capabilities across the organization, harnessing a suite of IBM® Cognos® solutions to provide greater automation and control in its consolidation, budgeting and forecasting processes. ProRes Group, an IBM Business Partner, provided consultancy to help the in-house team develop, implement and support the solution.

Benefits:
Gives each business unit the opportunity for an easier way to plan budgets and manage contracts. The solution ensures consistency while maintaining enough flexibility to support different business models. Provides greater control of financial information, helping to meet Sarbanes-Oxley and other regulatory compliance requirements, and to simplify external audits. Enables business users to access data almost instantly. In areas such as contract profitability forecasting, the solution has reduced manual updating work by up to two days per month.

Case Study

ATK is a global, diversified, industrial company that develops and manufactures highly engineered materials and products that support mission-critical applications for defense, aerospace, security and sporting customers. The company is headquartered in Arlington, Virginia, and employs approximately 18,000 people at more than 60 facilities across 22 states, Puerto Rico and other countries. The company also has representatives in more than 50 countries worldwide. Its largest customers include the US Army, Air Force and Navy, the US Government and NASA. It achieved annual sales revenues of $4.8 billion in 2011.

ATK’s product portfolio ranges from small-caliber ammunition for the armed forces and hunters to rocket boosters for the space program – in other words, it spans the entire spectrum from very high-volume manufacturing to customized precision engineering. Its individual divisions operate with a large degree of autonomy, and their business models are optimized for the specific types of contracts in which they specialize. As a result, corporate-level financial and operational management are especially challenging.

“For any large enterprise, financial consolidation, planning and forecasting are serious concerns,” comments Mike Varecka, Director of Finance, Performance Management Program at ATK. “For us, because a large proportion of our business comes from the federal government, it’s an even bigger challenge. The regulatory requirements are extremely strict, so we have to provide detailed reports on budgets and pricing that come under a high level of scrutiny.

“The diversity of our businesses makes this even more acute. Take budgeting, for example: in a high-volume business, the factors that you have to take into account are basic raw materials, logistics and labor. At the other end of the scale, you have teams of highly skilled engineers and expensive specialist components, and it’s not at all the same business model. You can’t have a ‘one size fits all’ approach – but at the same time, you need some kind of consistency in the way all the units report their results, otherwise it’s impossible to make corporate-level decisions.”

Turning to business analytics
Over the past five years, ATK has been working to resolve this dilemma through the adoption of business analytics technologies. Within the corporate services division, the company established a business analytics team and gave it responsibility for creating a solution capable of meeting corporate-level requirements while remaining flexible enough to suit each individual business unit.

As a technology platform, the company chose a suite of IBM Business Analytics software including IBM Cognos Business Intelligence, IBM Cognos Planning, IBM Cognos Business Viewpoint and IBM Cognos Controller. The in-house team worked with ProRes Group, an IBM Business Partner that specializes in business analytics and performance management solutions, to design, develop and implement the solution. Recently, ProRes has helped the company upgrade to version 10 of the Cognos software, enabling the creation of even larger and more sophisticated data structures without sacrificing stability.

Driving adoption of analytics
“Our BI team provides core business intelligence and planning services to all units of the business, but we also accept that some divisions will want to do additional analytics on their own,” says Kelly Reisdorf, Technical Lead for the BI Program at ATK. “So we act almost as consultants, sharing processes, tools, knowledge and data to help all the different divisions build what they need without becoming siloed and unsustainable. We try to maintain a fine balance between flexibility and standardization.”

The team quickly recognized that technology wasn’t the critical factor in driving the adoption of analytics across the company.

“The human aspect is more important than the technical capability,” explains Mike Varecka. “You can’t just deploy everything to everyone and expect them to use it. So what we have done is work with the divisions that were initially most enthusiastic, and use them to really showcase the full capabilities of the platform. Once people see what it can do, analytics sells itself: instead of trying to convince people to use it, they start coming to you and requesting more and more functionality.”

Greater control for financial consolidations
The first major analytics solution that ATK developed was designed to enhance its financial consolidation process. With 45 accounting entities and 10 individual ledgers, this was always a complex process. When more comprehensive financial legislation such as the Sarbanes-Oxley Act was introduced, the company’s previous consolidation solution struggled to provide the internal controls required to demonstrate compliance. The ATK team chose IBM Cognos Controller as the heart of its new consolidation solution.

“Cognos Controller gives us much more robust internal controls,” says Jodi Schermerhorn, Model Developer. “Previously, each division had to extract data from its financial systems and format it in spreadsheets before we could load it into our consolidation system. Now all the data flows into Controller automatically, so there’s no risk of human error and we can be much more confident that our financial statements are full and correct. There is also a much more complete audit trail, so we can demonstrate that our processes are fully compliant with regulatory requirements.”

Mike Varecka adds: “Before Controller, technology was a barrier to getting the complete monthly financial close completed quickly and easily with all-inclusive compliance. We’ve eliminated that shortcoming, so if we can streamline some of the other aspects of the process, we could potentially save a lot of time.”

The Cognos Controller solution is integrated with Cognos Business Intelligence and Cognos Planning, which enable corporate-level planning and operational forecasting. ATK can create monthly income, cash flow and balance sheet forecasts for each business unit, giving senior managers a vital overview of financial performance across the whole enterprise.

Deeper insight into departmental budgeting
A second important area where the analytics platform is providing value is for detailed departmental budgeting.

“A large proportion of our business depends on winning large-scale, long-term contracts, often involving government agencies,” explains Mike Varecka. “To comply with US federal government budget guidelines, we have to provide very detailed pricing proposals for every aspect of the work. These proposals come under very close scrutiny, so we have to be certain we get them right.

“By combining Cognos Planning and Cognos Business Intelligence, we have been able to give departmental users much more immediate and powerful planning and forecasting tools. We have given them the ability to pull updated data into a model and create a forecast within minutes – so they can take the latest figures into their planning meetings and get a much better understanding of labor and materials requirements for forthcoming projects.”

Forecasting profitability
The third main analytics solution at ATK again harnesses Cognos Business Intelligence and Cognos Planning to provide profitability forecasts per contract.

“To make accurate financial statements, we need to understand how profitable each of our contracts is going to be,” says Mike Varecka. “And because many of the contracts will last several years, the only way to do this is to keep a close track of labor, materials and other costs over time against the total value of the contract. The business analytics platform makes a huge contribution to our ability to analyze this quickly and accurately – in fact, one of the business unit managers told me he was saving one or two days each month just because updating cost estimates is better coordinated now.”

Kelly Reisdorf comments: “Another tool that really helps here is IBM Cognos Business Viewpoint. We have hundreds of active contracts at any given time, and the list is always changing. It used to be the case that when a new contract needed to be added to the system, it was a job for IT. But with Business Viewpoint, it’s easy enough for business users to do it themselves – so the people who actually know about the contracts can be the people who manage them in the analytics system. This has received very positive feedback both from the business units and the IT team.”

Looking to the future
In the near future, the company plans to implement IBM Cognos TM1® to support even larger and more sophisticated planning models.

“In terms of the financial models we’re currently using, we are right on the edge of what is possible with our existing platform,” says Mike Varecka. “We see TM1 as a huge opportunity to achieve bigger and better things, because it can handle much larger and more sophisticated models. For example, in our contract forecasting solution, if we could put all our contracts, labor resources and work processes into a single model, we would have an incredibly powerful way to look at profitability on a detailed level.”

He concludes: “Our business analytics platform is now an integral part of our business, not just at group level but increasingly across the individual business units too. Our BI team has achieved great things – but we’re not about to rest on our laurels. The more we deliver to the business, the greater its demand for analytics becomes, so we’ll continue to work with IBM and ProRes to develop new ways to measure performance and enhance efficiency.”

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.

Products and services used

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

Software:
Cognos Controller, Cognos TM1, Cognos Business Intelligence, Cognos Business Viewpoint, Cognos Planning

Service:
Software Services for Business Analytics

Legal Information

© Copyright IBM Corporation 2012. IBM Corporation, Software Group, Route 100 Somers, NY 10589. Produced in the United States of America. January 2012. IBM, the IBM logo, ibm.com, Cognos and TM1 are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml. This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. It is the user’s responsibility to evaluate and verify the operation of any other products or programs with IBM products and programs. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. The client is responsible for ensuring compliance with laws and regulations applicable to it. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the client is in compliance with any law or regulation.