Integrated Financial Planning and Group-wide Analysis at CONAD
Delivering a 30% reduction in operating costs
CONAD (COnsorzio NAzionale Dettaglianti - NAtional COnsortium of Retailers) is a leader in the Italian supermarket sector and the largest Italian cooperative of independent retailers. The Group is currently organized into five cooperatives, which collectively:
- Have 59,000 employees
- Generate €14.3 billion in annual revenues (+5.9% vs 2018)
- Trade from 3,651 shops (including the top 66 in the former Auchan network)
- Are present in 1,470 municipalities across 108 Italian provinces
- Hold a 13.3% market share (source: GNLC)
- Achieve €4 billion in sales revenues from Conad-brand products (+8% vs 2018)
The Group is structured on three levels: "Associated independent retailers" – shop owners united in a project to promote an entrepreneurial culture with cooperative values; "Cooperatives" responsible for purchasing and distribution, comprised of Conad Adriatico, Conad Nord Ovest, Conad Centro Nord, PAC 2000, and Conad Sicilia; and the "National Consortium", which provides services, marketing, and communications support to the entire system.
CONAD is not only a leading brand in Italian retail distribution, but also a business model with unique characteristics that facilitates economic development and social cohesion in the markets it serves, creating jobs and an entrepreneurial approach throughout the entire country.
Conad del Tirreno and Nordiconad merged in October 2019 to form Conad Nord Ovest, present in seven Italian regions with a combined turnover of €3.7 billion, 587 shops, 387 active members, and over 16,000 employees.
The Board project at Conad Nord Ovest: Financial planning and end-to-end analysis
Integrated Financial Planning & Analytics Environment
- Budget preparation and Member pre-closing reports
- MA and Sales network environment (actuals, budget, pre-closing)
- Finance/Treasury dashboard with daily actuals
- Simulation of combined results (actuals, budget, pre-closing)
- Commercial cycle
- Group financial planning
- Fixed asset management on combined basis
- Economic planning at Cooperative level
- Economic and financial planning at Network level
- IFRS 16
Business dashboard (Cooperative - Network - Chain)
Income statement dashboard for mobile devices
Member collections dashboard
Monitoring of Cooperative marketing department activities
Business information reports
Activity-based costing (Administrative Services)
Member loyalty analysis
Monitoring of physical inventory in the network
Budgeting, Logistics & Transportation
Contract Reporting (monitoring of Member targets achieved to calculate rebates and discounts)
The Challenge: An integrated platform for a complex environment
As shown above, the Conad world is highly complex and varied. This means that the scope of management accounting activities and - more generally - of analysis, reporting and performance management - is extremely broad, not least because - stresses Franco Iazeolla, Management Control Director at Conad Nord Ovest – "we need full visibility and control of the numbers not only at Cooperative level, but also throughout the Network down to individual retailer level."
In fact, performance is monitored and reports and analyses are generated from two different standpoints: the Cooperative - being the organizational unit responsible for procurement and the provision of a broad range of ancillary services - and the Member - being the entrepreneur who manages one or more shops:
"In order to immediately grasp the complexity of our daily analyses, you just need to realize that, beyond the results of the Cooperative, a simple pricing decision also affects hundreds of income statements that we manage,"
The IT organization within Conad Nord Ovest is based on department-level information systems: certain operational solutions look after the commercial aspects while others track in detail the activities of shops, further systems look after administration and finance, and others provide marketing solutions. The growth of CONAD created challenges for performance management so, back in 2005, the leadership team decided to create a business database specifically for management accounting purposes, with automated input from the principal IT systems: commercial, suppliers, and HR, covering the various processes of the cooperatives, networks, and payments from shops.
"Until then" - recalls Iazeolla – "we only had a disconnected series of Excel sheets available. We needed an environment that allowed us to enter data while carrying out our management accounting activities, in order to make best use of all captions within the income statement. However, one problem could not be ignored: the creation, update, and general 'maintenance' of reports (based on Crystal Reports at the time) was the sole responsibility of the software house that helped us back then. We had to contact the software house whenever we needed to make a change, with inevitable delays as a consequence. What we wanted was a dedicated, integrated environment with the necessary flexibility to manage our reports and analyses on a self-service basis."
After trying SAP BusinessObjects for reporting purposes, Conad's management team realized that the solution did not satisfy the needs of the Group. So much so that - in practice - Excel usage continued, with data displayed in PowerPoint presentations. This Heath Robinson approach was just too restrictive and complicated, especially for such a highly complex and multi-faceted organization as Conad. It was no longer possible to manage simulations and the business model using spreadsheets.
Three requirements became increasingly evident:
- continue work on an integrated environment for analysis, reporting, and management accounting purposes by further developing the dedicated management accounting database to simplify its use, not least by implementing formal input processes;
- provide verified and accurate information to decision-makers, presenting reports and simulations of practical use to management, considering both the technology employed and their look & feel;
- become independent of all internal and external IT systems, while still relying on them as precious data sources.
"Clearly, we needed the ability to make rapid, data-driven decisions. As an example, if a decision depended on the reporting of actuals, the data would be accurate, but the decision would come too late. Our Members and Cooperatives often have to tackle emergency situations, changing their plans in real time as market conditions mutate. They certainly cannot wait for the final accounts and must act earlier, using statistical algorithms to guide their decisions in a proactive manner," continues Iazeolla. "The tool we wanted had to be easy to use, applicable and, above all, the same for all business departments. Board satisfied all these requirements perfectly."
The Solution: A responsive platform for Group-wide planning, budgeting, and financial analysis
During the software selection process, finance managers evaluated several tools, from SAP BusinessObjects, which had been used for reporting - but with the limitations already mentioned, to the principal solutions available in the BI and Performance Management market. The best choice turned out to be Board because
"it was the only tool that provided everything we sought in a single environment, guaranteeing ease of use and the flexibility needed to independently create new applications and adapt existing solutions to our continuously changing business needs" recalls Iazeolla. "We achieved our goal not only due to the prowess of my team, but also thanks to the help provided by the team of consultants from Board International and K.Group, a Board partner, who had the intelligence to understand how fundamentally important it was for planning, analytics, and reporting to become independent processes."
First, Conad Nord Ovest generates financial plans for the Group (Cooperative and Network) on Board, effectively planning the financial needs of all Group companies for a three-year period. Next, the economic budgets of the Cooperative and the Network are processed, with direct input from the Members. Lastly, the Board platform is used to manage all the final reporting processes.
Source: Conad Nord Ovest - webinar 04/17/2020.
The Conad Nord Ovest implementation of Board commenced with the development of a budgeting solution, which was followed by the pre-closing project before developing the entire management accounting area. The project included budget preparation together with management and reporting of monthly actuals for the Cooperative and the Network.
"This was highly complex work in which the professional advice and skills of our Board consultants were a great help. In this regard, Board assisted us in developing a suitable workflow; a sequence of procedures to validate each phase and complete the planning process with a good degree of certainty about the numbers used,"
Before Board, Conad’s finance teams were often constrained by the rigidities of spreadsheet-based processes for planning and analysis work that, as a result, absorbed huge amounts of time, resources, and effort.
"Just think" - continues Iazeolla – "that, with a pool of about 400 Members owning and managing over 500 shops (as well as a number of pharmacies and petrol stations), we had to generate budgets for each on custom Excel sheets and then send them out to each Member together with their actuals data. In turn, each Member returned their spreadsheets for 'assembly' and combination, so that we could see and understand the overall performance expected by our Network."
By using the SaaS web version of Board, Conad Nord Ovest has eliminated these lengthy processes and overcome the limitations of spreadsheets. Members now log onto the Board server independently, using an Internet connection, and process the budgets for their own shops within a well-defined project that is organized into phases, with approvals before continuation. In this way, each Member follows a clear and standardized procedure to complete the budgeting process, including submission to the Cooperative, with full awareness of the calculation algorithms used, the principles underlying the various KPIs, and the information sources for the data processed.
"At that point, it is extremely easy to combine the data" - notes Iazeolla – "because it has all been input to the Board database in a complete and consistent manner, providing a Single Version of Truth for the business that can be analyzed across all the many dimensions created, with information available immediately to management and our staff on multiple devices, including tablets and smartphones. In this way, we have obtained many advantages compared with the previous organization of decision-making processes, including savings in terms of cost and, above all, time. The workflow capabilities embedded in the Board platform have enabled us to build clear paths and procedures that simplify the activities of all our employees, who can now work within a standardized environment without foregoing any flexibility."
The Single Version of Truth is powered by all the data held in Conad’s databases, regardless of type: structured (data from transactional information systems, for example), or less structured (such as tables and CSVs). This allows Conad Nord Ovest to benefit fully from the enormous wealth of information available to the organization, transforming it into knowledge and meaningful summaries for the business.
"In the Finance area in particular, we have benefited greatly from sharing, via the Board platform, skills and experience that previously remained 'buried' - so to speak - within the spreadsheets of each finance professional" - highlights Iazeolla. "In other words, there is no longer any need for various members of the management accounting team to pick up or restart work that their predecessors had left behind in a series of Excel sheets, perhaps only comprehensible to specific individual users."
A real and quantifiable benefit: 30% reduction in operating costs thanks to an integrated FP&A platform
By bringing together the financial planning, analysis, reporting, and business modeling processes on the same platform, in a standardized and automated manner based on robust data governance, Board has elevated the traditional FP&A approach of Conad Nord Ovest to the next level, applying all the most advanced capabilities of BI, dashboarding, multi-dimensional analysis, and creation & sharing of KPIs to the same datasets available throughout the organization. In order to allow senior management to query Group borrowing in real time on Board, an additional dashboard - updated daily - has been created to report all current account balances together with comparative information about the related contractual conditions, analyzed by bank and individual account. Additionally, important steps have been taken to develop projects that pull together all the available financial information. In particular, it was necessary during the year to forecast the likely overall final results, given that the final accounts of Conad Nord Ovest are analyzed by the banking system.
"This was extremely delicate work" - recalls Iazeolla – "as, with about 57 companies to be combined, including strategic, property management, investment management, and retail management entities, we needed to prepare a set of financial and balance sheet indicators for the reporting perimeter, considering various economic/financial planning and Group structure scenarios over a three-year period. For this purpose, the National Consortium asked us to create a System-wide Reporting Tool and - in fact - we were able to respond to this need, covering all significant areas with an application built in Board."
In order to create this System-wide Reporting Tool for the Conad National Consortium, it was fundamental to process for each year, by the specified deadline (March of the following year), a set of indicators derived from an integrated process tied into the established forecasting activities (pre-closing and economic budgets), determining timings, actors, the corporate areas involved, and the documents needed, as well as the dedicated and integrated tools applied.
"I would like to invite everyone to visit Conad Nord Ovest and see what we have created using Board and how Board has elevated our technological development, keeping us abreast of innovations," concludes Iazeolla. "This is the only way to completely understand the potential of this software and the advantages of its adoption. By adopting this unified BI and Performance Management solution, we have lowered our operating costs by about 30% compared with when we only had the old tools available. Thanks to Board, we now apply the best possible methodologies, disseminating them throughout our complex organization and minimizing the time dedicated, the errors made and, therefore, the costs involved."