BI In Action >> What-If Analysis
Every business has changes. Every business has what-if questions
What-if business modeling creates the opportunity to evaluate a variety of scenarios rapidly, allowing more time for analysis. It also creates more consistency and discipline in the analysis. Both of these factors result in better business decision making.
A model may show how a number of variables change depending on changes in one or more inputs. Using a model you can reproduce or test reality without actually experiencing it.
Planners use models to address questions such as these:
- What profits can we anticipate next year if inflation is 7 percent and we continue current pricing policies?
- What if we were to hire 55 people in Sales, 10 in Marketing and 35 in R&D?
- What is the impact on manufacturing and shipping if the price of oil increases 15% during Q2?
- What would be needed for raw material and inventory if the demand of a product went up 20%?
- By using models you will have sales projections, materials and labor requirements, and projected income statements for alternative scenarios.
- Flexibility and multidimensionality to meet changing business strategies – Enter your data and change it as many times as you want, immediately see the changes and compare with historical data or other projections.
- Leading financial and non-financial indicators- Lower latency for performance measurement and corrective action.
- Performance management – expressing corporate goals in financial measures.
Benefits to End user:
- Strategy embedded in line functions – means increased agility, empowerment and self-optimizing behavior.
- Create, update, share and link models across the enterprise.
- Comprehensive and expressive modeling structure allows you to handle complex business models such as risk analysis, activity-based costing, inventory and merchandise planning, supply & demand, customer/product/brand profitability and compensation planning.