Value Driver Modelling

Example Value Driver Trees

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Modelling
Driver Trees

der a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

 Value Driver Modelling
Example Value Driver Trees
Benefits Realisation VDT

Benefit Dependency Network

HOW
“one- off programme related” “ongoing – new ways of working”
People + Process
IT Enablers Enablers Business Changes

Server Performance
Performance
Server Business Analytics Management
Virtualisation
Virtualisation System
System

Software-As-A- Standardise
Software-As-A- Business Timesheet
Service Business Timesheet System
System
Processes
Processes

To achieve the “new way of working”, IT, People and Process enablers
are required

Value Driver Tree

Increase revenue from accurate Increased hours from recording at least

timesheets ($) planned capacity (hrs)
1,875,000 1,250
X X

Legend X
Assumption

Investment Objective
Business Benefit
Recoverable Chargeable Rate ($/hr)

1,500
X
 WHAT WHY
new ways of working” “The benefits and why we want them”
Investment Drivers &
Business Benefit Objectives Objectives

Increase
Increase capture
capture
of
of hours
hours
Increase
Increase revenue
revenue Post
Post Merger
Merger
from accurate Environment
timesheets
timesheets (Internal)
(Internal)
Increase
Increase %
% of
of
chargeable time

ss enablers To achieve the Objectives and Benefits, a “new way of

working” is required

FTEs charging less than planned

capacity (#)
50

Days worked per year (#)

200

Additional hours per resource day

0.13

Gap from planned capacity

0.50
X
Planned hours (hrs)

8.0
-
Chargeable hours

7.5
 % of improvement

25%

Average Chargeout Rate ($/hr)

2,000

% of increase that is chargeable

75%
Value Driver Modelling
Example Value Driver Trees
Revenue VDT

Total Revenue ($USD) Average Price ($USD/L) Foregin Exchange (USD/AUD)

39,098,182 36.36 1.10

X ÷
Domestic Price ($AUD/L)

40.00

Total Litres Constrained (L) Total Chemical Input

Contrained (L)
1,075,200 1,157,863
Min Min

Legend
Calculation
Input

Total Production Input (L)

1,081,825
Min X

Total Labour (L)

1,075,200
X

X
 Total Litres produced from Consumable (L)
Consumable (L)
1,289,883 1,612,354
Min x
Litres Produced per
Consumnable Litres (L/L)
0.80

Reagents ($) Reagents (L)

1,157,863 5,789,316
x
Litres Produced per Reagent
Litres (L/L)
0.20

Operating Time (UtilHr)

1,985
X
Litres per hour (L/hr)

545

Total hours of work a year per Average days worked a year

person (hrs) (#)
1,920 240
X X
Average shift (Hrs)

Number of Employees (#)

14
X
Litres per hour (L/hr)

40
Value Driver Modelling
Example Value Driver Trees
Cost VDT

Total External Services Cost

Total Cost ($) Total Fixed Cost ($) ($)
21,995,356 612,562 28,000
+ +
Total General & Admin Cost
($)
584,562

Total Variable Cost ($) Total Materials Cost ($)

21,995,356 17,578,632
+ +

Legend
Calculation
Input

Total Electricity Cost ($)

250,324
+ X

Total Labour Cost ($)

4,166,400
X
X
 Consumables ($) Consumable (L)

6,000,000 2,000,000
+ X
Cost per Consumable L ($/L)

Reagents ($) Reagents (L)

11,578,632 5,789,316
X
Cost per Reagent ($/L)

Operating Time (UtilHr)

1,985
X
Power Cost ($/UtilHr) Power Consumption
(Kwh/UtilHr)
126 1,695
X
Electricity Cost ($/Kwh)

0.07

Total hours of work a year per Average days worked a year

person (hrs) (#)
1,920 240
X X
Average shift (Hrs)

8
 No. of Employees (#)

14
X
Average cost per Employees
($/Hr)

155
 Value Driver Modelling
Example Value Driver Trees
Profit VDT

Gross Profit ($) Total Revenue ($) Average Price ($AUD/L)

9,065,977 31,061,333 28.89

- X

Legend
Calculation
Input
Total Litres Constrained (L)
Linked value
1,075,200
Total Cost ($) Total Fixed Cost ($)

21,995,356 612,562
+

Total Variable Cost ($)

21,995,356
 Foregin Exchange
($AUD/$USD)
0.90
÷
Domestic Price ($USD/L)

26.00

Total Chemical Input Total Litres produced from

Consumable (L)
Contrained (L) Consumable (L)
1,157,863 1,600,000 2,000,000
Min Min x
Litres Produced per
Consumnable Litres (L/L)
0.80

Reagents ($) Reagents (L)

1,157,863 5,789,316
x
Litres Produced per Reagent
Litres (L/L)
0.20

Total Production Input (L) Operating Time (UtilHr)

1,081,825 1,985
Min X
Litres per hour (L/hr)

545

Total Labour (L) Total hours of work a year per Average days worked a year
person (hrs) (#)
1,075,200 1,920 240
X X
Average shift (Hrs)

Number of Employees (#)

14
X
Litres per hour (L/hr)
 40

Total External Services Cost

($)
28,000
+
Total General & Admin Cost
($)
584,562

Total Materials Cost ($) Consumables ($) Consumable (L)

17,578,632 6,000,000 2,000,000

+ + X
Cost per Consumable L ($/L)

Reagents ($) Reagents (L)

11,578,632 5,789,316
X
Cost per Reagent ($/L)

Total Electricity Cost ($) Operating Time (UtilHr)

250,324 1,985
+ X
Power Consumption
Power Cost ($/UtilHr) (Kwh/UtilHr)
126 1,695
X
Electricity Cost ($/Kwh)

0.07

Total hours of work a year per Average days worked a year

Total Labour Cost ($)
person (hrs) (#)
4,166,400 1,920 240
X X
Average shift (Hrs)

No. of Employees (#)

14
X
Average cost per Employees
($/Hr)
155
Value Driver Modelling
Example Value Driver Trees
Financial VDT

Economic Value Added NOPAT

117,000 225,000
- X

Cost of Capital

108,000
X

Name
Asset turnover
Current asset turnover
Fixed asset turnover
EBIT margin
Gross profit margin
ROA
 Tax

30%

EBIT Contribution Margin Sales

750,000 1,000,000 4,000,000

- -
Cost of Goods Sold

3,000,000

Cost of Organisation

250,000

WACC

9%

Net Assets Fixed Assets

1,200,000 900,000
+
Current Assets

300,000

Definition Ratio
sales / assets 3.33
sales / current assets 13.33
sales / fixed assets 4.44
EBIT / sales 19%
(sales – cost of goods sold) / 25%
net income / assets 19%
Value Driver Modelling
Example Value Driver Trees
Reporting

Margaret Gold
Total Labour Costs ($) Total hours of work a year per person (hrs)
(CFO)
Planned 2,976,000 Planned
Actual 2,808,000 Actual
Variance -6% Variance

No. of Employees (#)

Planned
Actual
Variance

Average cost per Employees ($/Hr)

Planned
Actual
Variance
David O'Sullivan Matthew Wallace
Average days worked a year (#)
(HR) (Superintendent)

1,920 Planned 240

2,160 Actual 240
13% Variance 0%

Average shift (Hrs) Luke King

(Supervisor)
Planned 8
Actual 9
Variance 13%

David O'Sullivan
(HR)

10
10
0%

Susan Grace
(IR)

155
130
-16%
Value Driver Modelling
Example Value Driver Trees
Value Driver Table
Units Year 0 Year 1
Parameter

Cotton Gin Calendar Time (Hrs) 8,760 8,760 8,760

Cotton Gin Down Time Maintenance (Hrs) 1,474 1,474 1,474
Cotton Gin Scheduled Loss (Hrs) 476 476 476
Cotton Gin Unscheduled Loss Other (Hrs) 868 868 868
Cotton Gin Unscheduled Loss Failures (Hrs) 130 130 130

Cotton Gin Available Time (Hrs) 7,286 7,286 7,286

Cotton Gin No Scheduled Production (Hrs) 151 151 151
Cotton Gin Operating Standby (Hrs) 2,389 2,389 2,389

Cotton Gin Utilised Time (Hrs) 4,746 4,746 4,746

Cotton Gin Operating Delay (Hrs) 1,093 1,093 1,093

Cotton Gin Operating Time (Hrs) hrs 3,653 3,653

Average Metres per Hour m/hr 54 54

Total Metres Rolled m 197,253 197,253

Average Metres per Separations m/sep 25 24

Number of Separations sep 7,890 8,219

Average Separations per Processed Tonne sep/t 300 300

Amount of Processed Tonnes t 26 27

Number of Cotton Gins # 10 10

Total Processed Tonnes with Factory t 263 274

Baseline t 263 274

Improvement t 0 0
Value Driver Tree Version
Year 2 Year 3 Year 4

8,760 8,760 8,760

1,474 1,474 1,474
476 476 476
868 868 868
130 130 130

7,286 7,286 7,286

151 151 151
2,389 2,389 2,389

4,746 4,746 4,746

1,093 1,093 1,093

3,653 3,653 3,653

54 54 54
197,253 197,253 197,253

23 22 21
8,576 8,966 9,393

300 300 300

29 30 31

10 12 12
286 359 376

314 359 376

-29 0 0
Value Driver Modelling
Example Value Driver Trees
Longitudinal VDT

J A S
Actual 1,256 1,100 1,230
Production
Planned 1,250 1,500 1,250
Actual $ 12 $ 12 $ 12
Variable Cost
Planned $ 10 $ 10 $ 10
Actual $ 15,072 $ 13,200 $ 14,760
Total Variable Cost
Planned $ 12,500 $ 15,000 $ 12,500
Actual $ 5,000 $ 5,500 $ 5,600
Fixed Cost
Planned $ 4,500 $ 4,500 $ 4,500
Actual $ 20,072 $ 18,700 $ 20,360
Total Cost
Planned $ 17,000 $ 19,500 $ 17,000

Total Cost
$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$-
J A S O N D J F M A M J
 O N D J F M A
1,536 1,234 1,353 1,303 960 900 680
1,000 1,000 1,000 1,000 900 1,000 1,250
$ 13 $ 15 $ 13 $ 12 $ 11 $ 10 $ 10
$ 10 $ 10 $ 9 $ 9 $ 9 $ 9 $ 9
$ 19,968 $ 18,510 $ 17,589 $ 15,636 $ 10,560 $ 9,000 $ 6,800
$ 10,000 $ 10,000 $ 9,000 $ 9,000 $ 8,100 $ 9,000 $ 11,250
$ 5,700 $ 5,000 $ 3,000 $ 3,000 $ 3,500 $ 3,400 $ 3,600
$ 4,500 $ 4,500 $ 4,500 $ 5,000 $ 5,000 $ 5,000 $ 5,000
$ 25,668 $ 23,510 $ 20,589 $ 18,636 $ 14,060 $ 12,400 $ 10,400
$ 14,500 $ 14,500 $ 13,500 $ 14,000 $ 13,100 $ 14,000 $ 16,250

Fixed Costs
$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$-
A M J J A S O N D J F M A M J

Total Variable Cost Production

$25,000 1,800
1,600
$20,000 1,400
1,200
$15,000
1,000
800
$10,000
600
$5,000 400
200
$- -
J A S O N D J F M A M J J A S O N D J F M A
 600
$5,000 400
200
$- -
J A S O N D J F M A M J J A S O N D J F M A

Variable Cost
$16
$14
$12
$10
$8
$6
$4
$2
$-
J A S O N D J F M A
 M J
642 1,000
1,250 1,500
$ 10 $ 10
$ 9 $ 9
$ 6,420 $ 10,000
$ 11,250 $ 13,500
$ 3,400 $ 3,000
$ 5,000 $ 4,000
$ 9,820 $ 13,000
$ 16,250 $ 17,500

Production

S O N D J F M A M J
S O N D J F M A M J

Variable Cost

S O N D J F M A M J