Skip to main content

Functional Specification: The Financial Impact Model

Version: 2.0
Date: September 12, 2025
(Revised based on detailed feedback for enterprise credibility)

1. Objective & Core Principle​

  • Objective: To provide a real-time, transparent, and auditable model that accurately calculates the full financial impact of any S&OP plan or scenario, meeting the rigorous standards of enterprise finance teams.
  • Core Principle: To "financialize" every operational decision instantly. The model ensures that no operational lever can be pulled without the user immediately understanding the trade-offs in terms of revenue, cost, margin, and working capital [cite: opspilot_deep_dive_v3.md, your feedback].

2. Tiered Complexity & Implementation Roadmap​

As recommended, the model will be implemented in three distinct phases, allowing us to deliver core value quickly while building towards a best-in-class solution [cite: your feedback].

  • Phase 1 (Basic Level - MVP): Focus on correct unit economics and direct cost calculations.
  • Phase 2 (Standard Level): Layer in sophisticated working capital analysis and key indirect costs.
  • Phase 3 (Advanced Level): Introduce time-value-of-money calculations and a full variance analysis framework.

3. The Calculation Logic (Revised)​

3.1. Basic Level (MVP Implementation)​

This level focuses on getting the direct cost and revenue impacts mathematically correct.

  1. Corrected Revenue & Margin at Risk Formulas:

    • Revenue_at_Risk:
      Revenue_at_Risk = Stockout_Probability * Demand_Forecast_Units * Unit_Price

    • Margin_at_Risk:
      Margin_at_Risk = Revenue_at_Risk * Gross_Margin_%

    • Rationale: This correctly separates the top-line revenue risk from the bottom-line margin risk, as per your feedback [cite: your feedback].

  2. Direct Operational Cost Impact:

    • Overtime_Premium_Cost:
      Overtime_Premium_Cost = (Required_Hours - Standard_Capacity_Hours) * (Overtime_Rate - Standard_Rate)

    • Expedite_Cost:
      Expedite_Cost = Critical_Orders_Units * (Rush_Shipping_Rate_Per_Unit - Standard_Rate_Per_Unit)