STEM outline

Elements and inputs

A standard language of customers and locations, service demand and pricing, resource capacity and costs, forms a reliable production line for calculating business value

Our established methodology has been tried and tested around the world for more than two decades. By embracing these concepts, you not only unlock a wealth of reliable business logic which has been extensively road-tested already, but also enable a more meaningful and specific dialogue with your colleagues and clients which reduces scope for misunderstanding. From the compact summary below, you can see that there really isn’t much to learn. This could be the best investment you’ll make this year!

Element type and description Key inputs
Market: a group of customers who may use a certain tier of services, or may be chained as part of a market segmentation exercise Size (evolution in time)
Service: actual customers for a specific product or service, offered with a given fixed/variable pricing structure, and with onward requirements for key capabilities in the business (and resultant costs) Demand: Customer Base, Penetration and Traffic (i.e., load per customer)
Tariffs (i.e., pricing)
Transformation: an intermediate element, often with non-linearity effects, that matches different measures (e.g., ports and cards, or average arrivals and sufficient peak capacity) Input and Transformation
Resource: a commodity or ongoing capability (e.g., spares or fuel; or equipment, staff, buildings, etc.) that is required by one or more services, or as a fixed overhead for the business; optionally grouped with other equivalent resources in a Function when capacity of one may be replaced with another Capacity and Lifetime
Cost Trends
Location: a number of discrete locations for service delivery between which resource capacity cannot be shared (which typically differs between centralised and distributed regional or local functions) Sites (evolution in time)
Cost Index: a common cost trend for a general cost component such as hardware, software or labour, which may be shared by multiple resorces Cost Trend (evolution in time)
Collection: provides tabular data-entry and aggregate outputs (across all defined results) for specified elements, or collections of elements, of the same type; e.g., to define a hierarchy of costs Elements
Dimension (and Variants): define scenarios, from one set of options (variants) for a range of coherent assumptions (dimension parameters) to multiple independent choices (dimensions) Parameters
Variant Data
Template (and Variants): control the automated replication of a model fragment, e.g., for multiple site instances (variants) taking varying values for individual assumptions (template parameters), without resort to manual copy and paste Parameters
Variant Data
Sensitivity: defines a range of model assumptions (parameters) to vary in turn (or in correlated sets) in order to stress-test a model and generate tornado chart outputs Parameters
Steps and Perturbation
Debt Facility: describes a (typically finite) line of credit, allowing you to build up a borrowing context where there will be penalties for growing a business too fast and crossing a line into expensive finance Term, Interest and Fees
Globals: sets the context and starting conditions for a model, including the selection of months, quarters and years for outputs, as well as various funding options governing the split between debt and equity Run Period
Discount Rate
Tax and Interest Rates

The role and key (mostly time-series) inputs of each element of the STEM modelling process

STEM keeps working as you extend and alter a model

Each element comes with its own built-in calculations, so you can stay focused on the modelling imperative and your colleagues can have more confidence in your results.

Read on to learn more about the additional business logic inferred from every connection.

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