Activity Based Costing for Activity Based Management
Meiklejohn Paul, Director
Management Consulting
17 February 2012
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Agenda
1. What is Activity Based Costing (ABC)?
1.1 What is ABC and Why should it be used?
1.2 Traditional costing vs ABC
1.3 Activity based costing processes
2. How ABC should be used to manage (Activity based management)?
2.1 When to use ABC?
2.2 How to use ABC for ABM?
2.3 Scoring High - Low value adding activities
2.4 Activity Based Management applications
3. ABC/ABM implementation
3.1 Where ABC has been used
3.2 Steps to develop ABC Cost Flow Model
3.3 ABC Implementation Project
3.3 Challenges and success factors
Appendix: KPMG ABC and Cost Optimisation tools
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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1. What is Activity Based Costing? 1.1 What is ABC and Why should it be used?
• Bringing cost and operational information to the level needed for management decisions
• Gaining tighter control over overhead and indirect costs
• Pricing products/services more accurately
• Establishing foundation for activity-based management and performance measurement
• Promoting a continuous improvement framework and mindset
ABC (Activity Based Costing) is a technique for measuring the cost and performance of activities, products and services on the basis of the resources consumed by the various activities which produce that product or service.
What is ABC? (the Definition)
Products and services in themselves do not cause costs to incurred. Rather work itself consumes resources which in turn incur costs.
Why it should be used? (the Benefits)
To put ABC into context as a performance management tool
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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1. What is Activity Based Costing? 1.2 Traditional Costing vs ABC - The concept
Traditional Costing Activity Based Costing
Inputs (Resources/Costs) Inputs (Resources/Costs)
Product/Service Product/Service
Volume Related Basis
Resource Drivers
Activities
Activity Drivers
Assumes that costs vary with units produced
Activities consume resources/costs
Products/Services consume different levels of activities
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Activity Based Costing Traditional Costing
Key features
• ABC focuses on activities in the production or service delivery process.
• Costs are traced to activities to products/services, based on the demand for these activities during the production/delivery process.
• More complex
• Focus on the cost of the product only.
• Costs are traced to the product on assumption that resources are consumed in proportion to the volume produced.
• Simpler
Pros
• More accurate product and service costs enable better strategic decisions regarding:
• Product/service pricing
• Product/service mix.
• Make vs buy decision
• Investments in R&D, process automation
• Cost control
• Increased visibility of the activities performed enables a company to:
• Focus more on the management of activities, such as improving the efficiency of high cost activities.
• Identify and reduce non-value added activities
• In the past:
• Small number of products/services which did not differ much in terms of required manufacturing support.
• Labor was dominant component in the cost structure
Cons
• ABC can be expensive to use
• Some arbitrary overhead costs will continue
• Arbitrary volume drivers fail to account for product /service diversity in the form of size or complexity.
• Overhead is an indirect or common cost that generally cannot be traced.
1. What is Activity Based Costing? 1.2 Traditional Costing vs ABC – Feature comparison
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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1. What is Activity Based Costing 1.2 Traditional Costing vs ABC - Example
Company A produced two products X and Y in the period ended 31 Dec 2011 with following information: Product X Y
Direct material ($) 800 2,000 Direct labour ($) 150 500 Volume (units) 10 100 Number of production runs 2 8 Number of machine hours 30 100
Traditional Costing Overhead per unit = Total Overhead/Total number of units = $15,400/110 = $140 Cost per unit of each product ($): Traditional costing under allocates overhead costs to low-volume and less complex product (X) and over allocates overhead costs to high-volume and more complex product (Y). This distorts cost information and leads to wrong decision on sales price. ABC attempts to overcome the above problems.
Activity Based Costing Allocate Overhead to Activities ($): Allocate Overhead to Products: Cost per unit of each product ($):
Product X Y Direct material 80 20 Direct labour 15 5 Overhead 140 140 Total cost per unit 235 165 Selling price (20% margin) 294 206
Product X Y Number of machine hours per unit 3 1 Machine-run Costs per unit ($) 90 30 Number of units per production run 5 13 Set-up cost per unit ($) 230 92 Overhead per unit ($) 320 122
Illustrative example in a manufacturing company
Product X Y Direct material 80 20 Direct labour 15 5 Overhead 320 122 Total cost per unit 415 147 Selling price (20% margin) 519 184
Type of Overhead Machine-run
costs Set-up costs
Cost pool (total costs for the period) 3,900 11,500 Cost driver (number of machine hours/production runs) 130 10
Cost per machine hour/production run 30 1,150
Total overhead ($)
Machine-run costs ($) (cost driver is number of machine hours)
Set-up costs ($) (cost driver is number of production runs)
15,400 3,900 11,500
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Activity: Management Security Auditing
Activity: Opening Closing Withdrawals…
Activity: Introduction Development Advertising
Activity: Marketing Data processing Accounting…
All products /services (facility level):
Product/Service group/batch: Deposit taking Means of payment Loan investment
Types of products/services: Credit accounts Sales discount Mortgage loans
Product/service unit XYZ Credit account XYZ Sales discount XYZ Mortgage loans
Cost drivers
Cost drivers
Cost drivers
Cost drivers
IND
IREC
T C
OST
S
ACTIVITY BASED POOLS HIERARCHY
1.What is Activity Based Costing? 1.3 Activity based costing process – Activity classification – Activity Pool
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Fina
ncia
l Acc
ount
ing
Cos
t of A
ccou
ntin
g A
naly
sis
General service centers
Profit Centers
Cost of operation A,
Cost of operation B,
Cost of operation C
PR
OFIT C
EN
TER
S
Organizational centers
Operational cost centers
Profit centers
Unallocated costs for the
term
Operational cost centre
Unallocated costs for the
term
Profit centers
Unallocated costs for the
term
Cost Assignment Process
1. What is Activity Based Costing? 1.3 Activity based costing process – Cost assignment to profit centers
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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2. How ABC should be used to manage (Activity Based Management)? 2.1 When to use ABC?
• Product lines differ greatly in volume and manufacturing complexity
• Product lines are numerous, diverse, and require differing degrees of support services
• Overhead costs constitute a significant portion of total costs
• The manufacturing process or the number of products has changed significantly
• Production or marketing managers are ignoring data provided by traditional cost systems and are using bootleg cost information to make pricing decisions
When to use ABC?
When Is ABC Most Beneficial?
• When products/services differ significantly in their use of resources
• When resources (overheads) are a significant cost (thus when labor cost is a relatively small component of overall costs)
• What contributes to different usage of resources?
• Product/service diversity (functions used, inspections required, batch sizes,….)
• Production/service complexity
• Customer diversity (order sizes, distribution requirements)
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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2. How ABC should be used to manage (Activity Based Management)? 2.2 How to use ABC for ABM?
• ABM is an extension of ABC, from a product/service costing system to a management function, that focuses on reducing costs and improving processes and decision making
• ABM (Activity Based Management) is part of a continuous improvement framework and incorporates strategic cost management techniques
• Analysis of ABC output to provide management with meaningful cost and operational information
• ABC is primarily transaction based
• ABM is mainly driven by business analysis
Managers can use knowledge of costs gained by ABC analysis to make pricing and product-mix/service decisions, to identify and select cost reduction and process improvement projects, including relating to product /service design.
Knowing what costs are related to which product/service allows better analysis of:
which markets to emphasize
which products to consider for CIPs (cost improvement programs)
which customers to target for changes in pricing or service delivery
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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2. How ABC should be used to manage (Activity Based Management)? 2.2 How to use ABC for ABM – Cost View vs Process View?
Process View • Activity analysis
• Process mapping
• Benchmarking
• Cost reduction
• Cost of quality and waste
• Continuous improvement
• Process re-engineering
• Cycle time reduction
Activities
Resources
Cost Objects
Resource Drivers
Activity Drivers
Cost Assignment View • Product/service costing;
• New products design;
• Product/service/customer profitability analysis
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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High value adding activities are those: Low value adding activities are those:
• Required to meet customer requirements; • That modify or enhance purchased material of a product; • That, if more of them are accomplished, the customer might pay more for the product or service;
• That are critical steps that cannot be eliminated in a business process;
• That are performed to resolve or eliminate quality problems; • That are performed due to a request or expectation of a satisfied customer; and
• That, in general, if time permitted, you would do more of.
• Can be eliminated without affecting the form or function of the product or service;
• Result in waste and add no value to the product or service; • Are performed due to inefficiencies or errors in the process stream; • Are duplicated in another department or add unnecessary steps to the business process;
• Are performed to monitor quality problems; • Are performed due to a request of a dissatisfied customer; • Produce an unnecessary or unwanted output; and • If given the option, you would prefer to do less of.
Objectives: - To eliminate/minimize low-value-adding activities - Optimize higher value-adding activities - Enable employees to focus on the worth of their organization’s work
Benefits: - Reduce costs and improve business process towards better efficiency
- Employees can see how work really serves customers and which activities may be considered wasteful.
- Focus and visibility are enhanced because people can more easily see where costs are big or small and also which costs can be managed in the near term.
High vs. Low value adding activities
Using ABC/M to score activities along their “high- versus low-value-adding” scale
2. How ABC should be used to manage (Activity Based Management)? 2.3 Scoring High – Low value adding activities
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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2. How ABC should be used to manage (Activity Based Management)? 2.4 Activity Based Management applications
Activity Analysis
Costing Analysis
Performance Improvement
Transfer Pricing/Service Level Agreements
Resource Planning
Continuous Improvement
• Pricing • Estimating • Life Cycle Costing
• Analysis of products/services customers locations
• Investment Analysis • Insource/Outsource • Business
Rationalisation
• Budgeting/Forecasting • Target Costing
• Activity Value Analysis • Cost Driver Analysis • Performance
Measurement
• Business Process • Best practices • Cultural Assessment
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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3. ABC/ABM Implementation 3.1 Where ABC has been used
Industries to use ABC
References: Management Accounting Quarterly . Spring 2009, Vol.10 Dan Swenson and Douglas Barney, “ABC/M: Which Companies Have Success?” The Journal of Corporate Accounting & Finance, March/April 2001
Manufacturing •Metal/Rubber/Plastics •Machinery •Food/Textiles – (i.e. CONCO Food) •Electronics (i.e. ABB Switzerland) •Chemicals •Paper/Printing
•Services •Financial •Wholesale/ Retail Trade •Consulting •Business •Communication/Utilities •Computer/Software •Transportation •Health Care/ Medical / Legal •Education
•Government Sectors •Example: U.S Postal Service, UK National Health Services, Australian Federal Police Department
Characteristics of company which lead to ABC being successfully applied: • A high level of top management support and commitment; • Technical competence of the implementation team; and • Effective change management, that is, companies driven by competitive pressures to strive to better understand their
internal capabilities and external competition.
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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3. ABC/ABM Implementation 3.2 Steps to develop ABC Cost Flow Model
1. Collect Financial Data
2. Identify Activities
3. Develop Cost Flow Model
4. Identify Drivers
5. Collect Cost Driver Data
6. Calculate Activity Costs
7. Calculate Unit Costs
Modify Modify Modify
Preliminary
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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3. ABC/ABM Implementation 3.3 ABC Implementation Project
• Identify and classify Activities related to products via three approaches: top-down; recycling; interview or participative • Estimate cost of activities • Calculate a cost-driver rate for each activity • Assign Activity Costs to products
Significant indirect cost
Complex products and services
High-volume products and low-volume products
Disagreement by managers
Age of costing system
A pilot “rapid prototyping” workshop
ABC readiness
ABC Appropriateness ABC performance
• Study to get senior manager’s buy in if required • Create and enter cost center allocations in system • Analyse and review output • Refine and adjust as necessary • Gain approval for cost information from new system
ABC roll-out
Product cost based on Activities involved
Bank-wide ABC implementation
Follow-up
Phase 2: Diagnostic
Assessment of ABC Readiness
Phase 1: Preparation and
planning
• Introduce the concept to senior management
• Set up a steering committee
• Evaluate and select cost accounting software
• Engage a consulting firm
• Training for cost center managers and key staff
Steering Committee
ABC project plan
Phase 3: Designing an ABC
system and collecting necessary data
Phase 4: Implementing ABC
ABC Project Management
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Report
Report
Report
Report
Reporting Month
Group CEO/CFO
Central Finance
Business Units
Central Finance
Central Finance
Group CEO/CFO
Central Finance
Business Unit
Central Finance
Business UnitResponsibility
N/APrepare and issue budget analysis
Early Oct
N/A Submit budget
End May
N/A Issue budget instructions and Targets
13Prepare and issue forecast analysis
N/A
Based on Board dates
18-20
7
9
5
Working Day
Early Nov
Late Oct
Review Budget
Green Book Full Year (Jan)
Green Book Qtr 3 (Oct)
Green Book Half Year (July)
Green Book Qtr 1
(April)
Prepare and issue quarter end actuals and forecast analysis
End Nov
End Sept
End July
End March
Review forecast (QPR)
10+2+12
8+4+125+7+122+10+12Submit forecast
Blue Book
Blue Book
Blue Book
Blue Book
Blue Book
Blue Book
Blue Book
Actuals Flash
Prepare and issue actuals analysis
Submit actualsDecNovOctSepAugJulJunMayAprMarFebJanActivity
Report
Report
Report
Report
Reporting Month
Group CEO/CFO
Central Finance
Business Units
Central Finance
Central Finance
Group CEO/CFO
Central Finance
Business Unit
Central Finance
Business UnitResponsibility
N/APrepare and issue budget analysis
Early Oct
N/A Submit budget
End May
N/A Issue budget instructions and Targets
13Prepare and issue forecast analysis
N/A
Based on Board dates
18-20
7
9
5
Working Day
Early Nov
Late Oct
Review Budget
Green Book Full Year (Jan)
Green Book Qtr 3 (Oct)
Green Book Half Year (July)
Green Book Qtr 1
(April)
Prepare and issue quarter end actuals and forecast analysis
End Nov
End Sept
End July
End March
Review forecast (QPR)
10+2+12
8+4+125+7+122+10+12Submit forecast
Blue Book
Blue Book
Blue Book
Blue Book
Blue Book
Blue Book
Blue Book
Actuals Flash
Prepare and issue actuals analysis
Submit actualsDecNovOctSepAugJulJunMayAprMarFebJanActivity Analysis of synergy potentials products/markets
Infrastructure for new products-/market segments
Implementation of a divisional steering conceptNomination of group CROImplementation of KPI based sales controllingImplementation of risk transfer to ACPMImplementation of a strategy for trading/treasuryImplementation of group-wide portfolio structureEnhancement of technical infrastructure in FO and RMIntegration of decision-making processesImplementation of group-wide ACPMEstablishment of integrated planning processesImplementation of planning tools/methods etc.Development of a steering concepts on group levelImplementation of steering methods/instruments etc.Set-up of a management information system
LegendStrong mutual dependencies One-way dependencies
1
3
5
6
4
2
7
8
10
11
9
12
14
15
13
16
Development of cooperation model for IT/functional areasDevelopment of documentation standardsDerivation of a roadmap19
18
17
Su
pp
ort
p
roce
sses
Mutual dependencies between categories
4
7
16
15
14
13
12
11
10
9
8
6
5
1
2
3
17
18
19
Str
ateg
icfr
amew
ork
Co
re a
nd
ste
erin
g p
roce
sses
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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3. ABC/ABM Implementation 3.4 Challenges and Success Factors
Companies are able to determine how much revenue each of their various products and services generate, but unable to determine with any level of certainty how much it costs to provide these products and services
No way of determining which products are unprofitable and uncompetitive and which products are profitable and underdeveloped.
Reason for application
Generate buy-in from operational managers
Uncertainty in cost-savings
Duplication of effort in collecting information
Occasional lack of creativity on the part of the center managers.
Difficult to gain approval for cost information produced by new allocations
Challenges for application
ABC champion: convince management of the viability and necessity of ABC and create and sustain enthusiasm
Support and cooperation of employees: honest and open communication
Non threatening environment : which would facilitate the change culture
Key to success
Thank you
Meiklejohn Paul
Director
Management Consulting
KPMG Limited
Tel +84 (4) 3946 1600 (ext. 6315)
Mob +84 (0) 914 923 162
© 2011 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Why’s ABC?
Diversity in Product/Service types or Distribution/Sales Channels More complexity in Operation Overhead cost increase
Strong Development of Technology Organization automate what previously were manual job Proportion of Indirect cost increase
Market becomes saturated
Lost due to inaccurate cost allocation is high
Disagreement by managers over cost allocations
The company need to understand clearly its cost structure
High Indirect Cost
High Competition
To whom that ABC is most beneficial
Appendix – KPMG ABC and Cost Optimisation Tools 1. Activity Based Costing
what you can measure”
Enterprises have a clearer and more detailed view of the profitability structure of different products within the portfolio.
The costs and expenses are allocated to each product type, so enterprises could identify the profit margins for every product line, which aid pricing decisions
Enterprises gain insight into their cost per activity for correct cost optimization opportunity. Enterprises are also able to analyze return on investment based on the detailed cost information
ABC enables enterprises to analyze the efficiency of each activity & improve the processes across the value chain. This enables management to evaluate performance more effectively for longer-term benefits.
Profitability analysis
Cost and Resource Optimization
Cost estimation and Pricing
Performance Measurement and
Improvement
Knowledge
Technology
Change Management
Experience
•Lack of deep understanding of ABC theory
•Lack of strategy on how to use ABC model/data
•Lack of capacity to unify ABC theory and practical situation
•Personnel quality issues
•Reluctance to change in staff •Risk management •Lack of appropriated system to collect data and build ABC model
•Coordinate issues between ABC and the existing system
Challenges in ABC Implementation
Traditional Costing’s short-comings No way of determining which products are uncompetitive No way of determining which products are profitable No way of determining how to cut and optimize costs No way of managing indirect costs and expenses
…Solution is ABC
ABC traces and assigns costs based on cause-effect relationships with activities which consume them.
Losses on margins and profits Cost Optimization becomes virtual solution to survive and obtain profit.
© 2011 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Activities
Resources
Cost Objects
Resource Drivers
Activity Drivers
Res
ourc
e 1
Res
ourc
e 2
Res
ourc
e…
Res
ourc
e n
Activity 1 X1 X1 X1 X1
Activity 2 X2 X2
Activity n Xn Xn
Act
ivity
1
Act
ivity
2
Act
ivity
..
Act
ivity
n
Cost Object A Y1 Y1 Yn
Cost Object B Y2 Y2
Cost Object C Y2 Y3 Y3 Yn
ABC Conceptual Methodology Sample Deliverables KPMG Approach
1st stage
2nd stage
• Define and identify key resources • Verify actual costs from reliable information (financial
information, resources statistics, organisational information)
• Define and identify activities • Develop activity dictionary • Trace activities to resources • Define activity drivers • Calculate total activity cost
3rd stage
• Define and identify cost objects • Design cost flow model • Calculate cost-driver rate • Assign activity costs to cost objects
KPMG’s ABC Approach
Appendix – KPMG ABC and Cost Optimisation Tools 1. Activity Based Costing (cont.)
KPMG’s ABC Advisory Services Training Rapid Prototyping
Workshop One time study and support Full ABC implementation ABC for management
What we do
We transfer knowledge and demonstrate case study on ABC
We coach to build ABC model.
Our team conduct ABC based review of the costing structure
We work with clients to apply ABC from start to end.
We support in applying ABC into performance management
What you get
Knowledge and practical insights for ABC readiness
Quick win high level ABC model. Accelerated learning.
A report on your activities and costing structure. Ideas for process improvement and product mix
Effective and efficient ABC implementation Ideas and framework for improvement.
Business Improvement framework ( Where ABC costing system has already implemented ).
© 2011 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Today's businesses are under constant pressure to reduce costs, yet many find it hard to do so in a sustainable fashion. Ninety percent of cost reduction programs fail to achieve their targets, and the gains that are achieved appear to be short lived. The increasing interdependencies faced by companies – internally between functions and externally with suppliers, customers and other stakeholders - make cost management become a highly complex issue that can only be addressed at a strategic level.
Challenge KPMG research has shown that companies are, on average, achieving only 59% of expected savings. Reasons for this include: cost strategies are failing; revenue growth has eroded cost discipline; cost ownership is unclear and too narrow; cost strategies are too cautious; cost drivers are not clear or transparent; cost discipline is not embedded in the culture. Major causes for the failure of cost strategies include: inadequate processes to drive cost reduction; lack of transparency of information; too much reliance on cost avoidance rather than increased cost efficiency; too many conflicting projects.
How we can help Our cost optimisation program enables companies to:
gain an understanding of your cost structure, identify key cost drivers and create effective cost strategies through the improvement of structures and processes to enable significant cost savings.
access to comparable information to enable the analysis and assessment of performance and costs, which can help position you against benchmark data in order to quantify a performance or cost gap.
KPMG also can assist you with managing and measuring the implementation of cost optimization programs in the most optimal manner and with minimal disruption to your operations.
Plan, Scope and
Agree Goals Design Monitor Implement Opportunities Diagnostic
Industry-based
Hypotheses
KPMG core cost optimisation team working to globally consistent methodology
Industry insight
Private Equity Lens
(Transaction Services)
Investment and
Divestment
Systems and IT Treasury Finance
Function Real Estate Supply Chain, Procurement and Sourcing
Human Resources Tax
Cash and Working Capital
Access to areas of deep specialisation across KPMG
Appendix – KPMG ABC and Cost Optimisation Tools 2. Cost Optimisation
© 2011 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Benefits/Outcomes Our cost optimisation program enables clients to identify opportunities to reduce their operating costs while improving performance. Our team also can work with clients to help: Identify the risks through a thorough assessment of operating / business costs; Develop a cost reduction program to reduce costs, improve controls and enhance strategic effectiveness; Identify improvements in core processes and organizational structural models and apply industry better practices; Improve the performance of inventory, asset, and channel management activities to drive service, cash flow, and margin enhancements; Evaluate operations and planning processes, and the effectiveness of the supply and distribution networks for both alignment and rationalisation
opportunities. By gaining an in-depth understanding of key processes and cost drivers, clients can initiate and manage effective cost improvement programs.
Our wide-ranging approach can look across the company's overall business:
Appendix – KPMG ABC and Cost Optimisation Tools 2. Cost Optimisation (cont.)
© 2011 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).