SlideShare une entreprise Scribd logo
1  sur  69
Télécharger pour lire hors ligne
Effective
                            Resource
                           Management
                          How Activity-based Costing
                           could facilitate effective
                            resource management

     Presented by




                                     Workshop
                          Jointly Organised by AIA & HKU
Saturday, 29 March 2003               SPACE
                             Saturday 27 August 2005


                             Dr Joseph Yau, HKU SPACE
                            Mr Alan Lung, ABCM Consulting

                                              ABCM Consulting
Contents:
            Perspectives in Resource Management
2.30-2.45
            Building an analytical framework -- from
2.45-3.00
            historical data to fact-based management

            Highlights of ABC theories: The CAM-I
3.00-4.00
            Cross, Resource, Activity, Cost Object
            and Drivers

            Case Study – OFTA and Manufacturing
4.15-4.30
            Cases

            Some Practical Implementation Issues
4.30-4.45
            Group Discussion and Group
4.45-6.00
            Presentation


                                             ABCM Consulting
What is resource management?

•   An accounting term?
•   A public administration jargon?
•   Resource = Money? Property?
•   Resource = Knowledge, Skill, People?




                                           ABCM Consulting
Managing Resources in a
Government (Bureaucratic)
Organizations

• Resource Allocation
• Resource Deployment and Re-
  deployment
• Resource Review




                                ABCM Consulting
Please suggest ways for HKSAR Government to
       allocate the following resources




                                     ABCM Consulting
HRG/DRG is not likely to be
  implemented soon …




                       ABCM Consulting
Typical Resource Allocation

• Policy Objectives
• Key Result Areas by Programme (or CSF?)

  Global
  Allocation
              Proposed
              Distribution     Refined
                               Distribution
              Key
              Performance
              Indicators                Execution
     Programme Objectives
     Initiatives
                                              ABCM Consulting
What are the features of effective
    Resource Management?

   • Availability of physical, human,
     financial and intangible resources
   • Deployment and re-deployment
   • High value-added in core and
     supporting processes



                                 ABCM Consulting
What are the handicaps in the
    government sector?

   • Salaries constitute a very high %
     of total cost
   • Little room for reduction in direct
     costs
   • Difficult to identify non-value-
     added activities



                                     ABCM Consulting
Output/Outcome
      Management: How much “Inputs”
    (Resource) are used to produce specific
outputs? Were those “Outputs” (Services) useful
     to the “Outcomes” (Policy Objectives)?




                                            OUTCOMES
                               OUTPUTS
 IN PUTS




           Activities



                                          ABCM Consulting
Are all your customers Profitable?
            Profitability Analysis by Total Profit($) and Margin(%)

            Best
            customer
Profit($)




                                               low priority in
Total




                                               productionQuantity

                                                                    Profit
                                                                    (before
                                                                    HQ Costs)

                                                                    Manufacturing
                                                   FOB              Cost


                                                                                    increase
                                               Revenue


                                                                    Material


                                                                                    quantity
                                                                    Cost


                               increase
                               FOB
Margin(%)




              cost
              reduction
                                                                                    ABCM Consulting
CPA: Customer Profitability
                                                           Analysis
                                                                                                             cumulative
                                                                                                                 profit
                                                                                                                                                                              Hidden
                                                                                                                                                                               profit

                                                                                                                 Actual
                                                                                                                  profit
Differences in Cost-to-serve 




                                                        Different customers
                                                            use different                                                  0   Products ranked: most profitable first..

                                                              activities                                            Customer A                           Customer B




                                 cumulative
                                     profit
                                                                                                Hidden
                                                                                                 profit                    Customers are
                                     Actual
                                      profit
                                                                                                                          easier to influence
                                                                                                                            than products
                                               0   Products ranked: most profitable first..

                                           Product A                            Product B


                                                                                              Possibilities to influence 


                                                                                                                                                                          ABCM Consulting
Management
                                                                          Business planning, finance and control
                                                                          Training and management development
                                                                          Housing
                                                                          MIS
                                                                          Staff, logistics and quality assurance
                                                                          Produc                                                Ser-




                                                                                                                                      ary
                                                                                             Manu-           Marketi
                                                                              t     Procur            Assem Strategic Cost Management
                                                                                                                     Deliver
                                                                                             facturi          ng and Product costing




                                                                                                                                  Prim
                                                                          develo ement                  bly              y      vice
                                                                                               ng              Sales Price setting
                                                                          p-ment




              ..and do you recognize the
                                                                                                                   Portfolio management
                                                                                                                   Customer profitability




               ABC
                    hidden profit ??
cumulative
    profit
                                                                       Hidden
                                    Traditiona                          profit
                                        l

    Actual
     profit




         0
                       Products ranked: most profitable first..
                Product A                                  Product B

                   Hidden profit...drive to improve


                                                                       ABCM Consulting
Other reasons for using ABC at a
           Label Manufacturer
• Customer request short TAT  increase service level
• Tighter Cost Control
• Eliminate Non-value added activities
• Identify the profitable customer/product
• Evaluate if we intend to keep the account which are in
  lost. If so, what we can do to minimize it
• Achieve corporative objective




                                             ABCM Consulting
Project Objective for a PCB
             Manufacturer
 Determine the costs of all activities and resources
  associated with the PCBs production
 Evaluate and test the appropriateness of Activity
  Based Costing for a PCB manufacturer
 Reveal the “true cost” for the PCBs production at the
  company’s core activities




                                             ABCM Consulting
Contents:
            Perspectives in Resource Management
2.30-2.45
            Building an analytical framework -- from
2.45-3.00
            historical data to fact-based management

            Highlights of ABC theories: The CAM-I
3.00-4.00
            Cross, Resource, Activity, Cost Object
            and Drivers

            Case Study – OFTA and Manufacturing
4.15-4.30
            Cases

            Some Practical Implementation Issues
4.30-4.45
            Group Discussion and Group
4.45-6.00
            Presentation


                                             ABCM Consulting
BSC is closely related to
         ABC...




                        ABCM Consulting
Short History of the Balanced
          Scorecard




                         ABCM Consulting
Short History of Balanced Scorecard

     2004: Intangible Assets are the key
        value drivers in organisations – they
        account for 75% of value!
     Strategy Maps – describing how an
        organisation intend to create and
        sustain value for shareholders
     Link processes to measurements (BSC) –
        put emphasis on the Value Creation
        Processes
     Aligning intangible assets (Human
        Capital, Information Capital and
        Organisation Capital) to strategy –
        alignment of Knowledge
        Management concepts and BSC Consulting
                                    ABCM
Strategy is also a New
Destination (Getting from A to B)



                                   Successfully
                                    Executed
                                    Strategy
                      Landmark 2
         Landmark 1




   Formation of a
      Strategy
… the cockpit analogy




                        ABCM Consulting
Mission
             Where do we want to be ?




                    Strategy
               How do we get there ?




                                            Learning
Financial   Customer             Process        &
                                           Development


                                              ABCM Consulting
… the Value Creation Tree




                        ABCM Consulting
Blue Sky Airlines Strategy Map

                                        Draft Map
                                         Achieve
                                        Profitability
  Financial




                    Increase                                Maintain
                    Revenues                               Low Costs




              Increase
Custome




                                        Meet Flight           Increase
              Customer
                                        Schedules           Market Share
   r




               Loyalty
Processes
 Internal




              Understand                  Maintain               Improve
               Customer                 Fast Ground             Operating
               Segments                 Turnaround              Efficiency


                                         Maintain
                                         Employee
Learning &




                                        Productivity
Employee

  Growth




                Hire, train,
                and retain                Provide               Preserve our
                 the right                constant                 culture
                  people               communication
                                                                               ABCM Consulting
Strategic Feedback & Learning


       Strategy
                       M easurement of progress
                       toward objective indicates
                       success in strategic
                       execution.
    Critical Success
         Factors
                               Employee actions
                               contribute toward
                               achieving desired
                               results.
   Employee Action


                                     ABCM Consulting
St r at egy/ Goals

    Balanced Scorecard’s
     relationship to ABC:
                                                                           Grow t h &                                      Custom er              People        Process        Et hics &    Financial
                                                                          I nnovat ion                                    Sat i sf act ion      Com mit m ent   Quali ty      Compl iance




                                                                                                                                        Crit ical Success Fact or s ( CSFs)



                                                                                                                                       Or ganizat ion Perfor m ance Measur es


               Functional View
                                                                                                             Divisional or Pr ocess Level Per for m ance Measur es

                Resources

Process View

                                                                             St r ategy/ Goals




                                                                                                                                                  Balanced Scorecard and
                                   Gr ow t h &         Cust om er           Pe opl e      Pr oce ss     Et h i cs &     F in ancia l




   Cost
                                 I n n ovat io n      Sa t isf act ion   Co mm it men t   Qu ali t y   Com p li an ce




                                                               Cri t ical Success Factors ( CSFs)
                                                                                                                                                       ABC/M share:
  Drivers       Activities                                  Or gani zat ion Per for m ance M easur es                                                   - Activities,
                                                   Divi sion al or Pro cess Level Per for man ce M easur es                                            - Resources,
                                                                                                                                                           - Cost




               Cost Objects



    http://www.cam-i.org                                                                                                                                                   ABCM Consulting
Contents:
            Perspectives in Resource Management
2.30-2.45
            Building an analytical framework -- from
2.45-3.00
            historical data to fact-based management

            Highlights of ABC theories: The CAM-I
3.00-4.00
            Cross, Resource, Activity, Cost Object
            and Drivers

            Case Study – OFTA and Manufacturing
4.15-4.30
            Cases

            Some Practical Implementation Issues
4.30-4.45
            Group Discussion and Group
4.45-6.00
            Presentation


                                             ABCM Consulting
“Most companies in Hong Kong
  use financial statements to run
 their business – a situation that
is neither adequate
         nor satisfactory …”




                               ABCM Consulting
“How do we use fact-based and
  quantity-based management
information systems to measure
    ourselves objectively ?”




                           ABCM Consulting
Limitation of Traditional
Financial Accounting Approach
• Broad-brush allocations e.g. based on
  product volume, revenue size, no. of
  staff ……..
• Historical … not forward-looking
• Non-value-added activities and cost due
  to inefficiency can NEVER be detected!




                                   ABCM Consulting
What is ABC?
•   Resources are consumed by Activities


•   Activities are consumed by Products/Services




                                    Products
Resources          Activities          &
                                    Services




                                           ABCM Consulting
Cost Assignment View

                              Resources




                               Resource
                                 Cost
                                              Resource
                                              Resource
                              Assignment       Drivers
                                               Drivers
Process View


       Cost Drivers           Activities     Performance
                                              Measures



                             Activity Cost      Activity
                                                Activity
                             Assignment
                                                Drivers
                                                 Drivers


                                Cost
                               Objects



                                                           ABCM Consulting
The Need for ABC
       A key to understanding ABC is to understand how cost
       behavior truly varies in relation to other factors
                                 Changes in Cost Structure
        100%



                                                 Overhead                     The demand for
                                                                              overhead activities
  Cost                  Direct                                                are not much linked
                                  Material
Components                                                                    to sales or
                                                                              production volume.
                                                                              They result from:
                                                                              • The diversity and
                                                                                complexity of
                    Direct (recurring) Labor                                    products, services
                                                                                and customers
                                                                              • Quality levels
                                                                              • Rates of needed
                1950s                                            1990s          change
         0%
               Old-fashioned                 Hierarchical        Integrated

                                  Stages in Business Evolution
                                                                               ABCM Consulting
Management




        do you recognize the peanut
                                                                   Business planning, finance and control
                                                                   Training and management development
                                                                   Housing
                                                                   MIS
                                                                   Staff, logistics and quality assurance
                                                                   Produc                                                Ser-




                                                                                                                               ary
                                                                                      Manu-           Marketi
                                                                       t     Procur            Assem Strategic Cost Management
                                                                                                              Deliver
                                                                                      facturi          ng and Product costing




                                                                                                                           Prim
                                                                   develo ement                  bly              y      vice
                                                                                        ng              Sales Price setting
                                                                   p-ment




               butter (i.e. spreading)
                                                                                                            Portfolio management
                                                                                                            Customer profitability




    “Simple" clients that..
                            effect ??
                                          “Pain in the .." clients that..




•   Plan their ordering               •   Demand quick, ad hoc delivery
•   Order big volumes at one time     •   Order small quantities
•   Order on time                     •   Order too late
•   Order standard product            •   Order only special products
Not getting rewarded because          Not paying for the extra costs
traditional calculation..             they cause..


    Lots of wrong decisions are caused by poor calculation practices..


                                                               ABCM Consulting
Resource

“An economic element that is
applied to or used in the
performance of activities.”



            Defines what is needed
            Defines what is needed



                           Adapted from The CAM-I Glossary of
                           Activity-Based Management, Edited by
                           Norm Raffish and Peter B.B. Turney,
                           (Arlington: CAM-I, 1991.)


                                     ABCM Consulting
Resource Examples
Salaries


Technology



Travel


Supplies


Facilities
                             ABCM Consulting
Activity

“Work performed within an organization.”




              What we do
              What we do
                                Adapted from The CAM-I Glossary of
                                Activity-Based Management, Edited by
                                Norm Raffish and Peter B.B. Turney,
                                (Arlington: CAM-I, 1991.)

                                          ABCM Consulting
Activity Examples

Unloading trucks


Processing purchase orders



Training employees


Maintaining vehicles


Forecasting sales

                             ABCM Consulting
Cost Object

“Any customer, product, service, contract,
project, or other work unit for which a separate
cost measurement is desired.”



                           What we work on
                           What we work on



                                     Adapted from The CAM-I Glossary of
                                     Activity-Based Management, Edited by
                                     Norm Raffish and Peter B.B. Turney,
                                     (Arlington: CAM-I, 1991.)




                                               ABCM Consulting
Cost Object Examples

Customers


Products

Services


Contracts


Projects

                            ABCM Consulting
Management
                                                                          Business planning, finance and control
                                                                          Training and management development
                                                                          Housing
                                                                          MIS
                                                                          Staff, logistics and quality assurance
                                                                          Produc                                                Ser-




                                                                                                                                      ary
                                                                                             Manu-           Marketi
                                                                              t     Procur            Assem Strategic Cost Management
                                                                                                                     Deliver
                                                                                             facturi          ng and Product costing




                                                                                                                                  Prim
                                                                          develo ement                  bly              y      vice
                                                                                               ng              Sales Price setting
                                                                          p-ment




              ..and do you recognize the
                                                                                                                   Portfolio management
                                                                                                                   Customer profitability




               ABC
                    hidden profit ??
cumulative
    profit
                                                                       Hidden
                                    Traditiona                          profit
                                        l

    Actual
     profit




         0
                       Products ranked: most profitable first..
                Product A                                  Product B

                   Hidden profit...drive to improve


                                                                       ABCM Consulting
Management
                                                                          Business planning, finance and control
                                                                          Training and management development
                                                                          Housing
                                                                          MIS
                                                                          Staff, logistics and quality assurance
                                                                          Produc                                                Ser-




                                                                                                                                      ary
                                                                                             Manu-           Marketi
                                                                              t     Procur            Assem Strategic Cost Management
                                                                                                                     Deliver
                                                                                             facturi          ng and Product costing




                                                                                                                                  Prim
                                                                          develo ement                  bly              y      vice
                                                                                               ng              Sales Price setting




                   Realize hidden profit
                                                                          p-ment
                                                                                                                   Portfolio management
                                                                                                                   Customer profitability




        Loss making products                         Profitable products
           (or customers)                              (or customers)

POTENTIAL:                                 POTENTIAL and REDUCE RISK:

•Increase price (competition can’t do it   •Sell more of this product or to this kind
cheaper either!)                           of customer

•Stop (let your competitor serve these     •Know how much you can decrease
loss-making customers)                     price in case the market dictates so

•Reduce cost                               •Get more volume by discounting (at a
                                           level where you are still profitable)
     •Lower specs
                                           •Pamper thes customers, don’t let
     •Process improvement                  competition take these!




                                                                     ABCM Consulting
Management
                                                            Business planning, finance and control
                                                            Training and management development
                                                            Housing
                                                            MIS
                                                            Staff, logistics and quality assurance
                                                            Produc             Process Optimization          Ser-
                                                                               Manu-           Marketi
                                                                t     Procur      Process Costingand Deliver
                                                                                        Assem
                                                                               facturi          ng
                                                            develo ement Activity-Based-Costing
                                                                                          bly          y     vice
                                                                                 ng              Sales
                                                            p-ment Evalution of Process Improvements




                   ABM creates new insight
                                                                                Investment decisions
                                                                                    Make or Buy




Reporting on Cost
                               Activity-based-report
Categories

                                 Shipping Dept                               Budget
 Shipping Dept       Budget                                                 ($ 1000)
                    ($ 1000)
                                 Plan trucks                                           29
 Salaries              600
                                 Transport                                         838
 Material              372
                                 Load trucks                                       130
 Energy etc.            32
                                 Waiting time trucks                               185
 Depreciation          275
                                 Check delivery                                        32
 Office supplies        28
                                 Manage staff & resources                              27
 Other                   8
                                 Train staff                                           36
                      1315
                                 Maintain buildings                                    38

                                                                               1315




                                                       ABCM Consulting
Management Control the Support Staff
                                           Business planning, financeActivity Analysis
                                                             Overhead and control
                                           Training and management development
                                           Housing                 Transfer Pricing
                                           MIS Transparency in Overhead and Staff Departments
                                           Staff, logistics and quality assurance
                                                              Service Level Agreements
                                           Produc                                              Ser-
                                                              Manu-            Marketi
                                               t     Procur            Assem           Deliver
                                                              facturi          ng and
                                           develo ement                  bly             y     vice
                                                                ng              Sales




          Control the Support Staff
                                           p-ment




•   Overhead Activity Analysis
•   Transfer Pricing
•   Transparency in Overhead
    and Staff Departments
•   Service Level Agreements

              30-50% of costs is overhead
               Many people
                                 E.g. the IT
               in headoffice,
                                 department
               management
               and staff


          Cost Management makes
           overhead manageable
                                       ABCM Consulting
ABC Doesn’t Replace the Accounting
                 System
An ABC/ABM system does not replace the accounting system. It restates the
same data and adds operating relationships to more effectively support
decision making.
       Data                         Data+                Information


                                               A                  Ms. Strategy
                        General                B
      A blizzard of     Ledger                 C
      transactions      (expense               /
                                                                 Mr. Operations
                        account                A
                        balances)              B
                                               M


                          An                  Optical             Decision makers
                                               Lens
                      Accumulator           (Reassigns
                                              Costs)

                                                                   ABCM Consulting
Three Views of Cost

                 Operational View


                        Today
Financial                                  Strategic
View        Yesterday           Tomorrow       View
                           ?




                                            ABCM Consulting
HOW ABC IS USED
                Product Costing

                Cost Reduction

           Profitability Analysis

          Process Improvement

                Cost Estimation

     Performance Measurement

                 Pricing Models

Business Process Re-engineering

                 Benchmarking

                 Target Costing

            Inventory Valuation

            Capacity Utilization

                      Budgeting

                           Other

            Capital Justification

                    Downsizing

           Project Management

    Compensation/Gain-sharing


     Number of                      0    20   40   60   80    100       120
     Sites
                                                                              16

                                                             ABCM Consulting
Contents:
            Perspectives in Resource Management
2.30-2.45
            Building an analytical framework -- from
2.45-3.00
            historical data to fact-based management

            Highlights of ABC theories: The CAM-I
3.00-4.00
            Cross, Resource, Activity, Cost Object
            and Drivers

            Case Study – OFTA and Manufacturing
4.15-4.30
            Cases

            Some Practical Implementation Issues
4.30-4.45
            Group Discussion and Group
4.45-6.00
            Presentation


                                             ABCM Consulting
Switching
      from
Input Accounting
        to
 Output/Outcome
  Management
   at
   OFTA

          ABCM Consulting
About OFTA
• Executive arm of the Telecommunications
  Authority (Established by statue in 1993)
• Technical and economic regulator
• Dual role of ensuring
   – fair competition,
   – that Hong Kong gets the best telecom services
• Trading Fund Organization – ensuring “Cost
  Recovery”
• Place high priority on training and
  development


                                                     ABCM Consulting
A Systematic Way to
          Understand Costs
• Full Cost Recovery from fees charged
• Relative cost and benefits of services
  delivered
• High cost is weigh against social
  benefits
• ABC versus traditional costing:
   – “Cost Triggers” vs.
     “Revenue Based” and “Headcount
     Based” accounting
• Pricing of “Products” based on
  true costs


                                           ABCM Consulting
OFTA
                                                 ABC Conceptual Cost Flow
General Ledger                                                   Resources                             Activities                                                    Cost Objects
                     G/L
                                                   Cost Pool                          Resource Cost                                           Activity Cost
                                                    Drivers                              Drivers                                                Drivers
                                                                                                                                                                               Licences
 Classification of G/L Items into Cost                           Resource Cost Pools -                 Activities - by Section
               Baseline                                             by Staff Grade

     G/L Items            Cost Baseline                                                                  Computer Services
                                                                    Computer Services
                           Business Sustaining
Audit Fee                        Cost                                                                   For example:
Telephone - mobile                                                                                      Direct Operation Support
Printing                     Administration                                                             Trouble-shooting and Maintenance
Depreciation                                                          For example:                      System and Network Administration
Electricity                 Communication                                 SITM                          Security Management
Staff Salaries                                                            ITM                           Development
Advertising                Computer & Elect.                               ITO                          Licensing System Redevelopment
                               Equip                                        IT                          Preventive Maintenance
      .                                                                                                 Web Updating                             Activity Driver
      .                         Utilities                               Standards                       Supervision (Evenly Assigned)              Surveys
      .                                                                                                 Support Cost (Ave. % of time spent)
      .                     Office expenses                                                                                                        Percentage            PRS-2G
      .                                                                                     Resource         Standards                           No of requests          PRS-3G
                                                                     External Affairs 1
      .                                                                                      Driver:                                             No. of Systems          Mobile Radio System
      .                      Office Facilities      Allocation                                Time                                               # of headcount
                                                                                                          External Affairs 1                                             Fixed Network
                                                       Keys          External Affairs 2                                                           # of licences
                             Maintenance                                                     Survey                                                # of reports
                                                                                                                                                                         Ship Station
                            (office & Equip)                                                              External Affairs 2                        # of cases           Fixed Carrier (Restricted)
                                                                                                                                                # of participants        Broadcast Relay Station
                                                                  Administrative Services                                                       # of applications        Radio Paging System
                              Depreciation                                                             Administrative Services
                                (Note)                                                                                                                   .                            .
                                                                                                                                                         .                            .
                                                                     Corporate Affairs                    Corporate Affairs                              .                            .
                               Publicity &                                                                                                               .                            .
                               Promotion                                                                                                                                              .
                                                                         Finance                              Finance                                                                 .
                                                                                                                                                                                      .
                              People Cost                                                               RMU + Investigation &
                                                                   RMU + Investigation &                   Prosecution
                                                                      Prosecution
                           Senior Management
                                 Cost                                                                  Inspection & Licensing
                                                                  Inspection & Licensing
                             Transportation                                                             Regulatory & Training
                                       .                           Regulatory & Training
                                       .                                                                Business Sustaining
                                       .
                                       .                                                               Other Section's Support
                                       .                                                                        Cost
                                       .


Note: In the model, depreciation categorised as:                                                         Activity
- Land & Building                                                                                      Support Cost
- Computer, Furniture & Fixtures                                                                          Intra-
- Telecom Equipment
- Vehicle                                                                                              Assignment



ABC provides more relevant information as it turns more indirect costs into direct costs
                                                                                                                                                                    ABCM Consulting
ABC Conceptual Flow at OFTA

• For 2002/03, OFTA has
   – No of Resource items: 165
   – No of Activities: 599
   – No of Cost objects (products): 50
• Results
   – Project commenced in May 2003 and first
     management report issued in Sept 2003
   – More understanding on the costs of
     telecommunications licences
   – Enterprise-wide model developed with less indirect
     costs and more direct costs identified


                                                ABCM Consulting
“The ABCM exercise in OFTA gives us an
   opportunity to evaluate services costs and re-
   deploy resources in a more effective manner.

   But senior management should be prepared to
   communicate openly and explain the reasons
   behind an ABC exercise to avoid having the
   potential misconception problems”

                   WONG Kwok-shu, Assistant Director
            Office of the Telecommunications Authority



                                          ABCM Consulting
Four Stages of Implementation

• Stage One: Consultants to provide
  conceptual training and conduct a pilot
  study
• Stage Two: Map out plan to roll-out using
  own staff
• Stage Three: Further conceptualization
  and explanation to staff at each level
• Stage Four: Organization-wide
  implementation (to be completed in
  2004/2005 Financial Year)


                                         ABCM Consulting
Experience Learnt
• Avoid setting too aggressive targets
   – Agree the cost objects with top and middle management
   – Restrict the number of activities and cost objects
   – Allow enough time for checking and review
• Importance of management support and teamwork
   – Seek support from top management
   – Require team efforts (project team members
     and other staff)
• Importance of face to face communication
   – Conduct in-house interviews to complete the
     Activity Dictionary (24 interviews arranged
     with duration of 2 hours each)
   – Convene meetings to explain the logic and
     reasons for ABC implementation
     (4 meetings held)
                                                     ABCM Consulting
Future direction of ABC at OFTA:
Automation & Refinement
  • Automate data integration between
    ABC database and data gathering
    process
     – e.g. develop time log system to
       capture time spent


  • Refining the ABC Model framework
     – capture of regular cost and driver data




                                            ABCM Consulting
Future direction of ABC at OFTA:
           Predictive Planning
       • Launch Activity Based Management
         Initiatives
         – continuous improvement on ABC information to
           facilitate predictive resources management and
           pricing decisions


                             ABC

                               ABB



Past                           Now                             Future



                                                      ABCM Consulting
Future direction of ABC at OFTA:
Output/Outcome Management




                                             OUTCOMES
                                OUTPUTS
IN PUTS




               Activities



                                          ABCM Consulting
Conclusion – About OFTA
•   Executive arm of the Telecommunications Authority              (Established by statue in 1993)

•   Technical and economic regulator

• Dual role of ensuring
     – fair competition,
     – that Hong Kong gets the
       best telecom services
•   Trading Fund Organization – ensuring “Cost Recovery”




                                                                                  OUTPUTS
•   Place high priority on training and development

                                                                     ABCM Consulting


                          Future direction of ABC at OFTA:
                                     Output/Outcome
                                      Management




                                                                       OUTCOMES
                                                  OUTPUTS
                           IN PUTS




                                     Activities




                                                            www.qprcostcontrol.com




                                                                                                     ABCM Consulting
Contents:
            Perspectives in Resource Management
2.30-2.45
            Building an analytical framework -- from
2.45-3.00
            historical data to fact-based management

            Highlights of ABC theories: The CAM-I
3.00-4.00
            Cross, Resource, Activity, Cost Object
            and Drivers

            Case Study – OFTA and Manufacturing
4.15-4.30
            Cases

            Some Practical Implementation Issues
4.30-4.45
            Group Discussion and Group
4.45-6.00
            Presentation


                                             ABCM Consulting
Implementing Fact-based Resource
          Management


   • Mis-conception About ABC
     Implementation – too
     complicated
   • Rapid Prototyping




                            ABCM Consulting
Mis-conception about ABC
      Implementation

• It involves a massive enterprise-wide
  involvement of people and mudslide of
  data
• No result until the ABC system is
  completely constructed
• It will take forever to implement and
  perhaps may not worth the effort


                                  ABCM Consulting
ABC Application Adopting Iterative
          Prototyping

• Education and awareness
• High-level modeling (Model “0”)
• Analyzing Model “0” to get buy-in
• Securing and propagating the
  Learning: A Communication Plan
• Lower-level modeling (Models “1”,
  “2” etc)



                                 ABCM Consulting
Level “0” Modeling

• Usually starts with the ledger expenditure
  data
• Obtain crude data through interviews to
  identify work activities, work products, and
  the time involved
• Aim at “aggregated” (i.e. grouped) cost
  drivers
• It will only take a few days to complete
• ABC Team will spend more time on learning
  the approximation error in the ABC “cost
  assignment”

                                         ABCM Consulting
Rapid Prototyping, BEFORE
           Piloting
• Not to work on detailed costing, just
  to stimulate participants
• Will not necessarily provide final
  answer
• It starts with crude approximations
• Accuracy to be refined in the lower-
  level models




                                    ABCM Consulting
The Typical ABC Team


• A Project Leader
• Professionals
• Application services
• In-house modeler (not necessary be
  accountant or cost engineer)
• External consultant (NOT a must)



                              ABCM Consulting
Contents:
            Perspectives in Resource Management
2.30-2.45
            Building an analytical framework -- from
2.45-3.00
            historical data to fact-based management

            Highlights of ABC theories: The CAM-I
3.00-4.00
            Cross, Resource, Activity, Cost Object
            and Drivers

            Case Study – OFTA and Manufacturing
4.15-4.30
            Cases

            Some Practical Implementation Issues
4.30-4.45
            Group Discussion and Group
4.45-6.00
            Presentation


                                             ABCM Consulting
Thank you!


         Q&A
    For more information, contact:
Alan Lung, Consultant & General Manager
        ABCM Consulting(China)Ltd
Tel: +852 2503-1383 Fax: +852 2503-3645
  E-mail: alanlung@abcmconsulting.com




                                          ABCM Consulting

Contenu connexe

Tendances

Crest Sep13 Sesssion 4
Crest   Sep13   Sesssion 4Crest   Sep13   Sesssion 4
Crest Sep13 Sesssion 4ukabuka
 
IBM, BP, Kickoff 2013 - BP Enablement
IBM, BP, Kickoff 2013 - BP EnablementIBM, BP, Kickoff 2013 - BP Enablement
IBM, BP, Kickoff 2013 - BP EnablementIBM Danmark
 
IBM Business Partner Eablement kick off
IBM Business Partner Eablement kick offIBM Business Partner Eablement kick off
IBM Business Partner Eablement kick offJesper Slot Rohr
 
Fourth Quarter UAL Investor Update
	Fourth Quarter UAL Investor Update	Fourth Quarter UAL Investor Update
Fourth Quarter UAL Investor Updatefinance13
 
Ison Case Study Strategy
Ison Case Study StrategyIson Case Study Strategy
Ison Case Study StrategyISON
 
Driving Sales In A Tough Economy
Driving Sales In A Tough EconomyDriving Sales In A Tough Economy
Driving Sales In A Tough EconomyActegy Consulting
 
Business model tbs 2012v3 ppt
Business model  tbs 2012v3 pptBusiness model  tbs 2012v3 ppt
Business model tbs 2012v3 pptWai Chamornmarn
 
Dynamic Discounting: New Opportunities for No-risk, High-yield Cash Returns
Dynamic Discounting:  New Opportunities for No-risk, High-yield Cash ReturnsDynamic Discounting:  New Opportunities for No-risk, High-yield Cash Returns
Dynamic Discounting: New Opportunities for No-risk, High-yield Cash ReturnsSAP Ariba
 
Value Reference Model - Supply Chain
Value Reference Model - Supply ChainValue Reference Model - Supply Chain
Value Reference Model - Supply ChainArnaldo Colombo
 
Operational Excellence in Virgin Media
Operational Excellence in Virgin MediaOperational Excellence in Virgin Media
Operational Excellence in Virgin Mediasharedserviceslink.com
 
INVENTORY OPTIMIZATION
INVENTORY OPTIMIZATIONINVENTORY OPTIMIZATION
INVENTORY OPTIMIZATIONRajeev Sharan
 
Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009
Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009
Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009Faycal Chraibi
 
Comstock doug
Comstock dougComstock doug
Comstock dougNASAPMC
 
Workflow Part1 1
Workflow Part1 1Workflow Part1 1
Workflow Part1 1evil66_in
 
Enginuity2012 tutorial
Enginuity2012 tutorialEnginuity2012 tutorial
Enginuity2012 tutorialkktung
 

Tendances (20)

Crest Sep13 Sesssion 4
Crest   Sep13   Sesssion 4Crest   Sep13   Sesssion 4
Crest Sep13 Sesssion 4
 
IBM, BP, Kickoff 2013 - BP Enablement
IBM, BP, Kickoff 2013 - BP EnablementIBM, BP, Kickoff 2013 - BP Enablement
IBM, BP, Kickoff 2013 - BP Enablement
 
Custom Overview
Custom OverviewCustom Overview
Custom Overview
 
IBM Business Partner Eablement kick off
IBM Business Partner Eablement kick offIBM Business Partner Eablement kick off
IBM Business Partner Eablement kick off
 
Fourth Quarter UAL Investor Update
	Fourth Quarter UAL Investor Update	Fourth Quarter UAL Investor Update
Fourth Quarter UAL Investor Update
 
Pushing the pencil high tunnel economics 11 22 2010
Pushing the pencil   high tunnel economics 11 22 2010Pushing the pencil   high tunnel economics 11 22 2010
Pushing the pencil high tunnel economics 11 22 2010
 
Ison Case Study Strategy
Ison Case Study StrategyIson Case Study Strategy
Ison Case Study Strategy
 
Pushing the pencil high tunnel economics feb.7&8,2012
Pushing the pencil   high tunnel economics feb.7&8,2012Pushing the pencil   high tunnel economics feb.7&8,2012
Pushing the pencil high tunnel economics feb.7&8,2012
 
Driving Sales In A Tough Economy
Driving Sales In A Tough EconomyDriving Sales In A Tough Economy
Driving Sales In A Tough Economy
 
SaaS Benchmarking Study
SaaS Benchmarking StudySaaS Benchmarking Study
SaaS Benchmarking Study
 
Business model tbs 2012v3 ppt
Business model  tbs 2012v3 pptBusiness model  tbs 2012v3 ppt
Business model tbs 2012v3 ppt
 
Dynamic Discounting: New Opportunities for No-risk, High-yield Cash Returns
Dynamic Discounting:  New Opportunities for No-risk, High-yield Cash ReturnsDynamic Discounting:  New Opportunities for No-risk, High-yield Cash Returns
Dynamic Discounting: New Opportunities for No-risk, High-yield Cash Returns
 
Value Reference Model - Supply Chain
Value Reference Model - Supply ChainValue Reference Model - Supply Chain
Value Reference Model - Supply Chain
 
Operational Excellence in Virgin Media
Operational Excellence in Virgin MediaOperational Excellence in Virgin Media
Operational Excellence in Virgin Media
 
INVENTORY OPTIMIZATION
INVENTORY OPTIMIZATIONINVENTORY OPTIMIZATION
INVENTORY OPTIMIZATION
 
Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009
Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009
Amr Research 0906 The Fast-Payback SAP Projects for Saving Money in 2009
 
Comstock doug
Comstock dougComstock doug
Comstock doug
 
Workflow Part1 1
Workflow Part1 1Workflow Part1 1
Workflow Part1 1
 
Minacs spend smart
Minacs spend smartMinacs spend smart
Minacs spend smart
 
Enginuity2012 tutorial
Enginuity2012 tutorialEnginuity2012 tutorial
Enginuity2012 tutorial
 

En vedette

How Skullcandy Handles Omnichannel from DRS, 7.29.14
How Skullcandy Handles Omnichannel from DRS, 7.29.14How Skullcandy Handles Omnichannel from DRS, 7.29.14
How Skullcandy Handles Omnichannel from DRS, 7.29.14Digiday
 
Strategic HRM - Lesson 5 (t)
Strategic HRM - Lesson 5 (t)Strategic HRM - Lesson 5 (t)
Strategic HRM - Lesson 5 (t)SkimaTalk
 
Music Program Skullcandy 2011 Recap
Music Program Skullcandy 2011 RecapMusic Program Skullcandy 2011 Recap
Music Program Skullcandy 2011 RecapLucas George
 
Product development strategy of skullcandy
Product development strategy of skullcandyProduct development strategy of skullcandy
Product development strategy of skullcandyCharm Rammandala
 
Case study skullcandy - Strategic Management By Jack Ng
Case study   skullcandy - Strategic Management By Jack NgCase study   skullcandy - Strategic Management By Jack Ng
Case study skullcandy - Strategic Management By Jack NgJack Ng
 

En vedette (6)

How Skullcandy Handles Omnichannel from DRS, 7.29.14
How Skullcandy Handles Omnichannel from DRS, 7.29.14How Skullcandy Handles Omnichannel from DRS, 7.29.14
How Skullcandy Handles Omnichannel from DRS, 7.29.14
 
Strategic HRM - Lesson 5 (t)
Strategic HRM - Lesson 5 (t)Strategic HRM - Lesson 5 (t)
Strategic HRM - Lesson 5 (t)
 
Music Program Skullcandy 2011 Recap
Music Program Skullcandy 2011 RecapMusic Program Skullcandy 2011 Recap
Music Program Skullcandy 2011 Recap
 
Product development strategy of skullcandy
Product development strategy of skullcandyProduct development strategy of skullcandy
Product development strategy of skullcandy
 
Case study skullcandy - Strategic Management By Jack Ng
Case study   skullcandy - Strategic Management By Jack NgCase study   skullcandy - Strategic Management By Jack Ng
Case study skullcandy - Strategic Management By Jack Ng
 
Skullcandy
SkullcandySkullcandy
Skullcandy
 

Similaire à Resource Management + OFTA case study (27 Aug 2005)

Balanced Scorecard Presentation For Gemba
Balanced Scorecard Presentation For GembaBalanced Scorecard Presentation For Gemba
Balanced Scorecard Presentation For GembaBenjamin Shobert
 
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINALarvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINALfinance27
 
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINALarvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINALfinance27
 
Content Scenarios New Information Products
Content Scenarios New Information ProductsContent Scenarios New Information Products
Content Scenarios New Information ProductsMaxwell Hoffmann
 
Performance Consulting & Training Services
Performance Consulting & Training ServicesPerformance Consulting & Training Services
Performance Consulting & Training ServicesHj Arriffin Mansor
 
Co pa power point
Co pa power pointCo pa power point
Co pa power pointkrnprjp
 
Hyperionbpccompetiivedata 12907454604299-phpapp02
Hyperionbpccompetiivedata 12907454604299-phpapp02Hyperionbpccompetiivedata 12907454604299-phpapp02
Hyperionbpccompetiivedata 12907454604299-phpapp02Alex2600
 
A roadmap towards peak performance
A roadmap towards peak performanceA roadmap towards peak performance
A roadmap towards peak performanceHj Arriffin Mansor
 
What Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost ManagementWhat Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost Managementalanlund
 
Collaborative Sourcing: Unlocking Greater Savings and Value for You and Your...
Collaborative Sourcing:  Unlocking Greater Savings and Value for You and Your...Collaborative Sourcing:  Unlocking Greater Savings and Value for You and Your...
Collaborative Sourcing: Unlocking Greater Savings and Value for You and Your...SAP Ariba
 
Managing economic volatility
Managing economic volatilityManaging economic volatility
Managing economic volatilitykeshav lagwal
 
2011 pmo symposium Bridging the Agile-to-PMO Communication Gap
2011 pmo symposium Bridging the Agile-to-PMO Communication Gap2011 pmo symposium Bridging the Agile-to-PMO Communication Gap
2011 pmo symposium Bridging the Agile-to-PMO Communication GapBrent Barton
 
Leadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES Dehradun
Leadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES DehradunLeadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES Dehradun
Leadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES DehradunUPES Dehradun
 
Operations management project
Operations management projectOperations management project
Operations management projectakshah67
 
Value Republic Company Presentation 2010
Value Republic Company Presentation 2010Value Republic Company Presentation 2010
Value Republic Company Presentation 2010ictcomfort
 
at ADAPT: AgileEVM Delivering Value within Constrained Systems
at ADAPT: AgileEVM Delivering Value within Constrained Systemsat ADAPT: AgileEVM Delivering Value within Constrained Systems
at ADAPT: AgileEVM Delivering Value within Constrained SystemsBrent Barton
 
profitability cost mgt
 profitability cost mgt profitability cost mgt
profitability cost mgtguesta7ae170
 

Similaire à Resource Management + OFTA case study (27 Aug 2005) (20)

Balanced Scorecard Presentation For Gemba
Balanced Scorecard Presentation For GembaBalanced Scorecard Presentation For Gemba
Balanced Scorecard Presentation For Gemba
 
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINALarvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
 
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINALarvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
arvinmeritor Bear_Stearns_Conf_050707_ARM_FINAL
 
Content Scenarios New Information Products
Content Scenarios New Information ProductsContent Scenarios New Information Products
Content Scenarios New Information Products
 
ABC for Telecom (Telecom Research Project of HKU, Feb 2002)
ABC for Telecom (Telecom Research Project of HKU, Feb 2002)ABC for Telecom (Telecom Research Project of HKU, Feb 2002)
ABC for Telecom (Telecom Research Project of HKU, Feb 2002)
 
Performance Consulting & Training Services
Performance Consulting & Training ServicesPerformance Consulting & Training Services
Performance Consulting & Training Services
 
Staff measurements 250
Staff measurements 250Staff measurements 250
Staff measurements 250
 
Co pa power point
Co pa power pointCo pa power point
Co pa power point
 
Hyperionbpccompetiivedata 12907454604299-phpapp02
Hyperionbpccompetiivedata 12907454604299-phpapp02Hyperionbpccompetiivedata 12907454604299-phpapp02
Hyperionbpccompetiivedata 12907454604299-phpapp02
 
A roadmap towards peak performance
A roadmap towards peak performanceA roadmap towards peak performance
A roadmap towards peak performance
 
What Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost ManagementWhat Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost Management
 
Collaborative Sourcing: Unlocking Greater Savings and Value for You and Your...
Collaborative Sourcing:  Unlocking Greater Savings and Value for You and Your...Collaborative Sourcing:  Unlocking Greater Savings and Value for You and Your...
Collaborative Sourcing: Unlocking Greater Savings and Value for You and Your...
 
Managing economic volatility
Managing economic volatilityManaging economic volatility
Managing economic volatility
 
2011 pmo symposium Bridging the Agile-to-PMO Communication Gap
2011 pmo symposium Bridging the Agile-to-PMO Communication Gap2011 pmo symposium Bridging the Agile-to-PMO Communication Gap
2011 pmo symposium Bridging the Agile-to-PMO Communication Gap
 
Leadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES Dehradun
Leadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES DehradunLeadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES Dehradun
Leadership map by Mr Sudhakar Rao at HRRT organised by ISPE & UPES Dehradun
 
Smartsizing
SmartsizingSmartsizing
Smartsizing
 
Operations management project
Operations management projectOperations management project
Operations management project
 
Value Republic Company Presentation 2010
Value Republic Company Presentation 2010Value Republic Company Presentation 2010
Value Republic Company Presentation 2010
 
at ADAPT: AgileEVM Delivering Value within Constrained Systems
at ADAPT: AgileEVM Delivering Value within Constrained Systemsat ADAPT: AgileEVM Delivering Value within Constrained Systems
at ADAPT: AgileEVM Delivering Value within Constrained Systems
 
profitability cost mgt
 profitability cost mgt profitability cost mgt
profitability cost mgt
 

Plus de Asia Pacific Intellectual Capital Centre Ltd

Plus de Asia Pacific Intellectual Capital Centre Ltd (20)

Does Hong Kong have an informal diplomatic role for China on the New Silk Roa...
Does Hong Kong have an informal diplomatic role for China on the New Silk Roa...Does Hong Kong have an informal diplomatic role for China on the New Silk Roa...
Does Hong Kong have an informal diplomatic role for China on the New Silk Roa...
 
Pages from gii 2016 -- the age of innovation diplomacy
Pages from gii 2016 -- the age of innovation diplomacyPages from gii 2016 -- the age of innovation diplomacy
Pages from gii 2016 -- the age of innovation diplomacy
 
Hk rating - The Most Innovation Cities in Asia Pacific
Hk rating  - The Most Innovation Cities in Asia PacificHk rating  - The Most Innovation Cities in Asia Pacific
Hk rating - The Most Innovation Cities in Asia Pacific
 
HK Ranking - Global Innovation Index 2016 (full-report- 2016-v1)
HK Ranking  - Global Innovation Index 2016 (full-report- 2016-v1)HK Ranking  - Global Innovation Index 2016 (full-report- 2016-v1)
HK Ranking - Global Innovation Index 2016 (full-report- 2016-v1)
 
Our HK Foundation -- The Ecosystem of Innovation and Technology in HK (Dec 20...
Our HK Foundation -- The Ecosystem of Innovation and Technology in HK (Dec 20...Our HK Foundation -- The Ecosystem of Innovation and Technology in HK (Dec 20...
Our HK Foundation -- The Ecosystem of Innovation and Technology in HK (Dec 20...
 
CITIE Report 2015
CITIE Report 2015CITIE Report 2015
CITIE Report 2015
 
Human Freedom Index - 2015 by Cato Institute
Human Freedom Index - 2015 by Cato InstituteHuman Freedom Index - 2015 by Cato Institute
Human Freedom Index - 2015 by Cato Institute
 
Government-sponsor Future Centres (3 March 2016)
Government-sponsor Future Centres  (3 March 2016)Government-sponsor Future Centres  (3 March 2016)
Government-sponsor Future Centres (3 March 2016)
 
政府參與的 未來中心
政府參與的 未來中心政府參與的 未來中心
政府參與的 未來中心
 
HK Innovation and Technology Policy presentation by Nick Yang at HKGCC Member...
HK Innovation and Technology Policy presentation by Nick Yang at HKGCC Member...HK Innovation and Technology Policy presentation by Nick Yang at HKGCC Member...
HK Innovation and Technology Policy presentation by Nick Yang at HKGCC Member...
 
Crowdsourcing for democracy_f_www-libre
Crowdsourcing for democracy_f_www-libreCrowdsourcing for democracy_f_www-libre
Crowdsourcing for democracy_f_www-libre
 
ITB Connectivity
ITB ConnectivityITB Connectivity
ITB Connectivity
 
Future of manufacturing_driving_capabilities
Future of manufacturing_driving_capabilitiesFuture of manufacturing_driving_capabilities
Future of manufacturing_driving_capabilities
 
Wef gac ageing_white_paper
Wef gac ageing_white_paperWef gac ageing_white_paper
Wef gac ageing_white_paper
 
Top 10 emerging_urban_innovations_report_2010_20.10
Top 10 emerging_urban_innovations_report_2010_20.10Top 10 emerging_urban_innovations_report_2010_20.10
Top 10 emerging_urban_innovations_report_2010_20.10
 
Managing complex change
Managing complex changeManaging complex change
Managing complex change
 
Kicking Away the Ladder -- the “Real” History of Free Trade
Kicking Away the Ladder -- the  “Real” History of Free TradeKicking Away the Ladder -- the  “Real” History of Free Trade
Kicking Away the Ladder -- the “Real” History of Free Trade
 
Dutch Future Centres for Public Sector
Dutch Future Centres for Public SectorDutch Future Centres for Public Sector
Dutch Future Centres for Public Sector
 
IP Trading Final Report
IP Trading Final ReportIP Trading Final Report
IP Trading Final Report
 
Industry 4.0 -- Roland berger t2014-04-03
Industry 4.0 -- Roland berger t2014-04-03Industry 4.0 -- Roland berger t2014-04-03
Industry 4.0 -- Roland berger t2014-04-03
 

Resource Management + OFTA case study (27 Aug 2005)

  • 1. Effective Resource Management How Activity-based Costing could facilitate effective resource management Presented by Workshop Jointly Organised by AIA & HKU Saturday, 29 March 2003 SPACE Saturday 27 August 2005 Dr Joseph Yau, HKU SPACE Mr Alan Lung, ABCM Consulting ABCM Consulting
  • 2. Contents: Perspectives in Resource Management 2.30-2.45 Building an analytical framework -- from 2.45-3.00 historical data to fact-based management Highlights of ABC theories: The CAM-I 3.00-4.00 Cross, Resource, Activity, Cost Object and Drivers Case Study – OFTA and Manufacturing 4.15-4.30 Cases Some Practical Implementation Issues 4.30-4.45 Group Discussion and Group 4.45-6.00 Presentation ABCM Consulting
  • 3. What is resource management? • An accounting term? • A public administration jargon? • Resource = Money? Property? • Resource = Knowledge, Skill, People? ABCM Consulting
  • 4. Managing Resources in a Government (Bureaucratic) Organizations • Resource Allocation • Resource Deployment and Re- deployment • Resource Review ABCM Consulting
  • 5. Please suggest ways for HKSAR Government to allocate the following resources ABCM Consulting
  • 6. HRG/DRG is not likely to be implemented soon … ABCM Consulting
  • 7. Typical Resource Allocation • Policy Objectives • Key Result Areas by Programme (or CSF?) Global Allocation Proposed Distribution Refined Distribution Key Performance Indicators Execution  Programme Objectives  Initiatives ABCM Consulting
  • 8. What are the features of effective Resource Management? • Availability of physical, human, financial and intangible resources • Deployment and re-deployment • High value-added in core and supporting processes ABCM Consulting
  • 9. What are the handicaps in the government sector? • Salaries constitute a very high % of total cost • Little room for reduction in direct costs • Difficult to identify non-value- added activities ABCM Consulting
  • 10. Output/Outcome Management: How much “Inputs” (Resource) are used to produce specific outputs? Were those “Outputs” (Services) useful to the “Outcomes” (Policy Objectives)? OUTCOMES OUTPUTS IN PUTS Activities ABCM Consulting
  • 11. Are all your customers Profitable? Profitability Analysis by Total Profit($) and Margin(%) Best customer Profit($) low priority in Total productionQuantity Profit (before HQ Costs) Manufacturing FOB Cost increase Revenue Material quantity Cost increase FOB Margin(%) cost reduction ABCM Consulting
  • 12. CPA: Customer Profitability Analysis cumulative profit Hidden profit Actual profit Differences in Cost-to-serve  Different customers use different 0 Products ranked: most profitable first.. activities Customer A Customer B cumulative profit Hidden profit Customers are Actual profit easier to influence than products 0 Products ranked: most profitable first.. Product A Product B Possibilities to influence  ABCM Consulting
  • 13. Management Business planning, finance and control Training and management development Housing MIS Staff, logistics and quality assurance Produc Ser- ary Manu- Marketi t Procur Assem Strategic Cost Management Deliver facturi ng and Product costing Prim develo ement bly y vice ng Sales Price setting p-ment ..and do you recognize the Portfolio management Customer profitability ABC hidden profit ?? cumulative profit Hidden Traditiona profit l Actual profit 0 Products ranked: most profitable first.. Product A Product B Hidden profit...drive to improve ABCM Consulting
  • 14. Other reasons for using ABC at a Label Manufacturer • Customer request short TAT  increase service level • Tighter Cost Control • Eliminate Non-value added activities • Identify the profitable customer/product • Evaluate if we intend to keep the account which are in lost. If so, what we can do to minimize it • Achieve corporative objective ABCM Consulting
  • 15. Project Objective for a PCB Manufacturer  Determine the costs of all activities and resources associated with the PCBs production  Evaluate and test the appropriateness of Activity Based Costing for a PCB manufacturer  Reveal the “true cost” for the PCBs production at the company’s core activities ABCM Consulting
  • 16. Contents: Perspectives in Resource Management 2.30-2.45 Building an analytical framework -- from 2.45-3.00 historical data to fact-based management Highlights of ABC theories: The CAM-I 3.00-4.00 Cross, Resource, Activity, Cost Object and Drivers Case Study – OFTA and Manufacturing 4.15-4.30 Cases Some Practical Implementation Issues 4.30-4.45 Group Discussion and Group 4.45-6.00 Presentation ABCM Consulting
  • 17. BSC is closely related to ABC... ABCM Consulting
  • 18. Short History of the Balanced Scorecard ABCM Consulting
  • 19. Short History of Balanced Scorecard 2004: Intangible Assets are the key value drivers in organisations – they account for 75% of value! Strategy Maps – describing how an organisation intend to create and sustain value for shareholders Link processes to measurements (BSC) – put emphasis on the Value Creation Processes Aligning intangible assets (Human Capital, Information Capital and Organisation Capital) to strategy – alignment of Knowledge Management concepts and BSC Consulting ABCM
  • 20. Strategy is also a New Destination (Getting from A to B) Successfully Executed Strategy Landmark 2 Landmark 1 Formation of a Strategy
  • 21. … the cockpit analogy ABCM Consulting
  • 22. Mission Where do we want to be ? Strategy How do we get there ? Learning Financial Customer Process & Development ABCM Consulting
  • 23. … the Value Creation Tree ABCM Consulting
  • 24. Blue Sky Airlines Strategy Map Draft Map Achieve Profitability Financial Increase Maintain Revenues Low Costs Increase Custome Meet Flight Increase Customer Schedules Market Share r Loyalty Processes Internal Understand Maintain Improve Customer Fast Ground Operating Segments Turnaround Efficiency Maintain Employee Learning & Productivity Employee Growth Hire, train, and retain Provide Preserve our the right constant culture people communication ABCM Consulting
  • 25. Strategic Feedback & Learning Strategy M easurement of progress toward objective indicates success in strategic execution. Critical Success Factors Employee actions contribute toward achieving desired results. Employee Action ABCM Consulting
  • 26. St r at egy/ Goals Balanced Scorecard’s relationship to ABC: Grow t h & Custom er People Process Et hics & Financial I nnovat ion Sat i sf act ion Com mit m ent Quali ty Compl iance Crit ical Success Fact or s ( CSFs) Or ganizat ion Perfor m ance Measur es Functional View Divisional or Pr ocess Level Per for m ance Measur es Resources Process View St r ategy/ Goals Balanced Scorecard and Gr ow t h & Cust om er Pe opl e Pr oce ss Et h i cs & F in ancia l Cost I n n ovat io n Sa t isf act ion Co mm it men t Qu ali t y Com p li an ce Cri t ical Success Factors ( CSFs) ABC/M share: Drivers Activities Or gani zat ion Per for m ance M easur es - Activities, Divi sion al or Pro cess Level Per for man ce M easur es - Resources, - Cost Cost Objects http://www.cam-i.org ABCM Consulting
  • 27. Contents: Perspectives in Resource Management 2.30-2.45 Building an analytical framework -- from 2.45-3.00 historical data to fact-based management Highlights of ABC theories: The CAM-I 3.00-4.00 Cross, Resource, Activity, Cost Object and Drivers Case Study – OFTA and Manufacturing 4.15-4.30 Cases Some Practical Implementation Issues 4.30-4.45 Group Discussion and Group 4.45-6.00 Presentation ABCM Consulting
  • 28. “Most companies in Hong Kong use financial statements to run their business – a situation that is neither adequate nor satisfactory …” ABCM Consulting
  • 29. “How do we use fact-based and quantity-based management information systems to measure ourselves objectively ?” ABCM Consulting
  • 30. Limitation of Traditional Financial Accounting Approach • Broad-brush allocations e.g. based on product volume, revenue size, no. of staff …….. • Historical … not forward-looking • Non-value-added activities and cost due to inefficiency can NEVER be detected! ABCM Consulting
  • 31. What is ABC? • Resources are consumed by Activities • Activities are consumed by Products/Services Products Resources Activities & Services ABCM Consulting
  • 32. Cost Assignment View Resources Resource Cost Resource Resource Assignment Drivers Drivers Process View Cost Drivers Activities Performance Measures Activity Cost Activity Activity Assignment Drivers Drivers Cost Objects ABCM Consulting
  • 33. The Need for ABC A key to understanding ABC is to understand how cost behavior truly varies in relation to other factors Changes in Cost Structure 100% Overhead The demand for overhead activities Cost Direct are not much linked Material Components to sales or production volume. They result from: • The diversity and complexity of Direct (recurring) Labor products, services and customers • Quality levels • Rates of needed 1950s 1990s change 0% Old-fashioned Hierarchical Integrated Stages in Business Evolution ABCM Consulting
  • 34. Management do you recognize the peanut Business planning, finance and control Training and management development Housing MIS Staff, logistics and quality assurance Produc Ser- ary Manu- Marketi t Procur Assem Strategic Cost Management Deliver facturi ng and Product costing Prim develo ement bly y vice ng Sales Price setting p-ment butter (i.e. spreading) Portfolio management Customer profitability “Simple" clients that.. effect ?? “Pain in the .." clients that.. • Plan their ordering • Demand quick, ad hoc delivery • Order big volumes at one time • Order small quantities • Order on time • Order too late • Order standard product • Order only special products Not getting rewarded because Not paying for the extra costs traditional calculation.. they cause.. Lots of wrong decisions are caused by poor calculation practices.. ABCM Consulting
  • 35. Resource “An economic element that is applied to or used in the performance of activities.” Defines what is needed Defines what is needed Adapted from The CAM-I Glossary of Activity-Based Management, Edited by Norm Raffish and Peter B.B. Turney, (Arlington: CAM-I, 1991.) ABCM Consulting
  • 37. Activity “Work performed within an organization.” What we do What we do Adapted from The CAM-I Glossary of Activity-Based Management, Edited by Norm Raffish and Peter B.B. Turney, (Arlington: CAM-I, 1991.) ABCM Consulting
  • 38. Activity Examples Unloading trucks Processing purchase orders Training employees Maintaining vehicles Forecasting sales ABCM Consulting
  • 39. Cost Object “Any customer, product, service, contract, project, or other work unit for which a separate cost measurement is desired.” What we work on What we work on Adapted from The CAM-I Glossary of Activity-Based Management, Edited by Norm Raffish and Peter B.B. Turney, (Arlington: CAM-I, 1991.) ABCM Consulting
  • 41. Management Business planning, finance and control Training and management development Housing MIS Staff, logistics and quality assurance Produc Ser- ary Manu- Marketi t Procur Assem Strategic Cost Management Deliver facturi ng and Product costing Prim develo ement bly y vice ng Sales Price setting p-ment ..and do you recognize the Portfolio management Customer profitability ABC hidden profit ?? cumulative profit Hidden Traditiona profit l Actual profit 0 Products ranked: most profitable first.. Product A Product B Hidden profit...drive to improve ABCM Consulting
  • 42. Management Business planning, finance and control Training and management development Housing MIS Staff, logistics and quality assurance Produc Ser- ary Manu- Marketi t Procur Assem Strategic Cost Management Deliver facturi ng and Product costing Prim develo ement bly y vice ng Sales Price setting Realize hidden profit p-ment Portfolio management Customer profitability Loss making products Profitable products (or customers) (or customers) POTENTIAL: POTENTIAL and REDUCE RISK: •Increase price (competition can’t do it •Sell more of this product or to this kind cheaper either!) of customer •Stop (let your competitor serve these •Know how much you can decrease loss-making customers) price in case the market dictates so •Reduce cost •Get more volume by discounting (at a level where you are still profitable) •Lower specs •Pamper thes customers, don’t let •Process improvement competition take these! ABCM Consulting
  • 43. Management Business planning, finance and control Training and management development Housing MIS Staff, logistics and quality assurance Produc Process Optimization Ser- Manu- Marketi t Procur Process Costingand Deliver Assem facturi ng develo ement Activity-Based-Costing bly y vice ng Sales p-ment Evalution of Process Improvements ABM creates new insight Investment decisions Make or Buy Reporting on Cost Activity-based-report Categories Shipping Dept Budget Shipping Dept Budget ($ 1000) ($ 1000) Plan trucks 29 Salaries 600 Transport 838 Material 372 Load trucks 130 Energy etc. 32 Waiting time trucks 185 Depreciation 275 Check delivery 32 Office supplies 28 Manage staff & resources 27 Other 8 Train staff 36 1315 Maintain buildings 38 1315 ABCM Consulting
  • 44. Management Control the Support Staff Business planning, financeActivity Analysis Overhead and control Training and management development Housing Transfer Pricing MIS Transparency in Overhead and Staff Departments Staff, logistics and quality assurance Service Level Agreements Produc Ser- Manu- Marketi t Procur Assem Deliver facturi ng and develo ement bly y vice ng Sales Control the Support Staff p-ment • Overhead Activity Analysis • Transfer Pricing • Transparency in Overhead and Staff Departments • Service Level Agreements 30-50% of costs is overhead Many people E.g. the IT in headoffice, department management and staff Cost Management makes overhead manageable ABCM Consulting
  • 45. ABC Doesn’t Replace the Accounting System An ABC/ABM system does not replace the accounting system. It restates the same data and adds operating relationships to more effectively support decision making. Data Data+ Information A Ms. Strategy General B A blizzard of Ledger C transactions (expense / Mr. Operations account A balances) B M An Optical Decision makers Lens Accumulator (Reassigns Costs) ABCM Consulting
  • 46. Three Views of Cost Operational View Today Financial Strategic View Yesterday Tomorrow View ? ABCM Consulting
  • 47. HOW ABC IS USED Product Costing Cost Reduction Profitability Analysis Process Improvement Cost Estimation Performance Measurement Pricing Models Business Process Re-engineering Benchmarking Target Costing Inventory Valuation Capacity Utilization Budgeting Other Capital Justification Downsizing Project Management Compensation/Gain-sharing Number of 0 20 40 60 80 100 120 Sites 16 ABCM Consulting
  • 48. Contents: Perspectives in Resource Management 2.30-2.45 Building an analytical framework -- from 2.45-3.00 historical data to fact-based management Highlights of ABC theories: The CAM-I 3.00-4.00 Cross, Resource, Activity, Cost Object and Drivers Case Study – OFTA and Manufacturing 4.15-4.30 Cases Some Practical Implementation Issues 4.30-4.45 Group Discussion and Group 4.45-6.00 Presentation ABCM Consulting
  • 49. Switching from Input Accounting to Output/Outcome Management at OFTA ABCM Consulting
  • 50. About OFTA • Executive arm of the Telecommunications Authority (Established by statue in 1993) • Technical and economic regulator • Dual role of ensuring – fair competition, – that Hong Kong gets the best telecom services • Trading Fund Organization – ensuring “Cost Recovery” • Place high priority on training and development ABCM Consulting
  • 51. A Systematic Way to Understand Costs • Full Cost Recovery from fees charged • Relative cost and benefits of services delivered • High cost is weigh against social benefits • ABC versus traditional costing: – “Cost Triggers” vs. “Revenue Based” and “Headcount Based” accounting • Pricing of “Products” based on true costs ABCM Consulting
  • 52. OFTA ABC Conceptual Cost Flow General Ledger Resources Activities Cost Objects G/L Cost Pool Resource Cost Activity Cost Drivers Drivers Drivers Licences Classification of G/L Items into Cost Resource Cost Pools - Activities - by Section Baseline by Staff Grade G/L Items Cost Baseline Computer Services Computer Services Business Sustaining Audit Fee Cost For example: Telephone - mobile Direct Operation Support Printing Administration Trouble-shooting and Maintenance Depreciation For example: System and Network Administration Electricity Communication SITM Security Management Staff Salaries ITM Development Advertising Computer & Elect. ITO Licensing System Redevelopment Equip IT Preventive Maintenance . Web Updating Activity Driver . Utilities Standards Supervision (Evenly Assigned) Surveys . Support Cost (Ave. % of time spent) . Office expenses Percentage PRS-2G . Resource Standards No of requests PRS-3G External Affairs 1 . Driver: No. of Systems Mobile Radio System . Office Facilities Allocation Time # of headcount External Affairs 1 Fixed Network Keys External Affairs 2 # of licences Maintenance Survey # of reports Ship Station (office & Equip) External Affairs 2 # of cases Fixed Carrier (Restricted) # of participants Broadcast Relay Station Administrative Services # of applications Radio Paging System Depreciation Administrative Services (Note) . . . . Corporate Affairs Corporate Affairs . . Publicity & . . Promotion . Finance Finance . . People Cost RMU + Investigation & RMU + Investigation & Prosecution Prosecution Senior Management Cost Inspection & Licensing Inspection & Licensing Transportation Regulatory & Training . Regulatory & Training . Business Sustaining . . Other Section's Support . Cost . Note: In the model, depreciation categorised as: Activity - Land & Building Support Cost - Computer, Furniture & Fixtures Intra- - Telecom Equipment - Vehicle Assignment ABC provides more relevant information as it turns more indirect costs into direct costs ABCM Consulting
  • 53. ABC Conceptual Flow at OFTA • For 2002/03, OFTA has – No of Resource items: 165 – No of Activities: 599 – No of Cost objects (products): 50 • Results – Project commenced in May 2003 and first management report issued in Sept 2003 – More understanding on the costs of telecommunications licences – Enterprise-wide model developed with less indirect costs and more direct costs identified ABCM Consulting
  • 54. “The ABCM exercise in OFTA gives us an opportunity to evaluate services costs and re- deploy resources in a more effective manner. But senior management should be prepared to communicate openly and explain the reasons behind an ABC exercise to avoid having the potential misconception problems” WONG Kwok-shu, Assistant Director Office of the Telecommunications Authority ABCM Consulting
  • 55. Four Stages of Implementation • Stage One: Consultants to provide conceptual training and conduct a pilot study • Stage Two: Map out plan to roll-out using own staff • Stage Three: Further conceptualization and explanation to staff at each level • Stage Four: Organization-wide implementation (to be completed in 2004/2005 Financial Year) ABCM Consulting
  • 56. Experience Learnt • Avoid setting too aggressive targets – Agree the cost objects with top and middle management – Restrict the number of activities and cost objects – Allow enough time for checking and review • Importance of management support and teamwork – Seek support from top management – Require team efforts (project team members and other staff) • Importance of face to face communication – Conduct in-house interviews to complete the Activity Dictionary (24 interviews arranged with duration of 2 hours each) – Convene meetings to explain the logic and reasons for ABC implementation (4 meetings held) ABCM Consulting
  • 57. Future direction of ABC at OFTA: Automation & Refinement • Automate data integration between ABC database and data gathering process – e.g. develop time log system to capture time spent • Refining the ABC Model framework – capture of regular cost and driver data ABCM Consulting
  • 58. Future direction of ABC at OFTA: Predictive Planning • Launch Activity Based Management Initiatives – continuous improvement on ABC information to facilitate predictive resources management and pricing decisions ABC ABB Past Now Future ABCM Consulting
  • 59. Future direction of ABC at OFTA: Output/Outcome Management OUTCOMES OUTPUTS IN PUTS Activities ABCM Consulting
  • 60. Conclusion – About OFTA • Executive arm of the Telecommunications Authority (Established by statue in 1993) • Technical and economic regulator • Dual role of ensuring – fair competition, – that Hong Kong gets the best telecom services • Trading Fund Organization – ensuring “Cost Recovery” OUTPUTS • Place high priority on training and development ABCM Consulting Future direction of ABC at OFTA: Output/Outcome Management OUTCOMES OUTPUTS IN PUTS Activities www.qprcostcontrol.com ABCM Consulting
  • 61. Contents: Perspectives in Resource Management 2.30-2.45 Building an analytical framework -- from 2.45-3.00 historical data to fact-based management Highlights of ABC theories: The CAM-I 3.00-4.00 Cross, Resource, Activity, Cost Object and Drivers Case Study – OFTA and Manufacturing 4.15-4.30 Cases Some Practical Implementation Issues 4.30-4.45 Group Discussion and Group 4.45-6.00 Presentation ABCM Consulting
  • 62. Implementing Fact-based Resource Management • Mis-conception About ABC Implementation – too complicated • Rapid Prototyping ABCM Consulting
  • 63. Mis-conception about ABC Implementation • It involves a massive enterprise-wide involvement of people and mudslide of data • No result until the ABC system is completely constructed • It will take forever to implement and perhaps may not worth the effort ABCM Consulting
  • 64. ABC Application Adopting Iterative Prototyping • Education and awareness • High-level modeling (Model “0”) • Analyzing Model “0” to get buy-in • Securing and propagating the Learning: A Communication Plan • Lower-level modeling (Models “1”, “2” etc) ABCM Consulting
  • 65. Level “0” Modeling • Usually starts with the ledger expenditure data • Obtain crude data through interviews to identify work activities, work products, and the time involved • Aim at “aggregated” (i.e. grouped) cost drivers • It will only take a few days to complete • ABC Team will spend more time on learning the approximation error in the ABC “cost assignment” ABCM Consulting
  • 66. Rapid Prototyping, BEFORE Piloting • Not to work on detailed costing, just to stimulate participants • Will not necessarily provide final answer • It starts with crude approximations • Accuracy to be refined in the lower- level models ABCM Consulting
  • 67. The Typical ABC Team • A Project Leader • Professionals • Application services • In-house modeler (not necessary be accountant or cost engineer) • External consultant (NOT a must) ABCM Consulting
  • 68. Contents: Perspectives in Resource Management 2.30-2.45 Building an analytical framework -- from 2.45-3.00 historical data to fact-based management Highlights of ABC theories: The CAM-I 3.00-4.00 Cross, Resource, Activity, Cost Object and Drivers Case Study – OFTA and Manufacturing 4.15-4.30 Cases Some Practical Implementation Issues 4.30-4.45 Group Discussion and Group 4.45-6.00 Presentation ABCM Consulting
  • 69. Thank you! Q&A For more information, contact: Alan Lung, Consultant & General Manager ABCM Consulting(China)Ltd Tel: +852 2503-1383 Fax: +852 2503-3645 E-mail: alanlung@abcmconsulting.com ABCM Consulting

Notes de l'éditeur

  1. Framework Employees now have tangible, measurable goals that they can address that will support the execution of organizational strategy. Employee action is now directed towards achieving CSF ’ s. Measuring progress towards CSF ’ s indicates success at implementing strategy.