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CostPerform Presents a Best In Class Tool and an Innovative Approach to Develop Business
Models Designed for Performance Improvement |
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Every organization wants to improve performance. The private sector seeks a sustainable level of profitability. The public sector seeks to provide its services in a more efficient and effective manner. |
Managers are on a constant lookout for: |
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Process improvements, |
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A means for determining which products and services are most significant for the future, as differentiated from those that are at the end of their usefulness, and |
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Strategies for determining how the organization can deliver desired outputs and outcomes at the lowest cost. |
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The key question for the executive is, “How do I best approach performance improvement?” We believe the answer resides in performance efficiency and effectiveness information that is clear and consistent and that information is provided in a manner that supports decision-making. It is essential for decision-makers to know the costs of delivering their products and services and to be able to immediately isolate the costs of individual business processes that comprise those costs. This information, when combined with timeliness, customer satisfaction, customer quality and customer value, allow the manager to analyze his/her product and service portfolio and readily resolve issues that impede program performance and service delivery. |
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CostPerform is a software and analytical methodology designed to deliver such information to decision-makers. The CostPerform offering is steeped in process cost modeling, which represents a significant, evolutionary improvement over traditional activity-based costing (ABC). CostPerform accrues many benefits to the decision-maker. For example, CostPerform: |
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Reports product and process costs in tabular or graphic format, including comparisons across geographic locations or over time. This capability allows information to be communicated via familiar reports or charts and graphics. |
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Reflects how the organization works and how its business gets done by modeling the unique processes by which products and services are produced and delivered. |
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Produces rapid results based on the fact that it is implemented and installed in the organization in weeks, rather than months, as was previously the case with ABC tools. |
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Produces reports on product costs, and profitability that can be formatted, distributed and manipulated over the web. Additional data on customers’ perception of timeliness, quality and value can be incorporated as desired. CostPerform reports allow users to drill-down to greater levels of detail where detail is most relevant. |
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Reports product and business process costs in a manner that enables an organization to “reach back” into past periods and accurately produce budget forecasts for future periods based on projected product volumes and process productivities, and; |
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Identifies and quantifies capacity overages and constraints for all projection scenarios. |
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CostPerform Features Enables Performance Improvement and Product/Customer Profitability
Improvement In 3 Critical Ways |
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1. CostPerform Communicates Relevant Information Clearly To Executives and Managers |
| Web-Based Reporting & Graphics Features for Clarity of Communicating |
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Interactive web-based drill-down model reports are useful for managers, model builders, and customer analysts. Reports are standard and custom designed through a wizard for ease. Graphical chart views of data and information is easy and repeatable in both model screens and reports. Key measures can be viewed regularly and web-based reports and views allow for virtual performance management sessions. |
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The example below illustrates how the client organization used the model to understand and communicate through the software browser the direct, shared (indirect services such as IT), and sustaining (indirect pure overhead such as executive management) components of costs. In the same browser, the client organization can see and understand product/service volume flows, including attrition (losses) in this sample recruitment model.
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Using the same sample recruitment model, the following graphical features which can be viewed in the software as a saved view or in a report as a printed or web-based file, shows various cost and non-financial metrics. For instance, the client organization was able to understand cost per recruit across various regions, as well as productivity per recruiters across various regions.
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| 2. CostPerform Allows You To Model Exactly How Your Organization Works by Analyzing Production Flows |
| Build Models That Fit the Business – (Sections or Layers Tailored to Reflect Production Points of Product/Service Flow) |
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Flexibility of structuring the model enables a more accurate depiction of your organization's processes and outputs. A business model that reflects reality must be able to communicate what is going on at each stage of an output's production. Additionally, flexible model architecture or design allows business models to report overhead, interdepartmental services, and direct activity components of each process, product or service cost separately and simultaneously. |
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The following graphic from the sample recruitment model illustrates how a client organization can design a model that communicates cost and product/service flow simultaneously, and at each stage of a product/service lifecycle, from resources, processes, direct costs (without overhead), and with overhead and shared services layered on to the point of customer delivery.
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Actual and Unit Cost Visibility at Each Stage of Product/Service (Output) Flow |
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Total and unit costs are visible throughout the various product/service stages, to enable viewing cost with and without overhead, and at each level or stage of product/service flow. Additionally, consumption rates (pull) or fixed costs (push) drivers may be used through a single interface to more precisely model business complexity. This enables a more precise knowledge of what processes vary by service levels, what processes vary by process levels, and what processes remain fixed. |
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The following graphic from the sample recruitment model illustrates how multiple cost drivers and calculation rules can be used within the same model for various components of a process.
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Using the same model, the following illustration shows how total and unit costs are visible at each stage of a product/ service flow.
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3. CostPerform Produces Accurate Product and Process Service Costs for Past Periods and Enables Streamlined "What-If" Scenario Projections and Forecasting (By Varying Product Quantity and Productivity Assumptions You Can Analyze Budget and Capacity Impacts) |
Dashboards That Monitor Key Metrics, and Project/Forecast Impacts on Organizational Resources, Processes, and Outputs |
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Historical models and planning models that enable projections and forecasting are easily developed to allow an organization to both understand process and output costs, and to analyze productivity, profitability, and performance improvement. This is powerful feature that enables capacity and output volume "what-if" scenarios. |
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The following graphic illustrates how certain model variables (i.e., capacity, productivity, resource costs, output volume) can be viewed in a dashboard interface and varied to analyze impact on costs, processes, and outputs.
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The following graphic illustrates how input variables can be designed within the model to test them for use in a dashboard. Productivity and attrition are key variables in this client model and the model was designed to test the impact of these variables on organizational resources, process costs, and outputs: |
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The following graphic from the sample recruitment model illustrates how multiple cost drivers and calculation rules can be used within the same model for various components of a process.
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Case Study : How the American Red Cross Uses CostPerform Business Models to Manage The Complex Process of Blood Manufacturing and Distribution |
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The American Red Cross (ARC) is responsible for managing over 52% of the nation's blood supply – from marketing to donors, to collection, testing, storage, transportation and distribution, and sell to hospitals and other customers across the nations. |
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ARC divisions and regions run a complex supply chain that functions as a single source of safe and reliable blood supply for our nation's hospitals. Managing a product such as blood is a very complex set of processes. From a single collection (pint), multiple products are produced, including platelets, red blood cells, and whole blood of various types (A, O, B). Along each production point or lifecycle of the blood products, losses occur – for instance, at testing, inventory shelf, and other points along the supply chain. The management of ARC has been relying on multiple technology applications to try and track both volume and cost of processes and products. Inventory tracking was able to supply the management with a certain amount of product visibility, and a reliable financial system was able to manage the complexity of the supply chain costs across multiple divisions and regions. However, ARC management needed an integrated solution that linked processes, and product volume flow with costs. More so, ARC needed to determine the precise loss of blood products at exact points in the supply chain and put a cost to such losses. They wanted to know the profitability of each product by customer. |
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To remedy the gap in their management information, ARC embarked on a performance improvement project in 2007 to gain visibility of the blood manufacturing and distribution process and link product volume flow throughout the supply chain with cost visibility. The CostPerform™ tool has provided a platform whereby blood product volume is tracked throughout the supply chain, and costs are linked to the volume flow. |
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The CostPerform business model began with a clear understanding of the complex processes throough which blood is collected, tested, broken down into multiple products with different shelf lives, inventoried, transported and sold. The business models had to accurately track costs along this complex supply chain, including the various components of costs (direct blood product costs, shared costs such as information technology (IT) and Human Resources Management (HR), and sustaining (pure overhead such as executive and administrative management). To do so, the platform had to accurately model the volume flow along the same path – particularly the breakout of blood into multiple components like platelets and blood cells, and the losses of blood and byproducts along the supply chain. |
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Modeling the interrelationships between product/service costs and volume in a supply chain where product volume is lost throughout the supply chain points is particularly challenging. For instance, whole blood goes through a process of spinning to produce multiple components, each of which have different inventory and distribution lifecycles. The CostPerform™ software starts with each product/customer combination separately and calculates the volume of all steps needed to produce that end product – all the way back to recruiting blood donors. The model is complete in itself; no complex calculations are required to build the data tables that drive the model. |
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After a pilot on one region, iterative modeling and validation was performed. Once the model was validated for accuracy the ARC rolled out model templates in its varying regions and divisions. This has enabled the ARC to determine and monitor: |
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The total and unit costs of all blood products by customer; |
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The exact volume flow of blood products at specific points in the supply chain; |
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Cost of product losses such as inventory shelf life expiration; |
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Total cost of ARC supply chain components. |
