CostPerform a new, affordable, analysis and modelling tool that has recently been launched in the UK will dramatically enhance the functionality and effectiveness of Activity Based Costing (ABC) and Activity Based Management (ABM), says its UK provider, Develin & Partners.
Speaking about the launch, Brian Plowman, Managing Director of Develin & Partners, says that CostPerform goes beyond traditional ABC by its ability to link volume of outputs, the processes that are performed and resource capacity all in one model. “This is a significant step forward and with an entry price below £15k, CostPerform is a very attractive choice,” he added.
CostPerform is proving its mettle in industries as diverse as healthcare, manufacture, utilities, distribution and shared services.
“In Healthcare many of the issues are brazenly commercial: there is a need to be ‘profitable’ and give value-for-money while improving patient care. Examples around the world include the use of CostPerform to calculate the costs of treatments and patients in over 90% of the hospitals in Holland, which is largely an insurance company funded system. In the UK one of the largest private hospital groups needed to know what margin it makes on over 700 treatments that are provided to a large range of customer groups including tranches of contracted NHS operations at fixed tariffs,” says Plowman.
But it is not only the affordability of CostPerform that excites Plowman – process visibility is a major differentiator, he says.
Since the 1980s ABC methodology and software was successful in supporting a better understanding of costs; particularly improving overhead allocation. This traditional approach helped organisations assign overhead costs to products and services more accurately than previous costing methodologies. Traditional questions answered using this ABC architecture include customer profitability, ‘true’ net margin of products, and the cost of activities performed in the organisation. This has been and continues to be a very useful output from an ABC model.
However they have had very limited usefulness in process modelling and the support of budgeting and planning in complex organisations. “CostPerform is the first system totally designed from the ground up to be a comprehensive product, customer andbusiness process costing platform,” adds Develin’s Plowman.
“In the USA the American Red Cross (ARC) is responsible for managing over 45% of the nation’s blood supply – from marketing to donors, to collection, testing, storage, transportation and distribution. All other ABC software tools had failed to handle how all the processes worked. Using CostPerform, ARC gained total visibility of the manufacturing and distribution process and linked product volume flow throughout the supply chain with cost visibility and processes,” he added.
Commenting to FSN he said, “Other ABC software packages are based upon the traditional ABC architecture which is limited to a layer for resources, a layer for activities and a layer for outputs or services. These packages provide no separate layer for activities to be aggregated into processes and require overhead allocations to be mixed into the same step as the tracing of direct costs. This makes it difficult for the model to report out these underlying differences in cost behaviour and can lead to incorrect decisions about the resource needs to achieve associated strategic outcomes”.
