The Brief

Our client is a leading manufacturer in the Agribusiness sector with facilities in Australia and New Zealand, and a key supplier to local and Asian markets.

Our client initiated a Cost-to-serve project, the objective of which was to allow it to understand the profitability of each customer account, as well as each product, based on the actual business activities and overhead costs incurred.  To support this, they required a process driven costing tool, the key requirements of which were:

• Development of a data repository and calculation engine
• Linking of the tool to the existing business systems
• Cost allocations based on key activities as well as customer behaviours
• Flexible drill-down capability including customer, product, sales representative and market segment
• The tool needed to be simple to update and user friendly, in order to be easily used by personnel across the business

Our Approach

Parity worked closely with the finance team, as well as key personnel in key departments including sales, customer service, planning, logistics and manufacturing.  We conducted interviews across the business to understand the key cost drivers and available data in addition to working with the business to define the key activities to be considered by the model.  Based on this we developed an analysis structure and cost allocation methodologies.

The Cost-to-serve model was developed using Microsoft BI tools including Power Query and Power Pivot and validated against known costs and the general ledger.

Outcome

The Cost-to-serve model was used by several departments within the business.  It allowed the client to understand the total contribution to the bottom line by customer and product, as well as how specific customer demands impact cost and profitability.  The model facilitates this through a cube-type functionality that allows data drill-down for both standardized reporting and ad hoc analysis.

“Parity worked closely with the finance team, as well as key personnel in key departments including sales, customer service, planning, logistics and manufacturing.”