DEEPER INSIGHT
Customers demand customized services across increasingly complex channels making it difficult to accurately identify product and customer costs. With personnel expenses representing the largest single component in service institutions, it follows that the companies are searching for improved methods of cost assignments to products and customers. A detailed understanding about your organization’s costs provides a competitive advantage and empowers management with valuable information that can be used to implement process improvements throughout the organization.

FROM ABC TO SCM
An expansion of the traditional Activity Based Costing (ABC) approach imparts service organizations with the ability to provide better actionable information. ABC, as developed in the manufacturing sector, is applicable to services organizations, but must be adapted carefully. There are a number of differences between service and manufacturing costs and transaction structures, which require planning, stakeholder support, and careful consideration prior to implementation. Strategic Cost Modeling is an expansion of the traditional ABC processes which align with specific process reengineering practices and strategic initiatives. Strategic Cost Modeling employs an advanced modeling methodology, which can be successfully applied in any organization to better provide measurement of the resources, productivity, process costs, and profitability.

STRATEGIC COST MODELING
Strategic Cost Modeling is a comprehensive approach to reduce costs in an organization by strategically aligning the following initiatives with one enterprise consistent cost modeling framework:

• Internal Cost Recovery
• Cost Modeling and Analysis
• Performance Measurements
• Business Process Reengineering
• Customer Profitability

When combined with data warehousing, analytical technologies, and integrated with performance management and compensation, Strategic Cost Modeling becomes a strategic tool for significantly improving profitability.

THE NEXT STEP
Have you ever found yourself asking “why”, “what” or “how” when thinking about reducing your company’s costs, and increasing profitability? Give the Armada Consulting Team the opportunity to discuss the benefits that exist by engaging in a Strategic Cost Modeling initiative.

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