Challenge: Managing Costs Over Complex Channels
A Fortune 500 Financial Services Organization established an Activity Based Costing (ABC) framework for allocating costs for shared service recovery and product profitability reporting and analysis. The system in place has recently been centralized organizationally and undergone a process reengineering effort to analyze methodology and processes. The results identified deficiencies in the current methodology, activities, and technology limiting capabilities to fully serve the cost management information demands from the enterprise stakeholder community.

Specific findings included:
• Inconsistent adoption and utilization of existing ABC information
• Limited enterprise understanding of the uses and capabilities of cost information
• Current methodology is primarily based on subjective time surveys and full absorption costing
• Technology in use is out of date and further limiting advancement

Approach: Strategic Cost Management
To resolve these shortcomings a Strategic Cost Management & Analysis project was developed that integrated Six Sigma and Activity Based Costing Principles. In order to implement tools and processes to perform Strategic Cost Management, modeling was implemented to capture multidimensional expense scenarios, creating the ability to better understand product demand, work efficiency, and operational capabilities. A shift in modeling methodology was required to satisfy the information demands across the organization.

• Armada’s role in this project included project management, team leadership for Strategic Cost Management (SCM), development of a shared services internal recovery system, leadership in the business process reengineering effort, and support for data extract and billing system application.
• Organized the project team around client service areas based on the teaming of client designated project resources with Armada Consulting resources. The joint team managed and executed the project from kickoff to completion.
• Conducted discovery session interviews with the business units and support function’s management in order to identify high level requirements.
• Created a preliminary activity/process dictionary outlining the major processes and sub-processes to
be used throughout the rollout of SCM across the client’s organization.
• Developed cost object list based on information collected during manager and business discovery session interviews.
• Provided the overall model design including: ledger, resource, activity, cost object and product structure for each business and built initial prototype models.
• Coordinated with other client initiatives to ensure cost development and recovery methodology implemented is consistent with the direction of the management reporting architecture.
• Developed and coordinated a project work plan with the client including detailed task-level work plans that will outline the duration, key milestones and deliverables of all aspects of the project.
• Managed project time line on a weekly basis, while managing the project within scope and under budget.
• Identified and tracked issues that arose throughout the implementation of the project by providing weekly status reports to communicate all issues to client management.
• Documented all project steps, operation policies and procedures, decisions, meetings, deliverables, etc. during the project.

Results: Replinishable Model Improving Profitability
The project implemented systems and methodologies establishing decision support capabilities. These capabilities provided multidemensional cost analysis for shared services recovery, profitability measurement, and performance management. The changes were received with large scale commitment from support staff who successfully managed the organizational change. Implementation included analysis of billions of dollars in operational expenses, volume data extracts accross numerous applications and platforms, and identification of service consumption across multiple cost centers. The resulting system provided detailed information to managers and reduced consumption of internal services, with projected savings of over $25 million.

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