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Once the value chain map of the process is finalized, the following tasks should be performed to conclude the ABC analysis:
- Identify relevant costs and highlight cost drivers — ABC goes beyond identifying and allocating supplier’s indirect costs to products and services by identifying the drivers of such costs. Examples of cost drivers are the number of orders, length of setups, specifications, engineering changes, and liaison trips required. This identification allows management to identify and implement cost-saving opportunities.
- Analyze and produce activity costs (as-is) — ABC allocates as-is costs to specific activities rather than departments or functions. These costs may include as-is labor costs, material costs, overhead, etc. Therefore, it is the activity that drives the cost, and not the reverse.
- Analyze and produce activity costs (to-be) — ABC allocates to-be costs to specific activities. To-be costs are costs that are associated with the proposed project or purchase that the Postal Service would like to invest in.
- Assess the implications of potential changes — review all costs, and determine whether the changes will have any effect on the organization.
All steps in the process must be carefully reexamined to determine whether each step is value-adding, essential, or non-value-adding. Detailed attention should be given to value-adding and essential, rather than non-value-adding activities. Non-value-adding activities should be considered for removal if it is determined that performing the activities would increase cost and time to adhere to the client’s need.
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