powerpoint presentation...support pricing and contract negotiations drive product/service cost...
TRANSCRIPT
P R O D U C T C O S T I N G F O R M O D E R N F I N A N C E O R G A N I Z A T I O N S :
CREATING A COST-FOCUSED CULTURE
Solution Leader
ADRIAN ROCHOFSKI
OUR COMPANY
We are cost and profitability
thought leaders and the
inventors of ImpactECS
OUR PLATFORM
We provide tools and applications
to connect data, calculate results,
and provide insights.
ABOUT 3C SOFTWARE
OUR BENEFIT
We supplement ERP cost and profitability
capabilities, replicate ERP processes for
scenario analytics, and provide alternate
views and methods for costs and profits.
Why is culture important
The role of Finance in establishing culture
Building a cost-focused culture
Supporting a cost-focused culture with technology
Webinar Agenda
the way we do things around here
cul•ture noun
[kuhl-cher]
Terrance Dean, Allan Kennedy“Corporate Cultures: The Rites and Rituals of Corporate Life”
CULTURE AS A COMPETITIVE ADVANTAGE
Source: "Accounting for Corporate Culture", Robert Half
20%
Companies with a focus on creating outperform the competition by
FINANCE PLAYS A ROLE IN DEFINING YOUR CULTURE
Source: "Accounting for Corporate Culture", Robert Half
51%The number of CFOs actively involved in shaping their company’s culture.
WHY FINANCE? BECAUSE WE’VE GOT WHAT THEY WANT
Most companies have an average of 5 internal data sources, and the finance department plays the most prominent role in data management and governance.
5%
8%
24%
29%
41%
41%
60%
0% 10% 20% 30% 40% 50% 60% 70%
Other
Other business department
Marketing
Sales
BI Competency Center
IT
Finance
Who manages and governs data for decision-making?
(n=726)
BUT WHAT REALLY HAPPENS?
Source: "Costing and cost transparency: Helping finance create business value", Deloitte
58% Company bases decisions on gut vs data 58% of the time.
50% Company uses only 50% of available data to make decisions.
the way we make decisions around here
cost cul•ture noun
[kawst kuhl-cher]
Our approach to product costing 3C Software
WHAT IS ‘COSTING’ MADE OF?
Data structureProduct and service
costing methodsCost capture
Cost and profitability models
Chart of accounts Cost methods Work orders Management reporting
Cost centers Material valuation Transaction processing Inventory valuation
Profit centers Labor standards Confirmations Intercompany profit
Item masters Overhead rates Third-party processing Cost-based KPIs
Product familiesProduct and non-product cost
allocationsVariances Pricing and quotations
Units of measure New products and R&DAllocations, assessments,
and settlementSales and operational
planning and forecasting
Data governance, integrity, and control
Policy and process
Operating model – Organization structure, roles, responsibility, delegation of authority
Tax, statutory, and transfer pricing
Source: "Save-to-transform as a catalyst for embracing digital disruption, Deloitte’s second biennial global cost survey", Deloitte
COST TRANSPARENCY INFORMS EVERY DECISION
Transparent Cost
Information
True product costs
Operational performance improvement
Financial operations
Customers and contracts
Enterprise cost structure & operating
model
Business strategy
Total product cost/profitability at a product category of item level
Profitability analytics to drive strategic analysis and decisions
Visibility into overhead and shared services cost structure (fixed vs. controllable)
Brand and product P&Ls and cost drivers
Business performance and drivers across businesses, regions, and products
Cost-to-serve and profitability
Source: "Save-to-transform as a catalyst for embracing digital disruption, Deloitte’s second biennial global cost survey", Deloitte
Enhancing skills.The speed of business today requires finance to integrate and master analytical tools that deliver strategic insights.
TRAITS OF THE BEST COST CULTURES
Forging new relationships.Finance must move from the “numbers guys” to trusted internal partner and consultant.
Developing best practices.Evolve strategies into best practices and create an “analytics ecosystem” across the organization.
Balancing data with instincts.Decisions aren’t made on autopilot. Use data to validate or disprove, not to dictate.
BUILDING YOUR COST CULTUREBased on the “Six Components of a Great Corporate Culture” by John Coleman, Harvard Business Review, 2013
PEOPLEWho are the people that must share the vision, promote the
practices, and enable the practices?
NARRATIVE
What stories can you tell about costs and how they are calculated?
PRACTICESWhat are the activities that will
promote those values?
PLACEWhat tools and platforms do you use
to connect and share cost information?
VALUESWhat are the guidelines of establishing a cost culture?
VISIONWhat’s the purpose of costing?
-1-Future Focused
-2-Directional
-3-Specific
-4-Relevant & Purpose-Driven
-5-Values-Based
-6-Challenging
-7-Unique & Memorable
-8-Inspiring
VISION: WHAT ARE YOU TRYING TO ACHIEVE?
A good vision statement includes these 8 characteristics:
VALUES: DEFINE SUCCESS WHEN IT COMES COSTING
Values are at the core of any culture, and offer guidance when trying to achieve the ideal, or your organization’s “north star”
Support (your) real world situations
Include measurable and meaningful KPIs
Apply consistent logic and assumptions
Deliver timely results
PRACTICES: THE STEPS TO A BETTER COSTING PROCESS
PEOPLE: SHARE DATA TO EXPAND INSIGHTS Creating transparency and expanding accessibility of cost data amplifies your organization’s ability
to make informed and meaningful decisions.
Unique perspective of individual business area
Able to go to bat to justify business value
Involved hands-on in multiple analytic
areas and activitiesBeen around the block and had connections
Appetite for what matters relative to business priorities
Proven application of analytic tools to business problems
Contextualized vision of the organization
Traits of a Citizen Data Scientist
Source: “Citizen Data Scientists and Why They Matter", Carlie Idoine, Gartner Blog Network
You can adjust costing methods and process with changing market or business conditions
You can maintain and compare costs sets to minimize risk and expose opportunities
You can repeatably and reliably connect data between disparate systems (ERP, Shop-Floor/MES, BI, etc.)
You can quickly and confidently provide relevant cost data to different audiences in your organization
NARRATIVE: TELLING THE COST STORY
You know the unique cost of each product you manufacture
PLACE: LEVERAGE THE RIGHT TOOLS FOR THE JOB
Sys
tem
Ro
bu
stn
ess
HIGH
System FlexibilityLOW HIGH
Transactional system / System of Record
Rigid or limiting implementations with no inherent simulation capabilities
Integrated Modeling & Analytics Platform
Centralized modeling platform integrated with existing IT architecture
Complete flexibility in designing and managing data and model logic to meet business requirements
Desktop Modeling Tools
Limited controls and auditability assures integrity issues
Unable to scale or handle large data sets, limiting simulation capabilities
Niche Systems
Custom implementations with partial or reduced controls
Simulation capabilities limited to programmed options
ERPModeling &
Analytics Platform
User Defined Applications
Spreadsheets
CURRENT STATE: YOU ARE NOT ALONE
Source: "Costing and cost transparency: Helping finance create business value", Deloitte
93%The number of companies who are, or will be, taking action to improve the quality of their cost information.
REAL WORLD EXAMPLES:Supporting a cost-focused culture with technology
Opinions and assumptions can be changed based on data
THE RULES OF THE ROAD FOR MAKING DECISIONS IN A COST-FOCUSED CULTURE
Employees can manage data independently
Analytics is part of everyone’s job
The organization embraces the improvements suggested by data
Data is organized, accessible, and of a high quality
Each opinion is supported by numbers and data
Reports are replaced with interactive analytics tools
Every employee can access data that relates to them
Source: “Transform Decision Making with a Data Driven Culture"
WHY IS HAVING A COST CULTURE SO IMPORTANT
Supporting business strategy and strategic decisions and driving cost reduction are the primary uses of cost information, and they’re also the primary areas that need improvement.
25%
39%
51%
52%
61%
64%
13%
39%
44%
52%
61%
78%
Support financial reporting
Provide visibility for cost management initiatives
Monitor operational performance
Support pricing and contract negotiations
Drive product/service cost reduction
Support business strategy and and strategic decisions
Top roles of cost information vs. top areas for improvement
Among the top roles of costing information Among the top areas for improvement for costing information
Source: "Costing and cost transparency: Helping finance create business value", Deloitte