Client: Major Industrial Equipment Manufacturer
Problem:
A leading supplier of OEM hydraulic systems and components needed to upgrade its cost accounting processes and implement those changes using its ERP system. In particular, they needed a consistent, accurate way to make and apply valid "make or buy" decisions.
Scope of Work:
Identify fixed and variable costs for 112 work stations running more than 3200 items. Model the business processes to allow integration of the cost accounting information into their existing ERP (MAPICS) system. Upon completion of the cost accounting integration, develop a "make or buy" decision model that incorporates consistent and accurate cost analyses.
What Quantalyst Did:
- Mined ERP and satellite manufacturing systems, including tool crib, maintenance, assets, warranty and quality systems, to define complexity profiles of all work stations and all items.
- Developed activity-based cost structure that maintained an audit trail to the ledger.
- Isolated fixed and variable costs.
- Assigned costs to work centers using work center complexity profiles and assigned fixed and variable costs to items.
- Provided comprehensive impact model, including identification of winners and losers among the company's products.
- Integrated cost accounting model into existing ERP system.
- Developed custom database-driven "make or buy" decision model software program.
Results:
- Completed comprehensive item price audit using new cost accounting procedures.
- New "make or buy" decision model improved profitability by identifying best candidates for outsourcing
- Improved variable costing capability integrated into standard business processes to increase accuracy of of cost-based actions.
