Many food processing companies operate within slim profit margins. Companies looking to increase those margins and cut out financial fat can utilize Activity Based Costing (ABC) measures to achieve those goals.

Activity Based Costing measures the cost of a product/service/customer/process, based on the activities performed.

ValuMax uses actual expenses, using a top down allocation of costs to ensure full absorption costing. This allows managers a better picture of the economics of their operations.

This insight can be broadly categorized as:

• Customer Profitability
• Product Profitability
• Transportation Costing

Once an understanding of true cost is formed, various costing scenarios (“what-ifs) can be analyzed to power performance management decisions.

Valumax has been designed to handle complex cost allocation structures. It solves costing equations simultaneously using a powerful matrix calculation engine rather than an iterative calculation method that most other ABC systems use.

Product costing using ValuMax

ValuMax builds costing structures in the manner that the business functions. The business may consist of many business units or plants and departments/cost centers for which specific cost structures may be created. ValuMax considers not only cost transfers between activities and departments but also inter company/plant transfers. The example shown is for a Primary Processing plant and can be extended to include other plants and further processing plants. click here

An example of the calculated cost of a final product can be seen here.

Product & Customer Profitability

The solution focuses on product handling and customer service attributes that directly affect the costs of each component. The costing system will allow for precise costing of the service activities, as it allocates costs based on utilizing various cost drivers. It allows for transparency of cost components. Another plus is the ability to determine return on investment for our respective customers. the system replaces an Excel based costing system and automatically sources cost and volumetric information from various distribution centers across the country. The system caters for various multiple scenarios, allowing the client to model different pricing strategies.

The solution uses online analytical processing (OLAP) technology, which enables the customization of business models to accommodate unique business rules and answer questions specific to the client.

Transportation Costing

The logistics costing solution is driven by customer delivery detail and the transportation expenses. There are two basic cost components - fixed (such as distance) and variable (such as time) that relates to customer and the delivery respectively.