Value Chain Analytics: The Evolution Of Financial Analysis In The Retail/CPG Industry
Activity-Based Costing was the natural outcome of meshing the costs of the business to the General Ledger. The costing analysis systems of DPP and CAP put in place years earlier had a hand in tainting the Retail/CPG industry's view of how ABC could be used in the supply/demand chain. ABC was never intended to drive cost analysis down to the sku or product level across complex supply chains. By aligning with the General Ledger, costs could be assigned down through the organization to an appropriate level of complexity. The industry itself had an unrealistic view of the types of reporting it could do before analysis ever started.
ABC had been used in stable manufacturing systems or single entities in such a way that users felt confident the principles could be applied with ease into complex supply/demand chains. However, the hurdles found in the supply/demand chain proved too difficult. Not only was it daunting to drive the costs down to a granular level but the outside influences often found in the supply/demand chains proved next to impossible to reconcile. Rather than trying to make a methodology do something it couldn't, a new approach was needed to overcome those problems and provide financial transparencies.
SAS Value Chain Analytics was developed using ABC, DPP & CAP principles, not as a replacement for Activity-Based Costing, but as a solution to the problems found in the Retail/CPG industry's supply/demand chain cost and profit analysis. The last twelve years of testing in leading
Fortune 100 CPG Retailers and Suppliers has established that SAS VCA delivers:
- 1. Cost savings of 5-10% of sales.
SAS VCA delivers financial intelligence, enabling fact-based decisions to be made to reduce costs and improve profitability, both internally and across the CPG/Retail value chain. When organizations use VCA to optimize their value chain, they have identified cost savings of 5-10% of sales and increased profits by 60% or more. - 2. Insights that your organization can act on.
SAS VCA helps deliver financially based insights to the right decision-makers in the organization, providing intelligence on products, customers, suppliers and processes. Via the SAS reporting and portal capabilities, these insights can be leveraged for both one-off decisions and long-term performance monitoring.
In the end, utilizing a unique, mutually acceptable, industry-specific approach to cost and profit analysis, Value Chain Analytics integrates the supply and demand activities of the value chain, enabling trading partners to objectively examine and measure the financial impacts on their individual businesses.