A comprehensive activity-based costing system was designed and transformed into software for our client, a global company operating in the machinery and equipment sector, incorporating various part manufacturing and assembly processes.
Our support, which spanned nearly 6 months, involved a consistent focus of approximately 15 days per month, aimed primarily at developing a system to calculate the profitability of the client’s products. The key activities implemented during the project were as follows:
- All operations and manufacturing/assembly cells were reviewed, and production parameters outside of the existing ERP (Enterprise Resource Planning) system were digitized.
- Production work order routes and operations related to these areas were reviewed within the ERP system, and the data was consolidated and made available for activity-based costing by designing new reporting screens.
- Starting from variable and direct material expenses, around 100 expense codes—ranging from production to administrative expenses—were mapped to approximately 25 Responsibility Centers (Cost Centers) identified through a detailed analysis, and grouped into around 15 expense categories.
- A formula was developed to transfer costs from Responsibility Centers to work orders, and the conceptual design was completed based on prototype calculations, moving forward to the module and screen design stages.
- The developed prototype system evolved into two separate software development projects: one within the ERP system and another outside of the ERP system using derived data. Both applications were completed, enabling the allocation of all variable direct, fixed direct, and indirect costs to Responsibility Centers and, subsequently, to work orders and operations. As a result, unit total (and detailed) costs were generated for all products manufactured and services offered during the designated period.
The software development teams were guided through traditional project management and agile management approaches, overseeing the design, conceptualization, prototyping, development, and testing phases. The software was tested together with the end users, refined according to client needs, and delivered as a solution operating on a modern architecture.
