ORACLE ACTIVITY-BASED MANAGEMENT 11i

Oracle@Activity-Based Management (ABM) is an enterprise application that provides accurate cost information to managers throughout an organization. Managers use ABM to improve profitability and examine resource allocations. ABM goes far beyond traditional cost allocation, and allows companies to model the complexity of all costs based on activities, materials, resources, and product or service components. ABM is used across many industries including manufacturers, service providers, retailers and government agencies.

Activity-Based Management is part of the Oracle E-Business Suite, an integrated set of applications, which is designed to transform your business to an e-business.

Activity Based Costing and Activity Based Management

ABC is a methodology that measures the cost and performance of activities, resources, and cost objects, in relation to the inherent drivers of those costs. Specifically, resources are assigned to activities, then activities are assigned to cost objects based on their use. ABC goes far beyond traditional accounting methods, and recognizes the causal relationships of cost drivers to activities.

Activity based management is a discipline that focuses on the management of activities as the route to improving the value received by the customer and the profit achieved by providing this value. Activity based management includes cost driver analysis, activity analysis, and performance measurement, drawing on ABC as it major source of data. Using Oracle ABM, organizations have the benefit of knowing the value added to the organization by each activity and can easily perform detailed performance analysis to enable continuous improvement and competitive benchmarking.

Measure Profitability

Traditionally, businesses have measured profitability through the use of generalized cost data, which is allocated across products based on subjective decisions. However, this measure of profitability was not always accurate, since the costs were not related to the products, services or customers that actually caused those costs to be incurred.

Oracle ABM provides flexible cost modeling to more accurately map costs to the products, services or customers that consume resources, enabling a more accurate measure of profitability. Oracle ABM provides flexible modeling to allow profitability analysis for strategic segmentation of the market. Users analyze the segmented information to determine the appropriate product mix, or make outsourcing decisions to achieve maximum profitability.

Oracle ABM includes the ability to import revenue data, and then display profitability metrics using ABM Analyzer. When integrated with Oracle Performance Analyzer, activity rate data is combined with customer specific transaction data providing true 1:1 profitability analysis at the customer level.

Analyze Activity Costs

Oracle ABM supports the definition of a costing model that identifies the relationship between costs and how they are traced to each activity. Activity costs and rates may be used to support many business decisions including the following:

• Pricing models in a shared services organization. What are the appropriate charge back rates?
• Benchmarking and Performance analysis. What is the difference between costs for the same activity across facilities? How do you compare with competitors and industry standards? What performance measures can be developed across your organization?
• Target costing for new product development.

Answers to each of these questions supports process reengineering and operational management issues.

Activity cost reports: Drill down through process costs

Produce Accurate Product and/or Service Costs

Online exchanges and transparency of information have increased the need for accurate pricing models in today's competitive economy. Old outdated pricing models are no longer sufficient when responding to bids, or determining prices for new products or services. Oracle ABM provides easy to use modeling capabilities to quickly determine accurate pricing data based on the metrics specific to a bid or anticipated sales volumes. Users can mix and match activities, materials and other cost objects to define the components for new products, or the mix of components required to meet the details for a specific need.

Measure the Cost of Unused Capacity

Most organizations do not run at full capacity, or have all their resources fully utilized. When this is the case, what is the cost of this unused capacity? Oracle ABM computes activity rates using drivers based on the practical capacities for an organization. Then, by computing costs based on the difference between the practical and the actual level of activity for that volume of goods and services, users can identify the cost of unused capacity in your organization per driver, activity, or process.

Capture Multiple Cost Scenarios and Answer "What If" Analysis Questions

The answers to the profitability and costing questions are just the first step in the activity-based management process. An analyst now knows what it costs to provide products or services, but how can changes in business processes affect a company's costs? Oracle ABM has a flexible architecture that includes "what if" analysis and produces different costing scenarios. With versioning options for bill types, activity rate sets, and mapping rule sets, users can formulate different cost assignment scenarios, mix and match cost drivers, and assign alternate product cost structures. In addition to these functions, data can be stored in data sets that represent different time buckets and modeling scenarios.

Cost Object Comparison Report: Variances breakdown with column title drill down into variance detail

Generate Departmental Budgets

Oracle ABM extends the "what if" analysis one step further, by providing the ability to generate a department level budget using planned production volumes and a business' existing activity-based costing model. Users can "backflush" planned production volumes through their bill hierarchies to derive a set of activity drivers necessary for a specific level of production. After that step, they can specify which activity costs are fixed and flexible, based on the inherent nature of the activities. With that data, they can then generate a derived set of activity costs. The last step is to add up all costs by department and account, to give them a bottom up activity based budget based on your planned service or production levels.

ABM's flexible budgeting defines costs to vary from 0 to 100% with respect to driver values

Integrate Data Directly from Oracle G/L

The starting point for activity-based costing involves interfacing source system data for organizational costs to the ABM model. Oracle ABM comes with multiple facilities to import data into the application. Spreadsheet templates are provided to create model structures and import data in a single step. An additional function for staging tables is provided for the import of large data volumes into the application.

ABM enables users to import data from Oracle General Ledger directly. The application provides powerful consolidation functionality, rule-based field mapping, and robust reporting to facilitate the transfer of data.

Enterprise Activity-Based Management

The real power of a cost management application is the dissemination of ABM data throughout an organization. Oracle ABM is easily deployed throughout an organization because it is based on Oracle's Internet architecture. Users access the application through a web browser, which launches the Oracle Applications Self-Service framework. From this location, users are able to access a set of web-enabled reports, launch ABM specific workbooks with Oracle Discoverer, or launch the ABM application to modify and update the model. It is now possible for anyone in an organization to access the application or reports, with only a browser on their desktop. Whether an employee sits in Auckland or Zurich, access to ABM is only a browser screen away.

Complete and Flexible Integration

Oracle ABM is fully integrated with other Oracle Applications to provide comprehensive, Internet-based solutions for your cost management needs. Using Oracle's market-leading technology, users can rapidly implement solutions that integrate corporate information regardless of system or format, tailor functionality to meet specific requirements, and expand the system to keep pace with dynamic business evolution. Additionally, analysts can deploy various models concurrently and flexibly across the enterprise by plant, by product family, by production line, or by process. Oracle's ABM standards ensure that Oracle Applications deliver the highest return on software investment-today and tomorrow.

Oracle E-Business Suite The Total Solution

Transform the way you conduct business with Oracle's Internet-enabled e-business suite. Put your demand chain, supply chain, and internal operations online with Oracle's comprehensive and fully integrated solution. Combine the wide reach of the Internet with Oracle's fully globalized product to run your business consistently and accurately worldwide. Reduce costs and complexity by running on corporate intranets or the World Wide Web.

As a provider of global consulting, education, and support services, Oracle provides the most complete e-business solution available.

The Oracle E-Business Suite: transforming your business into an e-business

KEY FEATURES