SAS enables precise focus on profits

It has been said that "the customer is always right", but making some customers feel "right" can be a losing proposition that can deflate a company's overall profitability. While it is commonly believed that 25% of a company's customers are unprofitable, in certain cases up to 90% of some businesses' customers were causing them to lose money. What's worse, analysis shows that the unprofitable customers generally destroy 300% of the margins produced by the profitable customers, because the costs of serving the money-losing customers - account processing costs, handling costs, shipping costs and the like - far exceed the revenue they deliver.

The remedy? SAS, the leader in business intelligence, today announced the launch of SAS Activity-Based Management 6.0, a software solution now available that delivers a true understanding of the costs and profits associated with each customer, product, service or business process.

SAS Activity-Based Management 6.0 integrates with existing financial and operational systems to generate cost and profitability business models that support better overall decision making. It delivers advanced business modelling capabilities, a Web-enabled analysis and reporting interface, and data integration tools to retrieve and transform data from any system. With Web-based modelling, the new solution allows for distributed use throughout an organisation so that it can be actively integrated into the day-to-day operations of the business.

For example, pricing models that were traditionally updated manually or that ran in a standalone environment can now be integrated into an enterprise's systems using the enhanced extraction, transformation and loading (ETL) capability, allowing the models to incorporate business changes into the modelling environment as quotations are done.

SAS Activity-Based Management 6.0 reflects SAS' successful integration of the Oros line of activity-based management products acquired last year in SAS' purchase of ABC Technologies, Inc. SAS Activity-Based Management 6.0 brings together Oros' profitability analysis, cost management and predictive business modelling applications with SAS' award-winning data warehousing and data access technology.

"For years, Oros dominated the market for activity-based management against much bigger vendors. Now, the integration of SAS's data management muscle takes this solution to an even higher level of value for our customers," said Don Bean, SAS's solution manager for activity-based management. "Users of SAS Activity-Based Management will have the most formidable arsenal available to help them focus on the customers, processes, products and services that make a positive impact on the bottom line."

Please see below four examples of how SAS Activity-Based Management 6.0 can be successfully implemented.

The new SAS solution gives users the power to drive strategic and operational decisions by detecting potential problems, identifying opportunities for improvement and turning those opportunities into action so that the whole organisation can become more competitive and more profitable. Financial managers can access meaningful cost and profitability reporting by extracting data from financial and transactional systems and translating that data into accurate cost and profitability analyses. Ultimately, users can create true financial performance measures by revealing the actual costs assigned to products, customers, services or processes. This will enable them to understand the sources and bottom-line impacts of those costs from an operational perspective.

SAS Activity-Based Management can be used by executives and managers throughout the organisation, including:

* Profit centre managers - CFOs, CMOs and other senior executives who must understand the profit-and-loss performance of product lines, customers or service offerings within an organisation.

* Cost centre managers - CFOs, business support area managers and manufacturing managers who are responsible for the costs associated with delivering products or services to customers.

* Shared service managers - Managers of IT, human resources, administration and other corporate business support areas who must determine accurate costing and charge-back of services provided to internal customers and manage the financial planning and budgeting for future service levels.

* Planning and budgeting managers - CFOs and corporate controllers who manage the corporate planning and budgeting cycle.

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Based in the Netherlands, Royal Vopak, the market leader for independent tank storage and related logistics services to the oil and chemical industries, has chosen SAS Activity-Based Management 6.0.

"We wanted to be able to look at profitability by use of our assets (such as stainless steel tanks or mild steel tanks, single or double-hull inland barges) as well as by our traditional dimensions of customer, our customers' products (such as hazardous or non-hazardous products requiring different regulatory and/or safety provisions and procedures), and our own service offerings (such as dedicated versus commingled storage)," said Frank van Vliet, Vopak's activity based costing manager.

"SAS was the only software able to accommodate all four dimensions. This will allow us to optimise our use of our costly assets. We can see whether the capacity our customers order - for example, a particular size of tank - is in fact what they used and needed. Where this isn't the case, we can make a better offer to the customer based on a different asset and free up the more expensive asset for customers that really need it.

"We also liked the ability to store attributes - such as the fact that it takes x amount of time to process an order within the costing models - as this will help our sales and customer service staff understand the drivers behind the costs that make up our customer quotations," Van Vliet said. "This understanding will help them to easily see where they can suggest changes to a quotation to meet a customer's requirements in a way that will still result in a profitable outcome for Vopak.

"The Web-based functionality will also make it easier to distribute reports to sales, operations, finance and general management," added Van Vliet. "Last but not least, SAS Activity-Based Management 6.0 will be used to review our current customers' contracts and service-level agreements in order to capture the critical activity or cost drivers."

Malt-O-Meal, Co, the fifth largest cereal manufacturer in the US, began implementing Oros Activity-Based Management one year ago to answer operational questions relating to the company's production of branded bagged cereals and private label cereals for the grocery industry. Malt-O-Meal's accounting system produced profit-and-loss figures for each product line, but company analysts wanted a system that also could report product costs at the stock-keeping unit (SKU) level as well as the factors that influenced those numbers.

"We have 14 manufacturing lines that produce our 25 ready-to-eat products, and it takes time and resources to change these lines from producing one product or package size to another," said Sue Stroinski, information technology manager for Malt-O-Meal. "To get a better understanding of these costs, our process engineers asked us to determine the cost-per-product of performing line changeovers, and we elected to use Oros Activity-Based Management to answer these questions.

"After conducting an activity-based analysis of our production process, we found that our line changeovers were far more expensive than we had previously estimated," Stroinski said. "Now, we are taking this newfound knowledge into account when we determine how many packages of cereal we produce in any single line run and how much additional charge we incur for custom, non-standard orders from our customers."

Fully aware of the powerful intelligence that activity-based management software provides, Malt-O-Meal has agreed to be among the first SAS customers to implement SAS Activity-Based Management 6.0.

"The real power of SAS Activity-Based Management 6.0 is how it delivers intelligence into the hands of the users who can benefit most from this knowledge and then make the needed changes to reduce costs and improve profitability," Stroinski said.

"Through SAS Activity-Based Management's Web-based analysis and reporting, a larger and broader range of managers - from senior management all the way to our process engineers and other operational managers - can determine the costs and profitability for every process, product and customer we have, and then they can drill down even further to see the underlying factors affecting those figures."

SAS Activity-Based Management 6.0 demonstrates the successful integration of the ABC Technologies product line into the SAS solution set. In May, SAS introduced SAS Value Chain Analytics 6.0, a solution designed specifically for retailers, distributors, wholesalers and manufacturers in the consumer package goods (CPG) and retail industries. This solution provides financial transparency to organisations working in the value chain, allowing them to reduce product costs and increase profitability from post-production to retail check-out.

In the coming months, SAS solutions for financial intelligence, human capital management, IT management, marketing automation and strategic performance management will all feature out-of-the-box capabilities for activity-based measurement and analysis.

The announcement of the launch of SAS Activity-Based Management 6.0 was made at the 21st annual SAS European Users Group International conference here, attended by thousands of SAS customers and staff from around the world.