Database Reference
In-Depth Information
handover processes across department boundaries, etc. By contributing through
increased accuracy at dramatically reduced complexity, efforts, resources, costs, etc.,
TDABC plays a determining role in enabling all such exercises.
2. Along the critical path of departmental business processes, any drastic imbalances in
the capacity usage times of the various processes or subprocesses will highlight the
potential for dramatic improvements in terms of complexity, efforts, resources, mate-
rials, technology, costs, and so on and will become obvious candidates for detailed
scrutiny. This will usually result either in a BPR initiative or even in restructuring or
reconfiguration of the department(s).
3. Based on the analysis of capacity cost rate, TDABC plays a crucial role in deciding the
boundaries of an enterprise, that is, in bifurcation of core activities (that get executed
in-house) from noncore activities (that can get outsourced). TDABC is critical for
addressing the issues of dramatically reduced response times, turnaround times, high
throughputs, increased accuracy, etc. Hence, the reason that all customer-facing pro-
cesses like call centers or contact centers, customer service or customer response desks,
and help desks is usually outsourced.
The TDABC model simulates the actual business processes deployed across the enterprise. In
addition to addressing the improvement of inefficient processes and transforming nonprofitable
products and customers, an enterprise can also use TDABC to tackle the issue of excess capacity
revealed by the application of this model. An enterprise can use the TDABC model as the core
of its budgeting process to link its strategic plan and sales and production forecasts to the specific
demands for capacity required to implement the plan and realize the forecast. Thus, TDABC can
assist in deciding on the capacity the company needs to provision in the future.
1.2.2.3.3 Responsive Activity Pricing
For the sake of completeness, we will touch briefly on the issues related to the pricing of responsive
activities for BPR.
Some of the relevant characteristics of customer-responsive activities are as follows:
◾
There is no standardized product for which there is a market price. As the delivered solu-
tion is customized to each individual customer's need, the value of the delivered solution
is determined by how well the solution solves the customer's need and must be priced
separately.
◾
There are no products that are tradable; delivery services are not tradable. Therefore, there is
no market price for the delivery service.
◾
There are no products to inventory, only capacity that continuously perishes if it is not uti-
lized to deliver benefits.
◾
Commitments to the customers are made on the real-time basis.
Thus, the emphasis must be on pricing in the immediate run to maximize the yield that can
be obtained from the capacity scheduled in the short run, that is, minimizing wasted capacity
(or maximize capacity utilization) and maximizing the customer value of capacity. The objective
must be not only to collectively cover the fixed capacity costs but also to profit through contributions
