Tailored Solutions: Activity Based Costing Hot Topic at GraphExpo
Monday, October 14, 2002
Innovative thinkers at Graph Expo 2002 introduced a new buzzword to the print industry this year – Activity Based Costing (ABC). Several industry experts made presentations on the methodology during the four day event, and one company, Tailored Solutions Inc, introduced integrated activity based costing into their best in class print management software, Litho Traxx. A more comprehensive means of determining costs. According to PIA, analysis of the top 25% most profitable printing companies revealed that, the top businesses track and monitor support activities in addition to production costs. Support activities typically include anything done outside of the normal job production itself, not captured by traditional job costing systems. "What are the real costs incurred in running a print business?" asked Tailored Solutions president Ken Meinhardt. "Many companies use a variety of sophisticated costing programs to determine labor and material costs, but unfortunately, decision makers are forced to ‘guesstimate’ administrative and support activities associated with a particular job." According to Meinhardt, these methods tend to hide costs of unused capacity, thus giving company managers distorted views of how much excess capacity exists and the associated costs. That is, until they initiate Activity Based Costing methodology. Litho Traxx’s ABM (Activity Based Management) tool, based on Activity Based Costing methods, is focused on the "support expense" caused by support activities such as estimating a job, entering a job, capturing costs associated with sales activities and customer service, generation of purchase orders, and relevant accounting functions. Additionally, Litho Traxx monitors utilization of capacity to gain knowledge of "lost capacity costs" and how these costs affect the overall company health. Graph Expo attendees agreed that one advantage of the ABM tool is the ability to monitor most activities and collect the information automatically; therefore, relieving the employee of constant recording of their time. "I’ll be able to track my hidden costs on customers who we believe may be high maintenance." Said Paul Mathews, owner of Pittsburgh-based Mathews Printing. "This makes the (Litho Traxx) Costing module an even greater asset." "Our goal is to help you better identify money makers and money losers, find the root cause of problems and correct them, discover opportunities for cost improvement, and develop methods to improve strategic decision making, therefore improving the bottom line," said Meinhardt.