A Typical Process Workshop Agenda
Process workshops are an important tool for anyone running any type of process management projects. Here are Netcall’s top tips to creating a great process workshop agenda.
15th September 2023
Simple activity based costing is used for a wide variety of projects. Everything from identifying waste in processes, through to building business cases for change and transformation programmes.
You’ll find there are many different approaches available, so you may be asking yourself which is best for you? In this article, we explore the simplest form of activity based costing, which will typically suit 80% of uses. Plus, it will get you to an answer far quicker than a more advanced approach.
So, let’s start with some basics.
Also commonly known as ABC, simple activity based costing lets you calculate the aggregate cost of a given set of activities, in other words a process. This means the total cost of all the inputs such as materials required, time taken and the cost of people.
You use activity based costing to calculate the costs for each activity and add them together to get the total cost. This allows you to quickly identify problems in the process.
We often talk about them as bottlenecks, these problems typically demonstrate where too much time or money is wasted.
One common example is where an activity is repeated several times because it wasn’t done properly in the first place. This is called rework, and it happens when the work isn’t carried out to the correct level of quality. The work is passed back to the person that originally did it, so that they must do it again.
Another example is when the work is excessively manual and should be simplified or automated. Think about the times you have spent manually copying data from one system to another, from emails into spreadsheets etc.
These problems, and many more, are quickly highlighted when simple activity based costing is used.
Once you have your model in place, you can even start to use it to simulate the impact of changes.
What would happen if you removed a specific step? How much could you potentially save by automating certain activities? You can estimate this with a good degree of certainty, without having to start the hard work of changing things.
Simple activity based costing focuses on the basics and asks these questions:
The benefit of keeping it simple is that you can do it quickly and still get 80% of the answer you need. Which, in most cases, is more than enough to make key decisions.
To perform simple activity based costing you need to:
Once you have all the information above, the cost of each activity is calculated by:
(Duration X Hourly Cost of the person performing the activity) + Direct Costs = Activity Cost
The sum of all activities will give the total cost of the process.
Liberty Spark is our process improvement solution. It’s designed to make it simple and easy to map and analyse business processes. You can map a very simple process quickly with all the key steps and people displayed visually.
Recruitment process mapped in Spark
With Spark, you can easily enter the durations and direct costs against each step in the attachments panel. Then you can add the hourly cost against each role.
As soon as you enter this data, the Quantify dashboard in Spark will show you durations and costs of your process. It also provides further analysis to help you understand the breakdown of costs at each step. This is based on whether it relates to role costs or material costs.
Costing dashboard in Spark quantify module
Once you have this view of the process costs, you can start to experiment by removing activities or changing roles to see the impact on cost.
Spark also provides further insights to help you identify bottlenecks and even simulate the impact of changes in capacity.
What to remember
Simple activity based costing is a powerful tool to help you quickly identify ways to improve work in your business. More than that, it will help you build a compelling business case for fixing problems or making things even better.
We’d love to hear from you and share more about how we can help you achieve your goals. Take a free trial to get started.
Process workshops are an important tool for anyone running any type of process management projects. Here are Netcall’s top tips to creating a great process workshop agenda.
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