Case study: Management and cost results
“By institutionalizing and implementing the management and results of the ABC methodology in the organization in mid-2018, we found answers to the question “How much does it cost?”. The top management committee has established plans and strategies to move forward to the ABM methodology with answers to the next question: Why does it cost …?”
Director of Financial Planning and Costs
Equivida is a leader in the insurance market in Ecuador, operating in the segment since 1995. Supported by the most experienced professionals in the global market, such as Swiss Re and Hannover Live Re, Equivida is dedicated to offering solid and reliable services to its customers, by means of a rigorous adaptation to the laws and regulations of the sector in the country, and by seeking to meet the needs and plans of their consumers.
In 2017, following a strategic decision, two ABC cost models were designed, the first oriented to administrative and support costs, and the second oriented to business costs (Commercial, Operational and Technical). The models were structured within the MyABCM system and using their functionalities were integrated with each other, meaning that the costs of the first model (administrative and support) are assigned to the second (business) model to obtain consolidated results, totally absorbed, and with total traceability.
In the year 2018 in the area of Finance, these two models continued to be managed and fed with accounting, operational and commercial information in a centralized manner to analyze the results of total and unit costs at the line of business, branch and product level. MyABCM contributed significantly in this second year through its OLAP reports, allowing the interactive visualization of both Costs results at a Strategic level (e.g., Profitability and Cost to Serv), Operative (Unit Cost), and Administrative (Charge Back Cost), as Cost Indicators to be monitored in each area.
By institutionalizing and implementing the management and results of the ABC methodology in the organization in mid-2018, we found answers to the question “How much does it cost?”. The top management committee has established plans and strategies to move forward to the ABM methodology with answers to the next question: Why does it cost …?, Where MyABCM played an important role by allowing the decentralization of the two initial models in 5 support models (FIN, IT, TH, CON, EST) and 3 business models (MKT, COM, OPE) and by analyzing the efficiency, productivity and unused installed capacity in each area through calculated routers.
The next challenges for the ABC/M project are related to the review of the results of 2018 by area and in a consolidated manner, the comparison between the real cost and the budget during 2019, the simulation and projection of business scenarios to medium and long term in 2023, as well as the initiation of actions that allow the reduction of costs or complexity of activities, the monitoring of efficiency and productivity, and/or the decision-making related to doing vs. buying. We will continue using the MyABCM system functionalities for the automatic creation of scenarios, import and export of information (expenses, standard times, transactions, commercial volumes, etc., real, budgeted, or simulated) and model structures to facilitate the administration of costs and performance in Equivida.
The evolution of the ABC to the ABM has been possible thanks to the impulse of the General Management, the leadership of the Financial Management and its Planning and Costs team, the involvement of the Management of each Area, the specialized guide of Performance Empresarial, and the MyABCM support.