Cost and Profitability
Value Management - Organizations often struggle with defining and quantifying the value that they create. This is particularly true for internal business support functions. The nature of these functional areas is such that the activities and processes being performed are often hard to measure from a “value add” perspective and it is difficult to link any value being created to the resources providing the value. Aside from the nature of business support functions, value itself is difficult define - it is inherently customer focused which makes objective measurement difficult; it changes over time; and the same output is often perceived very differently by different customers. There appears to be no single, universal answer to the question of quantifying value for a business support function. The nature of an organization (size, complexity, domain, etc.), how it organizes its support functions, and even its culture will affect how it defines and measures value. However, a well-defined value framework could provide a focal point and tool that can be used by all organizations to help define value while accounting for organizational uniqueness.
The group’s objective is to assist member organizations in understanding and quantifying the value business support functions bring to an organization. This will be achieved through the development of a framework that will enable member organizations to consistently define the value business support functions bring to an organization and thereby allow cost / value trade-offs to be quantified and considered. The starting point to this is The Value Analysis Process publication by CAM-I on June 2019. The methodology and application have been used by two CAM-I member organizations with more organizations to apply it shortly. Demonstrating the Value in Business Support Functions is led by the CAM-I UK chapter with support from US.
Defining Value for Services – The group will re-examine a 2014 CAM-I deliverable focused on quantifying value for service-based organizations. Historically, target costing and value analysis is more easily applied to the manufacturing of a product. Services can present nuanced challenges in quantifying the processes performed and the importance to the customer. The group will review project member’s value mapping experience to-date and further explore gaps in the existing body of knowledge around quantifying value. The group will expand on individual member case studies to include the surveying of wider member organizations. Results will inform training and/or a report deliverable that members can use when implementing at their organizations.
Marginal Cost – Marginal cost is a simple term to define but can be difficult to calculate within complex and large organizations. Many member companies need to have a clear understanding of marginal costs at granular levels across product/service lines. This information is used to support product pricing and marketing decisions. Current methodologies result in miscalculation of these costs resulting in incorrect business decisions. Through a member company use case, the group will work on a framework to define marginal costs that can be replicated across similar organizations.
Cost Management & Target Costing Maturity Curve – CAM-I has contributed significantly to the field of Cost Management & Target Costing but how can new member organizations self-assess where they are in terms of maturity and what next steps to take to improve their organization? The group will use the existing body of knowledge to create a maturity curve explaining the accomplishments along the maturity curve.