It is not enough merely to report the basics facts of where a company is making or losing money, though this is absolutely important, and the VDDW approach does do a superior job of exposing NOP for every slice of the business, decomposed by business process. It is also important to elucidate why those figures are what they are. That is to say, a superior Financial / Operational Intelligence system will expose the drivers of performance.
Why is this important?
1. To determine if the numbers are really accurate. Overhead allocation should be traceable back to business variables which common sensibly capture the variability in efficiency for one slice of the business versus another; in this way, results can be proven either to align with those rules, or not.
2. To understand causes behind performance hotspots and troublespots, and therefore the best course of remedial or opportunistic action. It’s one thing to know that you’re losing money somewhere. It’s another to know what you should do about it.
The VDDW presents NOP and Process Expense figures in tight correlation with the drivers from which those numbers originated. The diagram to the right provides a visual illustration of how it displays this. Note the Packing activity which is highlighted in Red. For this particular company, the efficiency and expense of Packing up one delivery versus another comes down to 3 main variables: the packaging configuration (Pallets, Cases, or Individual Units (eaches)), the special handling requirements (Normal, Fragile, or Oversized), and the Qty involved. These 3 factors contribute to determine the total labor time, in Hours, required to execute the Packing activity.
As depicted, the VDDW enables not just the viewing of the Activity Expense and Hours Consumed, but the correlation and break-down of those figures relative to their drivers: Packaging Config, Handling Requirements, and Quantities packed. Further, it enables the construction of useful ratios that help drive initiatives such as Pricing and Capacity Planning, figures such as the “Packing Cost Per Pallet”, or the “Packing Time Per Fragile Case”.
Finally, as with all other useful measures the VDDW provides, it does so in completely ad hoc fashion, analyzable along any dimension or combination of dimensions of interest: by customer, supplier, product, line of service, etc., even down to individual transactions.
