BASICS: VDDW Architecture   >   Activity Dimension

  • The VDDW introduces one new dimension to the dimension bus – the activity hierarchy – which represents the collection of critical business functions & processes by which the enterprise operates. At the bottom level of this hierarchy, the individual activities represent the linkage point in the ABC engine between the flow of dollars out from the GL and down to the company's operational transaction records (the allocation terminus). That is to say, the ABC engine first spreads its cost from GL to resources and then to the activities those resources perform, by means of drivers that make business sense. Once the engine has finished pooling dollars in the individual activity buckets, it then spreads those dollars out from the activity pools to the operational transactions via the rate at which each transaction consumes that activity, again by means of transactional drivers pertinent to those activities.

  • From a reporting perspective, the VDDW assembles this collection of activities into a hierarchy that acts as a dynamic P&L (profit & loss) statement. By way of example, assume we had a fictitious distribution company, with a simple and straight-forward business model: It owns a warehouse where it collects widgets from various manufactures, resells them for a markup, and employs a workforce consisting of some laborers in the warehouse, plus a small sales team and customer service group that faces the customer. The activity hierarchy for such a business might look something like the bottom-right diagram.

  • That is to say, the activity hierarchy serves the dual purpose of itemizing / organizing the business's activities (we could have even sub-grouped the Operating Activities into 3 categories for "Warehouse Functions", "Customer Facing", and "Other", for example) while simultaneously expressing how those activities combine to affect financial performance.

  • In summary, under the VDDW approach, the activity dimension is introduced with the output of the ABC engine to yield a whole new collection of star schemas that together express how the business contributes resources to activities, and how the business’s partners and products consume those activities and resources.

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