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"Early in our project, certain 'experts' told us
that our requirements stretched beyond the limits of currently available technology.
ADC delivered this critical project on time, on budget while meeting or exceeding all of
our demanding requirements.
We'll continue to work with them on future projects for three key reasons;
1) they know how to deliver the best technology for the best value,
2) they have an ability to quickly understand business requirements and translate them into useful solutions and
3) they are extremely customer driven."
Pete Ginouves
Corporate Finance Director
Hewlett Packard |
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Summary of iCost Benefits
- Global decision support tool for cost optimization of the entire enterprise
- Enhanced visibility and control of enterprise costing data including customers, OEM's, partners and suppliers to all affected global business units
- Faster time to market by bridging gap between sales, finance, procurement and engineering
- Granular right-time product costing that drives revenues and lowers product cost by providing a global view of materials, LOH, Logistics, Warranty, Royalties, etc.
- Increased accuracy of Supply Chain "Wide" Costs
- Extensive "What if" modeling and Impact Analysis capabilities
- Improved product profitability
- Improved Customer Service Levels
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Case Study:
Hewlett Packard
How much does it Cost? - Enterprise Financial System Development
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When determining total product cost, HP identified a disconnect between corporate systems and those supporting various business units within the company. Various groups within the company each conducted cost calculation and cost forecasting using their own data sources and methodology. HP needed a single system that could integrate into the existing ERP systems, consisting of multiple instances of SAP, and provide global visibility to a consistent, single source of detailed costing data based on a common costing methodology.
To leverage the value of the costing information, HP also needed an enterprise modeling and decision support tool to support financial operations at multiple organizational levels. This included functions supporting manufacturing plants (both in-house and outsourced), distribution regions and worldwide operations. The solution needed to be massively scaleable providing timely processing and rapid response to inquiries done against an immense amount of company data.
In its current state, HP was sacrificing valuable time and resources in a highly competitive marketplace due to inaccurate and disparate costing information. In many instances, HP had inaccurate and/or outdated cost data from which to make pricing decisions. Additionally, HP was occasionally unable to take full advantage of manufacturing vendors' best costs across the entire company.
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HP evaluated existing and established systems, but found that none met all of the requirements for a new system. HP determined that their needs required a custom-built solution to meet both the functional requirements and time constraints.
HP considered proposals from some of the larger, Tier 1 consulting firms and determined that the budget and time constraints could not be met by such entities. Alliance Data Corporation was asked to submit a proposal for the project.
ADC impressed HP with its technical expertise, understanding of the project as demonstrated through a system prototype, appreciation for the limited time frame in which the system must be developed, and for its ability to develop the system at almost one third the cost of the larger consulting firms. ADC also presented HP with an impressive list of references. Ultimately, HP viewed ADC as providing the most value for their consulting and development dollars and selected ADC for the project. HP and ADC began work immediately with only one year to design, develop, test and deploy the system, as well as train the users.
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| System Interaction |
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In order to conduct the necessary costing calculations and allow for cost modeling, the system interfaces with a number of external systems operating within the HP environment. Among these systems are SAS-OROS (Activity-based costing system), SAP (HP's Enterprise Resource Planning system), xCost (an ADC developed system for vendor bid quoting) and CCS (an ADC developed system for forecast and contract cost management of procured parts).
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| Results |
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After several months of analysis, design, development, and system and end-user testing, the new system was deployed to the HP production environment on schedule and on budget. Thousands of users were trained worldwide and immediate savings were recognized as nine older legacy systems were taken off-line.
The web-based product costing application has been a resounding success. It integrates current and forecasted engineering, manufacturing and supplier cost information to drive lower costs and provide more accurate and rapid product pricing and design decisions. The system provides real time access to the latest cost and forecast costing information for all current and planned products in all configurations. The system also provides corporate finance users the ability to model and analyze the cost impact of product configuration changes.
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The Proven Success of iCost:
"Their [ADC's] costing solution has allowed HP to have a worldwide view of its product cost and inventories. HP's inventory turn has doubled since we deployed [ADC's costing solution]. The application has helped us manage cost, inventories and forecasts with far greater accuracy than in the past."
Jeff Clarke
Former EVP, Global Operations
Hewlett Packard
| The Success of Costing at HP |
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Thanks to iCost, HP has realized a return on investment of 500 percent with an estimated $35 M in annual savings.
The following items have been identified as the key drivers contributing to both the realized ROI and annual savings:
- Consolidation and replacement of 9 costing systems into 1 system has led to savings in both system administration and maintenance costs.
- The creation of buying synergies among manufacturing sites has resulted in HP saving millions of dollars annually in "best cost" purchases and configuration of saleable SKUs.
- Improved bid/no-bid ratio, resulting from accurate and timely costing information, has allowed HP to dramatically cut losses due to unprofitable sales.
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