Worldwide Express 123 (fictionary name but real company) with a leading global delivery provider with operations in 225 countries, 75,000 employees, and a fleet comprising over 16,000 ground vehicles and 267 aircraft. The goal? Replace their outdated cost tracking model with a robust Activity-Based Cost Management (ABC/M) solution that could handle the complexity of a multi-entity logistics operation and provide real-time insight into service-level profitability.
The Challenge
Despite rapid growth—15% annual revenue increases—the company faced declining confidence in its cost data. Local operations were using simplified cost models that no longer reflected operational reality. Pricing and customer-level profitability analysis were hindered by inconsistencies across their numerous country-specific accounting systems.
Two key issues drove the need for change:
- Lack of accuracy in cost reallocation and service pricing.
- Fragmented cost reporting due to multiple, localised accounting ledgers.
The Solution
To overcome these obstacles, Asher coordinated a multidisciplinary team of 20 professionals. The core team included one in-house ABC/M specialist and three external consultants. The approach involved:
- Conducting behavioural cost analysis at the local level to reflect real-world cost drivers.
- Using SAP Profitability and Cost Management (PCM) as the central platform for cost modelling.
- Gaining buy-in from key stakeholders and local managers to ensure operational alignment.
This ABC/M model allowed costs to be traced more accurately to activities and services, moving away from arbitrary allocations to data-driven reassignments.
Results
The new ABC/M framework yielded immediate value:
- Operational autonomy: Local managers could access profitability data without needing to manage complex integration processes.
- Pricing accuracy: Enhanced service-level cost information enabled the company to price more competitively while protecting margins.
- Scalable reporting: Monthly local reports supported tactical decisions, while quarterly consolidated data informed global strategic planning.
By embracing ABC/M principles such as cost-driver analysis, process-based costing, and layered cost visibility, Worldwide Express 123 transitioned from intuition-led decisions to insight-led strategies.
Conclusion
This project demonstrates how Activity-Based Cost Management can unlock significant financial clarity—even in the most complex, multinational logistics organisations. By enabling visibility from activity to outcome, Asher helped turn scattered data into a unified source of truth for profitability.
Ready to start your Profitability Journey ?
Learn More
📚 References
- CAM-I: Consortium for Advanced Management International – for best practices in ABC/M.
- “Activity-Based Costing: Making It Work for Small and Mid-Sized Companies” by Douglas Hicks.
- Kaplan & Cooper’s foundational work on The Design of Cost Management Systems.
