Resource Consumption Accounting
with Open Source Software
Larry R. White, CMA, CFM, CGFM, CPA
Director, RCA Institute
Anton van der Merwe
Principal, Alta Via Consulting
Business Information for Enterprise Optimization
1. RCA Introduction & RCA Modeling Principles
2. RCA Model Story Board and Business Situation
3. Overview of ROSA Software
4. Planning/Decision Scenarios
5. Overview of ROSA Manual
6. Implementing ROSA for Planning and Analysis
7. Questions
Resource Consumption Accounting
• RCA Inherits Core Principles from German
Cost Management (GPK)
Capacity
Analysis and
Management
– Grenzplankostenrechnung (GPK) Translated Flexible Analytic Cost Planning & Control
– Principles Applied in Practice since the late 1940’s
– Implemented by 3,000+ Companies
Process
Analysis and
Management
RCA
• RCA Integrates
– Activity-based Costing and Throughput Concepts
• RCA Creates an Integrated Economic
Model of Operations for Decision Making
– Enterprise Optimization
– Principle Based
– Highlights Resource Divisibility
Resource
view
Advantages
GPK
CapacityFocused
Process view
Advantages
ABC
ActivityFocused
3
RCA Recognition
Costing Continuum/Levels of Maturity
Predictive: Demand Planning Driven with
Capacity Sensitivity
Descriptive: Expense Tracking, Cost Reporting and Consumption Rates
Bookkeeping
1
Blind
No
marginal
insights
No
Marginal
Insight
Process/
lean
accounting
2
Process
Visibility
Limited
process
marginal
insights
Direct
cost to
outputs
3
Add
indirect
costs
4
Output
Visibility
Output
Visibility
Direct cost
marginal
insights
All output
cost
marginal
insights
Individual
std costs,
project &
job
costing
5
Explicit
Outputs
Output
specific
marginal
insights
Push
activitybased
costing
(ABC),
Product
costs
6
Explicit
Indirect
Costs
Explicit
output
marginal
insights
Level 6
with
customer
& channel
profitability
reporting;
Cost-toserve
7
Customer
Demand
Sensitive
Add
customer
& channel
marginal
insights
Marginal Insight Awareness
Unused
capacity
costs
(estimated)
8
(ABRP);
forecast
driver
quantities
X std unit
rates,
driverbased
budgeting
9
Unused
Capacity
Aware
Pull ABC
Resource
Planning
Common
fixed costs
begin to be
isolated
Increased
ability to
isolate
common
fixed costs
(TDABC);
forecast
driver
quantities
X std unit
rates;
direct cost
focus;
repetitive
work
conditions
10
Timedriven
ABC
Increased
ability to
isolate
common
fixed costs
Attributable
costs on all
objects,
blends
activity and
direct
resource
charges,
consumes
activities
back to
resources
11
R
C
A
Explicit
resource
cost object,
supplybased
denominator, strong
& weak
forms of
causality
catered for
Finite
systems
modeling
12
Simulation
No change
Detailed
Marginal Insights
What Causes Costs?
Resources (also generates all revenues!)
Every Decision is really a resource application decision!
Proportional
INPUT
Fixed
Services
Support
Resource
Pool
Proportional
OUTPUT
Fixed
Organizational Element
(Support or Production)
Labor
Equipment
Operating Budget
Another
Resource
Pool (s)
Or Final
Product/Service
Products
Services
Support
Work Requests
(Reflecting
Resources
Applied)
6
What we need to know:
Resource Pool A
Resource Pool E
Final Output 1
Final Output 2
Resource Pool B
Resource Pool F
Final Output 3
Resource Pool C
Resource Pool G
Resource Pool D
Resource Pool H
Final Output 4
RCA Storyboard
S: Ancillary
Production
Equipment
RP: Dryer
(Hours)
Capacity: 100
Output Qty: 100
S: Plant
Engineering and
Maintenance
RP: Chiller
(Hours)
Capacity: 50,000
Output Qty: 50,000
RP: Plant Maintenance
(Maint. Labor)
Capacity: 30,000
Output Qty: 30,000
S: Administration
Human Resources
& Accounting
Perfor
m
RP: Admin Labor
(Labor hours)
Capacity: 17,000
Output Qty: 17,000
HR
Legend
Perfor
m
S-Support
Accou
nting
P- Production
Perfor
m
P: Extrusion Line
Department
S: Quality
Assurance
Admin
Resource Pool
Abbreviated RP
RP: Extrusion Labor
(Labor hours)
Capacity; 32,000
Output Qty: 30,000
RP: Extrusion Machine1
(Machine hours)
Capacity; 17,520
Output Qty: 10,000
RP: QA Labor
(Labor hours)
Capacity: 14,000
Output Qty: 14,000
QA
Testin
g
Activi
ty
Produ
ct
Manufacturing Costs
Product Support Cost
Retur
ns
Budgeted Products
Product P & L’s
Common Fixed Costs
8
RCA Information
Plant Maintenance Resource Pool
Output Measure: Maintenance Labor Hour
Output Quantity: 20,000 Hours
Primary Costs
Fixed
Proportional
Technician Wages
$
-
$
600,000
Supervisor Salary
$
80,000
$
General Material
$
12,000
$
Depreciation: Shop Equipment
$
50,000
$
$
142,000
$
700,000
$
6,000
$
24,000
$
$
1,100
500
$
$
10,000
$
7,600
$
34,000
$
149,600
$
734,000
100,000
-
Secondary Costs
Resource Pool
Output
Utilities
MW-Hrs
Activity/Process
Driver
HR: Benefits Adjustments
Purchase: Gen Materials
# Adjusts
# PO's
Fixed Qty Prop Qty
40
160
Fixed Qty Prop Qty
22
10
0
200
Total Resource Pool Costs
Unit Cost Rates (/20,000 Hrs)
7.48
36.70
9
RCAStructure
Structure
RCA
for Marginal Costing
Quantitative
Definition of
Material Causal
Relationships
Support/Secondary
Resource Pools
Support/Secondary
Activities
Primary Resource
Pools
Primary Activities
Product/Service
Objects
Result Segments
Excess
Capacity
Costs
RCA Provides Greatest Benefit
•
•
•
•
High Capital Investment (Fixed Cost)
Tight Margins
Multiple Products/Services
Flexible Production/Service Capability
1. RCA Introduction & RCA Modeling Principles
2. Example Story Board & Business Situation
3. Overview of ROSA Software
4. Planning/Decision Scenarios
5. Overview of ROSA Manual
6. Implementing ROSA for Planning and Analysis
7. Questions
Get Well Corporation
Get Well Mfg, Model Storyboard
Support Costs
Resource Pool: 6001
Utilities
Electricity (Kwh)
Cap = 250 000
Outp = 233 000
Resource Pool: 6201
System Support
Infrastructure (Hr)
Cap = 3000
Outp = 1750
Resource Pool: 6102
Facilities
Square Feet (Sqft)
Cap = 100 000
Outp = 87 000
Resource Pool: 6401
Maintenance
Labor Hours (LH)
Cap = 12 000
Outp = 11 280
Business Process
10020
Procure Raw Materials
Outp = 40ea
Business Process
10010
Service Machines
Outp = 24ea
Distribution Costs
Production Costs
Resource Pool: 6301
Distribution
Tonmiles (Tm)
Cap = 150 000 Outp = 150
000
Resource Pool: 9001
Packaging
Labor hours (LH)
Cap = 25 000
Outp = 23 340
Resource Pool: 9002
Packaging
Machine Hours (MH)
Cap = 4000
Outp = 3190
Resource Pool: 7002
Production 1
Machine Hours (MH)
Cap = 2 200
Outp = 2 160
Resource Pool: 7001
Production 1
Labor Hours (LH)
Cap = 15 000
Outp = 14 050
Product Costing
PRODUCT 1:
PRODUCT 2:
PRODUCT 3:
PRODUCT 4:
NO PANE
RELIEF
BURN-AWAY
BETTER-BEAT
Resource Pool: 8001
Production 2
Labor Hours (LH)
Cap = 6 500
Outp = 5890
Resource Pool: 8002
Production 2
Machine hours (MH)
Cap = 2 000
Outp = 1 675
Get Well Support Resources
Support Costs
Resource Pool:6101Utilities
Electricity (Kwh)
Cap = 250 000
Outp = 233 000
Resource Pool:6102Facilities
Square Feet (Sqft)
Cap = 100 000
Outp = 87 000
Resource Pool:6201System Support
Infrastructure (Hr)
Cap = 3000
Outp = 1750
Business Process:10020
Procure Raw Materials
Outp = 40ea
Resource Pool:6401Maintenance
Labor Hours (LH)
Cap = 12 000
Outp = 11 280
Business Process:10010
Service Machines
Outp = 24ea
Get Well Distribution Resources
Inputs from assigned
Support Cost Centers
Distribution Costs
Resource Pool:6301Distribution
Tonmiles (Tm)
Cap = 150 000
Outp = 150 000
Resource Pool:9001Packaging
Labor hours (LH)
Cap = 25 000
Outp = 23 340
Outputs to assigned
Product Cost Objects
Resource Pool:9002Packaging
Machine Hours (MH)
Cap = 4000
Outp = 3190
Get Well Production Resources
Input from assigned
Support Costs
Production Costs
Resource Pool:7001Production 1
Labor Hours (LH)
Cap = 15 000
Outp = 14 050
Resource Pool:7002Production 1
Machine Hours (MH)
Cap = 2 200
Outp = 2 160
Outputs to assigned
Product Cost Objects
Input from Business Process:
Service Machines
Resource Pool:8001
Production 2
Labour Hours (LH)
Cap = 6 500
Outp = 5890
Resource Pool:8002Production 2
Machine hours (MH)
Cap = 2 000
Outp = 1 675
Get Well Products –
Inputs from assigned Distribution
and Production Costs
Product Costing
Input from Business Process:
Procure Raw Materials
PRODUCT 1:
PRODUCT 2:
PRODUCT 3:
PRODUCT 4:
NO PANE
RELIEF
BURN-AWAY
BETTER-BEAT
Outputs are categorized into different reporting
segments as desired
(ex., By customer, region, etc.)
1. RCA Introduction & RCA Modeling Principles
2. RCA Model Story Board and Business Situation
3. Overview of ROSA Software
4. Planning/Decision Scenarios
5. Overview of ROSA Manual
6. Implementing ROSA for Planning and Analysis
7. Questions
ROSA Overview
• Excel Template for PALO Business
Intelligence Software
– Template Designed by Alta Via Consulting
– PALO BI Software S/W fm Jedox.com (Free & Open
Source)
• ROSA is a planning tool using RCA.
– Template is not integrated with other systems to
collect actual/results data.
ROSA Overview Demo
• Shift to displaying ROSA Application
1. RCA Introduction & RCA Modeling Principles
2. RCA Model Story Board and Business Situation
3. Overview of ROSA Software
4. Planning/Decision Scenarios
5. Overview of ROSA Manual
6. Implementing ROSA for Planning and Analysis
7. Questions
Cost/Consumption Concepts
Operational
Decision Support
Opportunity Cost
Fixed
Variable
Avoidable
Unavoidable
“Relevant Range”
Which Cost Concept Must Form the Basis for Cost Modeling?
Can be Modeled
Basis for Action
Divisibility of Resource Information
Example 1
 A manufacturing company decides to replace an
old extrusion plant with modern equipment. This
results in a significant reduction in the amount of
maintenance required. The maintenance
manager realizes that he can reduce his total
maintenance capacity by 8,000 hours, the
equivalent of a whole crew including the crew's
supervisor.
 What are the respective operational and decision
cost concepts for each of technician wages and
supervisor salary in Example 1?
Example 1 Cont’d
 Operational Cost Concepts:
 The operational cost characteristics of technician wages
is a variable cost
 The operational cost characteristics of supervisor salary
is a fixed cost
 Decision Cost Concepts:
 Both technician wages and supervisor salary are
avoidable cost
 Hence, operationally fixed and variable cost are
avoidable
Example 2
 The same company receives an offer from an
outside vendor to take over the repair of extrusion
rollers. The manager knows from his MA system that
the company spends 2,400 hours per year on these
activities. A maintenance technician works 1,600
productive hours per year.
 What are the respective operational and decision
cost concepts for each of technician wages and
supervisor salary in Example 2?
Example 2 Cont’d
 Operational Cost Concepts:
 The operational cost characteristics are the same as for
Example 1
 Decision Cost Concepts:
 The wages of one technician is an avoidable cost
 The costs associated with the remaining 800 hours
(2,400 - 1,600) is unavoidable costs
 The crew supervisor will be less busy but his salary is
similarly unavoidable
 Hence, operationally fixed and variable cost are now
unavoidable cost
Basis for All Cost Concepts
Operational Cost
Concepts
Decision Cost
Concepts
Operations Cost Model with
Causality as Its Basis
Business Scenario 1
• Situation: Outsource the Maintenance Function?
– A service provider approaches you with an offer to take
over your maintenance function.
– He proposes to charge you $29.00 per hour. As we will
see from the ROSA model your cost is $30.84 per hour.
– Should you accept the offer and outsource
maintenance?
• Shift to ROSA Application
Business Scenario 2
• Situation: A Mutually Exclusive Resource
Application Decision
– You receive two orders but can only accept one due the
customers’ required delivery dates.
– Cost concept: The opportunity cost of committing a
resource to a particular course of action.
– Approximated by RCA’s proportional cost.
• Shift to ROSA Application
1. RCA Introduction & RCA Modeling Principles
2. RCA Model Story Board and Business Situation
3. Overview of ROSA Software
4. Planning/Decision Scenarios
5. Overview of ROSA Manual
6. Implementing ROSA for Planning and Analysis
7. Questions
ROSA Manual
• ROSA Manual
• Highlight:
– Intro to RCA
– Download and start up instructions
– Application Overview
– Building your own model
en.wikibooks.org/wiki/RCA_Open_Source_Application:_ROSA_Manual
1. RCA Introduction & RCA Modeling Principles
2. RCA Model Story Board and Business Situation
3. Overview of ROSA Software
4. Planning/Decision Scenarios
5. Overview of ROSA Manual
6. Implementing ROSA for Planning and Analysis
7. Questions
Using ROSA in Your Company
•
•
•
•
•
Conceptual RCA Model Design
Design RCA Storyboard for your company
Collect data and build initial data set
Upload data to ROSA
Use ROSA to simulate new business
scenarios.
ROSA Linked In Group
http://www.linkedin.com/e/vgh/3107067/
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• Responsible for Training of Practitioners and Adopters
• Provides A Number of Products and Services to Mitigate
Adopter Risk e.g., Certification, Assurance Services
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• Serves to Raise RCA Awareness and Fulfill Advocacy and
Outreach Roles
RCA Support & Quality Assurance
• Institute Membership
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• Certification
– Specialist, Practitioner, Master
– Software Products
• Adopter Exploratory Workshops
– Customized Workshops applying RCA to an organization
• Implementation Review/Assurance
– Support Adopting Organizations & Practitioner Expertise
• Adopter Internal Use Reviews
– Evaluations of An Organization’s Effectiveness Using and Maintaining
RCA
Questions???
ROSA Linked In Group:
http://www.linkedin.com/e/vgh/3107067/
http://en.wikibooks.org/wiki/RCA_Open_Source_Application:_ROSA_Manual
Contact Information:
www.RCAInstitute.org
lwhite@rcainstitute.org
757.288.6082
Contact Information:
www.altavia.com
antonvdm@altavia.com
513-257-7451