Manager of the Management Control Department at the Antwerp Port Authority
ABM empowers management to improve Antwerp Port profitability
Increased insight into costing structures raises awareness
The Antwerp Port Authority significantly improved the performance of its business processes and the operational result of many of its services between 2000 and 2014. This was supported by SAS® Activity-Based Management (ABM). The solution clearly represents the costing structure of each department and their activities, and enables the calculation of their profitability. These insights have led to a higher cost-awareness and a new business culture where all managers are stimulated to run their departments more cost-effectively.
SAS® Activity-Based Management enables the Antwerp Port Authority to continuously improve the performance of its business processes and the profitability of its activities.
Insufficient insight into business processes as a trigger
Managing a port is a particularly complex task. The wide diversity of its activities includes vessel traffic monitoring, dock and locks maintenance, dredging and tug services, to name just a few. In the past, the City of Antwerp managed all of these activities more or less independently from one another for the port. "The Antwerp Port Authority was established in order to optimize these activities", says Herwig Tulpinck*, Manager of the Management Control Department at the Antwerp Port Authority. "However, the new organization did not have sufficient information regarding the actual business processes already in place as well as their interactions and the related costs. This made it difficult to identify weaknesses and improve processes. The decision was made to implement Activity-Based Management as a concept for all departments."
Generating a realistic view of all cost flows
ABM identifies and registers each activity that a business performs. Valuable insight is created when the resulting data from each activity is retrieved and analyzed. To make this happen, the Antwerp Port Authority decided to collaborate with SAS. "SAS clearly offers the most comprehensive solution on the market. Their ABM is a robust and flexible tool that was easy to integrate into our self-developed data warehouse. It also provides the analytical structure necessary to integrate data from our different databases," says Tim Bellemans, Controller at the Management Control Department.
"More importantly," continues Bellemans, "SAS provides a strong calculation engine that is able to generate a realistic view of the entire cost flow of our organization and its individual departments. That includes direct and indirect costs, as well as all external invoices and internal cost allocations including recursive loops. The latter means that it takes into account two-way costing traffic between various departments whereas most other tools assign costs in just one way, i.e. from department A to department B."
Enhancing the performance of activities
Full cost reporting stimulates managers to run their departments more cost-effectively. Herwig Tulpinck points out that "The system can calculate the profit or loss of each department and this has created an entirely new business culture. We now have a solid basis for making sound strategic and operational decisions."
The organization also uses the system to perform Economic Value Added (EVA®) analyses, which enables the determination of whether a service delivers a return that exceeds the capital cost, including all investment costs. "With SAS, we are now able to identify services that underperform from an economic perspective," says Tulpinck.
Improving the profitability of internal activities
The Antwerp Port Authority also wanted its managers to get a more detailed picture of the profitability of their internal activities. "We therefore incorporated transfer pricing in our ABM system", says Bellemans. "Basically, we use ABM to calculate a transfer price for each activity that a department performs for another department. This enables us to calculate the profit or loss for that specific activity by the end of each reporting period and if necessary optimize the transfer price or activity. In a next stage, we will also benchmark certain transfer prices against market standards in order to determine our competitiveness. This will enable us to identify points for improvement and organize activities in a more efficient way."
Calculating profitability by customer
Along with calculating the profit and loss for each of its departments and activities, the Antwerp Port Authority has been looking into the possibility of using the ABM system for calculating the profit or loss by customer. "Although this is technically complex because of the number of subcontractors involved, we have taken the first steps to implement this at the level of the port terminals. We already had a clear idea of our revenues from each terminal, but not of our real cost per terminal. For example, we need to incorporate costs for the maintenance of the quaysides, the dredging of the docks, the harbour masters office , et cetera. Currently, the concession rates we charge cover our costs as a whole. The insight that SAS ABM can deliver is the measure in which this is also the case on terminal level. Thanks to SAS, we can easily integrate these and other new features. This makes us confident that we will be able to continuously improve our entire business", Bellemans explains.
Gaining insight into internal business processes and the profitability of each service
SAS® Activity-Based Management
- More efficient reporting
- Improved cost-effectiveness
- Better decisions thanks to simulation of the impact on profitability
- Detailed insight into the different processes in each department is necessary in order to be able to create the analytical model.
- Implementing ABM can lead to better cost-awareness and profitability in the business culture.
* In memory of Herwig Tulpinck (1966 – 2014)