José David Pérez
Deputy Director of Finance
How to know the real cost, efficiency and profitability of each activity
The Municipal Transport Company of Madrid (EMT) needed to get a clearer view of its costs – which of its operations were profitable, and which weren’t? It needed to develop a more precise cost system so it could accurately assess the direct and indirect costs of its activities and transfer those costs to each of the individual lines and buses.
To strengthen its cost control systems, EMT launched an activity-based costing project using SAS® Cost and Profitability Management. As a result, it can now obtain accurate information on costs and profitability of each line and bus.
Before this project, EMT – which is responsible for Madrid’s public bus transportation – didn’t have sufficient cost information to make informed decisions. Its financial control system provided only aggregate information, without much detail. "We now have detailed knowledge of all costs, direct and indirect, by activity – allowing us to make better business decisions and provide better services to our citizens," says José David Pérez, Deputy Director of Finance at EMT.
We now have detailed knowledge of all costs, direct and indirect, by activity, allowing us to make better business decisions and provide better services to our citizens.
José David Pérez
It is important for EMT to analyze the effectiveness and profitability of its services. With SAS Cost and Profitability Management, EMT can identify which processes are consuming the most resources, or if any of the activities have costs that outweigh their benefits.
This comprehensive analysis of costs helps EMT make better operational decisions, such as expanding the number of buses on a particular route or improving the customer services and optimizing scarce resources. "A cheaper bus may not be cost-effective if we have higher tire usage costs,” Pérez explains. “This is the comprehensive information we get with SAS. Thanks to this, we can identify all costs, direct and indirect, generated from each particular type of bus."
A very powerful analytical model
SAS Activity-Based Management has great flexibility and analytics, which allows EMT to compare costs by different variables such as bus model, operations center, lines and shifts, the profitability of these lines in each time slot, or cost per kilometer or passenger transported.
"SAS deepened the cost analysis to the level of detail that we needed,” Pérez said.
SAS experts collaborated with the University of Malaga to tailor SAS Cost and Profitability Management to EMT’s needs. The results of the model are analyzed using visual reports that will help future decision making.
EMT uses the information from SAS Cost and Profitability Management to generate three types of reports: one for senior management, which provides a broad view of general costs; one for the business managers to understand and analyze the profitability of each line and the cost per bus; and a third for the operations centers. EMT can also easily access all of the information the system provides through more detailed ad hoc analysis or drill-down reporting.
EMT now understands the costs of its services and activities. This information allows it to improve efficiency by optimizing resources, and therefore meet its commitment to provide a quality urban transportation service.
The current EMT reporting system did not include details such as cost per individual bus and line.
Access to detailed reports by cost per activity, bus route or individual bus.
EMT is responsible for the Madrid’s public bus transportation. It manages a fleet of 2,092 buses running on 216 lines, serving the public 365 days a year, 24 hours a day. Annually, they travel about 62 million miles and transport roughly 425 million passengers.