information from our SAP system, as well as provide for easy input of ... be on a database system should consist of main
Scope of Work
Refining, Modifying and Automating Activity Based Costing Models for Transnet Port Terminals
Background Transnet Port Terminals has developed Activity Based Costing Models for all of their 16 operating terminal’s about 4 years ago. These models were developed on MS Excel by TPT’s Costing Manager based at their head office. ABC models were developed for each operating terminal and they currently provide TPT with the handling cost per unit for all commodities handled at their 16 terminals. The models are currently used for understanding the cost of handling commodities within a terminal, tariff determination on an annual and adhoc basis, commodity profitability analysis and Transnet Value Chain reporting. The main objectives for developing the ABC models were for tariff determination and commodity profitability analysis. These costing models are updated twice a year i.e. full year & half year New Improved Automated Models In an increasingly competitive business environment, organizations seeking to maintain or improve their competitiveness need cost information that is accurate and relevant. The business requirement has changed over the years for TPT. TPT faces many challenges with regards to competition, securing new business and sustaining and increasing volumes with existing customers by reprieving tariffs. Therefore there is need to revise tariffs more quickly in order to determine reprieve tariffs for existing customers and to determine tariffs for securing new business. The business also needs to understand the customer and commodity profitability on a regular basis for decision making. However the current costing models only provide updated costs twice a year thus making it difficult for commercial to revise tariffs quicker and to calculate tariff reprieves. The current ABC model takes long to update because it’s a manual process. Currently TPT are using the old updated cost to revise tariffs and this poses as a risk to the business as these old costs could be higher or lower thus making the tariffs incorrect. The current model does not provide a budgeted cost per unit therefore there is nothing to measure the cost against. Also
currently the commodity profitability is not being compared to a budget therefore performance measurements are not being done. TPT is also on a drive to reduce cost within the business. Therefore TPT wants to identify waste and inefficiency within the business. The costing model currently does not determine any waste and inefficiencies.
Therefore, there is a need to have a new improved and automated costing model for all 16 terminals across TPT. Costing methodology An activity-based costing methodology will be used, with full absorption costing approach (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each.
New Automated and Improved Costing Model A new automated and improved model must be built for each one of TPT’s 16 terminals namely 1. R/Bay Dry Bulk Terminal 2. R/Bay Multipurpose Terminal 3. Durban Pier 2 Container Terminal 4. Durban Pier 1 Container Terminal 5. PE Multipurpose Terminal ( Bulk, Breakbulk & Cars) 6. East London MPT ( Bulk, Breakbulk & Cars) 7. Ngqura Container Terminal 8. PE Container Terminal 9. Cape Town Container Terminal 10. Cape Town Multipurpose Terminal 11. Saldhana Multipurpose Terminal 12. Saldhana Bulk Terminal 13. Durban Car Terminal 14. Durban Multipurpose Terminal 15. Durban Maydon Wharf Multipurpose Terminal 16. Durban Agribulk Terminal The model must have a user friendly front end, that is easy to update, and source relevant information from our SAP system, as well as provide for easy input of commodity processes. The model will be excel based, however data can be extrapolated from our operating systems (SAP, Navis & GCOS) using access or similar database system that links to the excel model. The portions that can
be on a database system should consist of mainly of the raw input data from TPT’s SAP Financial System. The input data of the model must be automated with very little to no manual interventions. The model must be automated were possible and easy to update and be very flexible. The model must be simplified and user friendly. As processes change and new commodities come on line, the model needs to be able to easily accommodate this. The model must include the following inputs
All the processes for handling commodities within a terminal (All 16 terminals). All the cost drivers for handling a commodity within a terminal (Budget, Target & Actual) i.e. (Labour, Equipment, Energy, Outsourced cost and Indirect Overheads) (All 16 terminals). o Some costs will be directly allocated to commodities and processes, while other will be allocated using relevant allocation principles Allocation of the above cost drivers to each commodity within a terminal (Budget. Target & Actual) All productivity drivers to handle commodities within a terminal (Budget and Actual) (All 16 terminals). All volumes input for every commodity handled within a terminal (Budget & Actual) (All 16 terminals). All financial data, cost centre reports etc. within a terminal (Budget and Actual) ( All 16 terminals) All other necessary input not mentioned above
The Model Outputs must include the following
An actual handling cost per unit, ton & move for each commodity, unit and container handled within a terminal for a specific a period i.e. month YTD or Full Financial Year (All 16 Terminals) A budgeted handling cost per unit for each commodity handled within a terminal for a specific a period i.e. month YTD of Full Financial Year (All 16 terminals) A target handling cost per unit for each commodity handled within a terminal for a specific a period i.e. month YTD of Full Financial Year (All 16 terminals) A cost per activity that exist within a terminal for all 16 terminals It must be able to calculate cost of handling new commodities. Automated and simplified enabling it easier to update. Reduce time to update model making it possible for monthly/quarterly updates Users must be able to update the model easily A separate tab to calculate commodity profitability. A model that is flexible where new commodities to be handled can be easily updated and added onto the model. Identify waste in the current activities and compute the financial impact thereof (which allows us to reduce the cost / unit by minimising or eliminating wasteful activity and inefficiencies)
o To this end, we need to be able to separately see cost associated with waterside and landside operations. Determine the financial impact of reducing waste on the cost / unit Model must accommodate what if analysis o The model must be able to generate the following reports o Income statement o Contribution statements o Profitability report per sector, terminal, commodity and customer o Report that can compare the unit cost for the same commodities across TPT, & compare different commodities across TPT o Any other relevant costing reports o The model must be able to report on and compare cost drivers etc. o The model must also be able to pick changes in the GL accounts. i.e. if there is an increase in of more than 10% Cost per move/unit/ton make up
Technical Knowledge of the Service Provider
Advanced Financial Modelling skills on MS Excel, MS Access Database and Programming (810 years experience). Must have experience in building and designing of complex financial models on MS Excel and MS Access Database. Must have extensive Activity Based Costing Knowledge and Experience (8–10 years experience). A good understanding of SAP financial software of similar ERP system. Knowledge of Cost Centre accounting. Knowledge of service related business. Knowledge of Cargo Handling. Have a proven track record of having built similar models
