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Norman George West
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1 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll l lllllllllllllllllllllll US A1 (19) United States (12) Patent Application Publication (10) Pub. N0.: US 2006/ A1 Wong ct al. (43) Pub. Date: Mar. 16, 2006 (54) SYSTEM, COMPUTER PROGRAM (52) US. Cl /10; 705/1 PRODUCT, AND METHOD FOR ENTERPRISE MODELING, TEMPORAL (57) ABSTRACT COSTING AND A method of temporal, activity-based cost modeling for an N organization is provided. The method includes the steps of _ (a) determining a plurality of data types contributing to costs (76) Inventors ge lgnhn ilfon gotlilg TOEEIIHO related to one or more activities of the organization; (b) C0Ac_ u on?),3? 19in 1h capturing data elements corresponding to the data types; (c) (CA)f gasons gant, all? b 0&1] 1 Creating an ontological enterprise model based on the data (CA)f ean ; ills lany r Y}; ak elements, by applying a Temporal Activity Based Costing ( ) Jason n few uen to Model to the organization; testing the applicability of the (CA) Temporal Activity Based Costing Model to the organization; _ and adjusting the Temporal Activity Based Costing Model to LLP the organization, based on the testing; and (d) con?guring a 20 QUEEN STREET WEST SUITE 2500 computer system to apply the ontological enterprise model to the data elements on an ongoing basis, such that the TORONTO 0N MSH 381 (CA) ontological enterprise model yields information about the 21 ( ) A 1' N I pp / costs of the activities for de?ned periods of time. The method enables derivation of cost knowledge from the cost (22) Filed: Sep_ 1, 2004 information, by operation of a pro?t k'nowledge utility. A Publication Classi?cation series of sub-methods are also provided to enable the application of the Temporal Activity Based Costing Model. A computer system and computer program is also provided (51) Int, C], for implementing the temporal, activity-based cost modeling G06F 17/30 (200601) of the invention for an organization. The invention also G06Q 99/00 (200601) provided for temporal, activity based billing, and generation /00 (200601) of real time temporal cost information. Times Quantities Rates Costs Prices Metrics / / / / / i 411 l 412/l 413i 414i 415i / 402 Needs of 407 \ 4>lncreased Pro?ts / Stakeholders 403. / Operatlonal Cost Operational data /- -> Knowledge / Costing System Solution / Better Decision External data > 405 Making \ l / 416 l 417i 418/l 419 Increased Oyerhead Delay Erroneous Complexity ' time and Data money Continuous lmprovement Opportunitie 406 Customer Development

2 Patent Application Publication Mar. 16, 2006 Sheet 1 0f 59 US 2006/ A1 Product A Product B Direct Labour 3 hours/unit 2 hours/unit Materials used 5 lbs/unit 8 lbs/unit Labour $20/hour $60 $40 Material $10llb $50 $80 O/H cost $150 $100 $50/hour of labour. Total cost _ $260 $220 FIG. 1

3 Patent Application Publication Mar. 16, 2006 Sheet 2 0f 59 US 2006/ A1 Product A Product 8 Activity Allocated Resource O/H Cost $ O/H Cost (Cost O/H Cost Driver allocated $ allocated Driver) Setup 10,000 # of setups 1 ' 2,500 _3 7,500 Machining 40,000 Machine 100 2,000 1,900 38,000 ' hours Receiving 10,000 # of receipts 1 2,000 8,000 Packing 10,000 # of 2 4,000 6,000 deliveries Engineering 30,000 #of 4 12, ,000 engineering changes Totai 100,000 22,500 77,500 Activity Driver: annual demand- 100 units 500 units units Overhead allocated $22,500/100 units = $77,500/500 units = $22.50lunit $155.00/unit Direct Labour Cost $60.00lunit $40.00/unit Direct Material Cost $50.00/unit $80.00/unit, ABC cost per unit $132.50Iunit $275.00Iunit Cost Assumptions: 1 Setup = $2,500 1 Machine Hour = $20 1 Receipt = $2,000 1 Delivery = $2,000 1 Engineering Change = $3000 FIG. 2

4 Patent Application Publication Mar. 16, 2006 Sheet 3 0f 59 US 2006/ A1 Product A Product B Activity Allocated Resource O/H Cost $ O/H Cost (Cost O/H Cost Driver allocated $ allocated Driver) Setup 10,000 Setup hours 70 7, ,000 Machining 40,000 Machine 100 2,000 1,900 ' 38,000 ' hours Receiving 10,000 # of-receipts 1 2, ,000 Packing 10,000 # of deliveries 2 4, ,000 Engineering 30,000 Engineering , ,000 ' hours Total 100,000 7 _ 33,000 67,000 Activity Driver: annual demand units 100_units 500 units Overhead allocated $33,000/100 units = $67,000/500 units = $33.00/unit $134.00/unit Direct Labour Cost $60.00/unit $40.00/unit Direct Material Cost $50.00/unit $80.00/unit ABC cost per unit $143.00Iunit $254.00lunit Cost Assumptions: '1 Setup hour = $100 1 Machine Hour = $20 1 Receipt = $2,000 1 Delivery = $2,000 1 Engineering Hour = $30 FIG. 3

5 Patent Application Publication Mar. 16, 2006 Sheet 4 0f 59 US 2006/ A1 Times Quantities Rates Costs Prices Metrics 410i 411i 412/l 413i i / 402 Needs of 4/O7 K \ 4> Increased Pro?ts Stakeholders / Operational Cost Operational data /- -> Knowledge Costing System Solution / Better Decision External data / > _ > Makin 405 g _1_. Customer Development _ 406 V / \ J 416/l 41d 418/l 419/1 Increased Oyerhead D el 8 Erroneous Complexity ' time and Data money Continuous Improvement Opportunitie FIG. 4

6 Patent Application Publication Mar. 16, 2006 Sheet 5 0f 59 US 2006/ A1 FIG. 5A FIG. 55 FIG. 5C FIG. 5D FIG. 5

7 _ Patent Application Publication Mar. 16, 2006 Sheet 6 0f 59 US 2006/ A1 501 \ Identify Enterprise/Customer Costing Requirements and = Business Objectives Target Product(s) or Service(s) / to Establish Cost Objects". V Identify Major Stakeholders including Company Personnel, Suppliers, Company Clients ' and Schedulea Kick-Off Meeting 504 v 505 liconduct kick-off meeting J/ l 503 ldentify'potential project risks. limitations, current costing, practices, and project plan. V Worksheets identify Competency 506 COSt Objects/Orders Questions (CQs), Continuous Competency / Improvement Metrics (ClMs) Questions and their in?uence on V Enterprise Performance Mm. i n n Activ" EABEM Catalog / Catalog Sg i?ca t mes l/ \_/_\ i 508 Activity Probing (Sub-process I) Worksheets EABEM Catalog, i ' 509 External Resources I Source required data J/ Process Flow 510 Diagram \/\ Coordinate access to data sources { 511 Test & Validate J/ l,

8 Patent Application Publication Mar. 16, 2006 Sheet 7 0f 59 US 2006/ A1 Construct EABEM (Sub-process ll) 4 Worksheets Downtime Reports Employee Logs Production E?'lciency Re orts ' Y 513 Temporal Data Population (Sub-process Ill) V Perform Forensic Cost Analysis and generate Baseline Cost Model 514 v 515 Test & Validate V 516 Review cost output data and evaluate 00s and ClMs

9 ' Patent Application Publication Mar. 16, 2006 Sheet 8 0f 59 US 2006/ A1 Training and Education V Con?guration of computer system for operational use 518 V Prepare EABEM for continuous real-time usage and/or advanced utilization 519 v Temporal Data Population 520 Computer system performs real-time Temporal-ABC

10 Patent Application Publication Mar. 16, 2006 Sheet 9 0f 59 US 2006/ A1 _" '_' 1 ' " 7T it"_7i"_ ' Utilization applications use Cost Information (e.g. for Pricing,Billing, Reporting, 521 vdecision Support, Continuous / improvement, Pro?t, Accounting, CRM & ERP systems) " 522 Worksheets. Cost Objects/Orders Test 8 val'date Competency l/ grazuons Use Cost Information and 523 results to answer 00s and ClMs for Daily Operational Usage Worksheets Performance Evaluatlon Measure and Record Success and/or Failings Worksheets Opportunities!, a 525 mp'rovements Action p an Assess, Detail, and Plan Opportunities for Action l" 526 Distribute Information to Team Members 528 \ 527 Perform nvesti ate otentia Predictive Cost. g p Yes-> Analysis using Improvements? f. uture scenarios anticipated - vworksheets No Strategy Report Y 529 Project Plan Execute on Action Plans such Action Plan as Cost, Pricing, Design and Process Improvements / Examine EABEM other processes or continue Current» Review & business work'on current Maintenance processes New 532 J FIG.

11 Patent Application Publication Mar. 16, 2006 Sheet 10 0f 59 US 2006/ A \ Pro?t Decision System (PDS) (Analysis and Decision Tools) 609 \ Pro?t Knowledge System (PKS) (Modeling and Operational Tools) ' 6C1 Pro?t Information System (PIS) (Data Extraction, Translation, Loading) Internet / Operational Data Source I Pro?t Information. are ouse r er Accounting I _ (Database or Data service Management Management 8 ystem CRM ERP W are h ouse) System I System / FIG. 6

12 Patent Application Publication Mar. 16, 2006 Sheet 11 0f 59 US 2006/ A1 Workstation Printer Operational LAN Operational Sewer Firewall Corporate Server Third-party server FIG. 7

13 Patent Application Publication Mar. 16, 2006 Sheet 12 0f 59 US 2006/ A1 Used _ 801 Identify starting _> signi?cant Activity \ / Select a ave Probe Required 4N all Required Resource Resources? Consumed Yes Classify Activity as Frontier 812 Were all Required Resources Classify Activity as Interior Classify Resource as Usable (with respect to this activity) 805 / 806 Classify Resource as Consumable (with respect to this activity) all Caused Resources V Select a Caused 815 Resource (usually a product or service) 817 Is Classify / Classify esource Require Resource as 809 Resource as by subsequent External \ Internal Yes Activity? No y Classify Classify v Resource as N / Resource as a 810 Perform Sub- Internal ?nal Cost Object \ Process l on signi?cant Activity A4 a I Causing this Perform Sub Resource Process l on signi?cant i Activity.. Requiring this Continue problng Resource ; i Continue probing FIG. 8

14 Patent Application Publication Mar. 16, 2006 Sheet 13 of 59 US 2006/ A1 Menu Bar TOOI Bar Primary Property Page / i: EABEM Editor Secondary Property Page FIG. 9

15 Patent Application Publication Mar. 16, 2006 Sheet 14 0f 59 US 2006/ A1 State State Junction 1 Junction 2 Activity» State State State Block 1 Block 3 ' Block 4 Resource Resource I Resource Resource _ 4 k J HJ Y Required Caused FIG. 10

16 Patent Application Publication Mar. 16, 2006 Sheet 15 0f 59 US 2006/ A1 Data View - Resource - Non-Period Capital Cost Rate Return Rate Total Cost Total Quantity FIG. 11

17 Patent Application Publication Mar. 16, 2006 Sheet 16 0f 59 US 2006/ A1 Data View - Resource - Period Cycle Duration Cost per Cycle Resource Usage FIG. 12

18 Patent Application Publication Mar. 16, 2006 Sheet 17 0f 59 US 2006/ A1 Data View - State Block Resource Relationship Data Type Specification FIG. 13

19 Patent Application Publication Mar. 16, 2006 Sheet 18 0f 59 US 2006/ A1 Temporal View - State-Block Status- Duration Eomm?ted \ 30 Enabl_ed j \2 _ Disable-Id E15 _

20 Patent Application Publication Mar. 16, 2006 Sheet 19 0f 59 US 2006/ A1 Data View - State Junction Activity Relationship Junction Type FIG. 15