Predictive Cost Assessments Versus Activity Based Costing
By John Busa

According to Frank Azzolino, President & CEO of aPriori Technologies (www.apriori.com), “There are fundamental differences in the way that decisions are made in the NPI process, (in the process that takes products from the conceptual design phase all the way through production delivery), by using aPriori’s predictive cost assessments vs. more traditional Activity Based Costing (ABC) methods. ABC applies methods where costs are allocated to production products “after the fact”, (after they have been designed, planned, sourced, and produced.)”

During the NPI process many decisions are being made which directly influence or affect product costs. During the conceptual design and engineering development phase of NPI, fundamental product decisions are being made in terms of product form, fit, and function. Typically, more than 60% of a product’s cost is committed early in the design process based on these design decisions, the remaining costs being determined by planning and sourcing decisions.

Without the real time predictive cost information provided by the aPriori cost management software platform, these cost relevant decisions are made in a cost knowledge vacuum, i.e. being made without either up-to-date or accurate cost information, or without any information whatsoever. Without aPriori’s real-time predictive cost assessments, the only recourse manufacturers have is to use historical information based on previous products or determine the costs of the current product after it has been in product for awhile, and then allocate those costs across the

different activities that occurred during the NPI process. Unfortunately, once the product is in production, it may be very difficult and expensive to make these changes.

aPriori’s Cost Management Software Platform enables manufacturers to better understand product cost decisions early and throughout the product lifecycle. aPriori’s Cost Management Platform empowers manufacturers to lower cost-of-goods sold (COGS), provides real-time visibility to “cost-critical” decision information, and builds critical cost knowledge to go on the business “offensive.” aPriori’s patent-protected cost management platform allows companies to assess, control, and reduce cost of goods sold by whole percentages.

The aPriori cost management platform uses innovative, patent protected technologies, and is capable of using design information driven off of MCAD geometry. Additionally the ability to model production facilities (including machine capabilities, raw materials, and facility cost structure) and the specific cost accounting methodologies, accurate predictive, allow “forward looking” real time cost estimates.

“aPriori has customers in a variety of industries including High Technology, Industrial Equipment, Automotive, and Heavy Machinery. Recent aPriori customers include John Deere, Panasonic, Thomas & Betts, JLG, Wrobel Engineering, and Dana Corporation.”

Contact:John BusaaPriori978-371-2006jbusa@apriori.com