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Ruokakesko

Activity Based Costing for Profitability and Category Management

With net sales of 3.6 billion € in 2006, Kesko Food (www.kesko.fi) operates at the grocery market providing trading services to consumers and business customers. Kesko Food manages and develops K-food store chains and is responsible for their marketing, purchasing and logistics services, network of outlets and retailer resources.

Having finalised their SAP implementation in 2003, Kesko Food was in need of replacing and upgrading the profitability management system of some 35 000 SKUs (Stock Keeping Units) sold via the 8 000 K-branded retail outlets in Finland and Baltic states.

The core objective of the profitability management system renovation was to implement Activity Based Costing for Category Management and Transfer Pricing transparency enhancement purposes. The automated system was to pull data out of some 20 ETL (Extract, Transform and Load) data sources to generate and push multidimensional product category/sales outlet profitability outcomes to build a subset of a 4,7 terabyte SAP Business Warehouse used for monthly Web-reporting by 20+ category managers.

The Activity Based Costing (ABC) system, constructed with some 70 activities and 20 cost drivers (out of which some 80% are time-study driven), utilises SAS Institute SAS ABM software. The implementation took approximately 1,5 years and was operational late 2004. Since then, the system has had three rounds of annual enhancements, the most important of them having been to improve the assignment of different types of cost to the profitability dimensions.

"We are impressed by Cox Consulting professionalism. During the implementation and at the annual maintenance phases thereafter, Cox Account Manager has become a vital asset – not merely because of his abilities with the technology, but also because of his in-depth know-how of Activity Based Cost Management concepts and sound business sense, not to mention the contingency provided to Kesko Food hampered with personnel promotions and similar changes throughout the life-cycle of the system so far" – Jukka Rahikainen, Controller and Tommi Kasurinen, Business Controller, Kesko Food Ltd