Allied Office Products is a stationary company dealing with typing, printing, business card production and research paper writing. The company integrates its corporate using Total Forms Control (TFC) method. Later TFC changed its duties to warehousing, financial control and inventory. The treatment TFC gives to its customers is not fair since it does not inform them the customers the change of management and services to the public. The company changes its employees and gives them new training. The management does not have a proper system that handles employees’ needs. According to the financial report, the ABC system involves storage, warehousing, data entry and desktop delivery. The technical staff of the firm had to serve the clients without prior notice of the job description. In a comprehensive analysis, TFC profitability is preferred to the traditional method. The example of two customers gives a clear explanation of the ways of incorporating ABC method in TFC profitability and the traditional method (Hill & Jones, 2008; Holm, Kumar & Rohde, 2012).
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The customer A has higher profits than customer B in terms storage, requisition handling, basic warehouse, pick-pack activity, data entry and desktop delivery. Customer profitability gets analyzed using return on investment (ROI), and a fall of ROI means failure of the system (Ang & Taylor, 2005; Holm et al., 2012). It is essential to use additional methods of measuring customer profitability in order to reduce chances of errors and improve accuracy in measuring profitability. In some situation, strategic planning is essential before engaging in customer transactions. The customer should consider the cost of engaging a transaction under the TFC profitability. Customer requisition ensures that the customer gets the essential information to engage in a transaction. TFC profitability has a problem of flexibility. The supervisors should incorporate other financial systems to ensure flexibility of the TFC flexibility. The analysis process exposes the Allied Office Products its improper manner of dealing with customers.
The Allied Office Products services can get rectified using the ABC based costing method. The ABC method employs Service Based Pricing (SBP) to manage the entire team. The distribution services under TFC become profitable after employing the ABC method. The sales of the organization will face acceptance through activity-based pricing program. The activity-based pricing method identifies the stuck ways of the system that need changes. ABC method results to increase in accounts and distribution of charges. The sales agents under the ABC pricing program get high advantages through an increase in the number of clients. In most situations, the sales agents surpass the set margins resulting in margin increase. The ABC program is solving most of the organizational problems resulting in stability of the organization (Ang & Taylor, 2005; Hill & Jones, 2008; Holm, Kumar & Rohde, 2012). The personnel in the accounts departments improve their database skills through incorporation of the ABC program. The clients have the ability most of the data and transactions in the respective accounts.
The TFC management system would begin the analysis but would not efficiently complete the process. The deficits and gaps present in the TFC system get solved using the ABC program. In addition, it is possible to manage different accounts belonging to the same individual (Ang & Taylor, 2005). Large businesses prefer having multiple accounts carrying large portions of transactions. Incorporating the ABC system is raising the working standards of the Allied Office Products. The customer profitability is evident through simple management of individuals’ database. The customers with a tendency of changing accounts have a high opportunity of saving the essential information in private accounts. The significant change of TFC profitability is improving profitability and management of Allied Office Products.
The case study reveals that ABC based costing assist in management of Allied Office Products. The customers receive improved services and beneficial information from the ABC model of analysis. The traditional method would lead to huge losses and bankruptcy of Allied Office Product, but the introduction of ABC based costing saved the company from such humiliations. For example, ABC based services cost would save on company’s expenses and increase on its gross profit. The example on customer A and customer B shows the current pricing system that makes Allied clients profitable and valuable in the Allied Office Products. The ABC model allows customers in handling individual charges and entries making easy to handle customers’ complaints. Desktop delivery and inventory charges in Allied Company are essential in increasing the profits of the organization. For example, increase of monthly charges would results to an increase of 1.5% profit per month.
The charges on all the services from Allied Office Products are essential in setting reliable costs of products and services. Desktop delivery in Allied Company is an example of return on investment (ROI) and is helpful in yielding profits to the company. The investments present in the Allied Company include SBP system implementation and fees on all freight charges. Increase on investments results to gain on the company and raise of profits. It is easy to evaluate the Allied Office products through the use of ROI and also checking on different investments within the financial year.
Ang, L., & Taylor, B. (2005). Managing customer profitability using portfolio matrices. The Journal of Database Marketing & Customer Strategy Management, 12(4), 298-304.
Hill, C. W., & Jones, G. R. (2008). Strategic Management: An Integrated Approach: An Integrated Approach. Stamford, CT: Cengage Learning.
Holm, M., Kumar, V., & Rohde, C. (2012). Measuring customer profitability in complex environments: an interdisciplinary contingency framework. Journal of the Academy of Marketing Science, 40(3), 387-401.