A Wholesale Mortgage Lender Unleashes the Power of ABC

As volume and margin narrowed in the market, the client was determined to reinvigorate their focus on strategy and operational efficiency. While cost data for large departments was readily available, the absence of segmented, activity-based costing (ABC) within a department was hindering strategic decision-making (e.g., What products are most profitable? Where should IT investments be made?) and operational management (e.g., What are the right key performance indicators to manage by?). The client’s Business Analytics management turned to West Pole for guidance on improving visibility into product and activity-specific loan processing costs and their drivers.

An Integrated Approach Breathes Life Into the Data

West Pole provided a three-step, integrated approach to transforming general ledger data into an ABC view. A rigorous review of the general ledger captured all direct and indirect expenses associated with the operations in scope. Interviews with subject matter experts and consensus building led to the identification of the appropriate level of activity disaggregation. Subsequently, the team gathered the necessary non-financial data and determined expense drivers and assignments for activities and products. Finally, West Pole delivered a roadmap for implementing a living, agile ABC process for providing responsiveness to operational and market changes.

Clarity Around Product Profitability

West Pole provided the client with specific activity and product costs at a high level of granularity. Previous to the engagement, the client was limited to a top-line view of costs in its underwriting and customer service departments. West Pole delivered a view of costs specific to products and sub-activities within the departments. The client gained clarity around product profitability and the value contribution of specific sub-activities. Moreover, the engagement delivered powerful key performance indicators for outcome-based operational management. The ABC platform positioned the client to make stronger, more informed strategic and operational decisions.

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