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WesCorp Determines Actual Costs with Hyperion App.

WesCorp tries to determine costs for products and services.

WesCorp (Western Corporate Federal Credit Union), headquartered in San Dimas, Calif., had a problem determining the costs it was incurring for its services. As the nation's largest corporate credit union, with assets of more than $24 billion, WesCorp serves 1,000 member/owner credit unions in 32 states, providing investment, credit, funds-transfer payment and settlement services. However, it was unable to identify the costs associated with delivering these products or services.

Ditching Excel

"We weren't using any sophisticated software other than Microsoft Excel," related WesCorp's David Scott, project manager, business modeling. "We needed to get a better understanding of the activities and costs behind those activities that we perform in delivering a product or service between internal departments or those business lines that provide products and services to our member/owners."

To achieve its objectives, WesCorp contracted with Hyperion Solutions (Sunnyvale, Calif.) to use Hyperion Business Modeling-an enterprise-class modeling solution that enables organizations to test operational and financial planning assumptions, model processes and activities, optimize resources and measure profitability. In addition, WesCorp is using Hyperion Essbase XTD-an open, integrated and scalable business intelligence platform-as well as Hyperion Analyzer, a component of Essbase XTD that delivers intuitive, Web-based interactive analysis.

WesCorp has four basic business lines: the investment division, item processing, electronic payment services and credit services. At this time, it has only modeled item processing services with Hyperion. WesCorp's goal is to model all of its business units and then model all of the support units to get a complete understanding to determine business line profitability and member profitability, as well as initiate efficiency and process improvement.

In the fall of 2001, the product evaluation team looked at two other options besides Hyperion Business Modeling. The team selected Hyperion Business Modeling because the following features were attractive to users in the company's finance area: the flexibility of the product to model what-if scenarios and the ease with which the model could be restructured to consider new products, new services and new delivery channels. Hyperion Business Modeling also allows WesCorp to see the before- and after-effects of incorporating process improvement changes associated with a specific department or the entire enterprise.

In January 2002 Phase I began with a Hyperion consulting team coming in-house to help WesCorp's staff build a pilot model. WesCorp also purchased a dedicated server for the software application. The modeled item-processing-services business unit was built and delivered in five months.

Item Processing Analysis

For item processing, costs by feature and by product were examined. WesCorp has modeled 19 features of its products or services, such as check processing (member share draft processing). WesCorp has also modeled the activity of receiving a member share draft, the processing, the crediting, the debiting from the proper accounts and sending the item back to the originator. In addition, it modeled 19 activities, including the physical work of taking the bundles of checks received, putting the checks through a sorter, capturing the information electronically, transmitting the information electronically and getting the checks back in a physical state ready to transport. In addition, 49 resources were identified within four item processing locations in three states. Profitability by member was also extracted. This allowed WesCorp to accurately adjust pricing to costs and hone in costs for each process and service. The "what if" scenarios gave WesCorp the insight in needed to change a process or expect volume fluctuations.

Drilling Down on Actual Costs

The key benefits include "more timely and accurate product cost information, more accurate and supportable internal cost information, and the fact that state-of-the-art software allows us to get away from the task of using Excel," Scott said.

WesCorp is now in the process of modeling its three other business units, along with their support departments, with its own in-house team. When the process will be completed has not yet been determined. Upon completion, the Hyperion Business Modeling software will be used by the managers of the four business units, while non-business-unit department heads will use the information to address any efficiency gains made, opportunities and cost savings.

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Fast Facts

INSTITUTION: WesCorp (Western Corporate Federal Credit Union), San Dimas, Calif.

ASSETS: $24 billion

BUSINESS CHALLENGE: Measure transaction costs to better price services.

SOLUTION: Hyperion Business Modeling from Hyperion Solutions, Sunnyvale, Calif.

KEY QUOTE: Benefits include "more timely and accurate product cost information, more accurate and supportable internal cost information, and the fact that state-of-the-art software allows us to get away from using Excel."-David Scott, Project Manager, WesCorp

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