What do retailers, financial institutions, telephone companies, airlines, universities, and distributors have in common? They are all engaged in a high transaction volume environment. With hundreds of thousands, if not millions of orders each period, encompassing a myriad of customers and products, they thrive on uniformity. Without it, they could never achieve the speed of processing required of them. Customers at Target would get out of the line and take their business to Wal-Mart. Travel agents would direct their customers to different airlines that offer the same price. These institutions and their industries have mastered their processes (e.g., customer service). They are the McDonalds in their respective fields. Every time you walk into a PNC Bank or place an order with Sysco Food Service, regardless of location, you will be offered the same products and services. Your transactions will be processed through the same systems. Your bills / receipts will have the same look. And the phone call you get when your account is delinquent will be the same. Standard Operating Procedures are good business. They lower overall cost, improve quality, and most importantly, enable scalability.
Growing the business through more stores, more students, and more planes increases revenue and the likelihood of survival. But this comes at a price. All of this new business increases complexity. The company becomes exponentially more difficult to manage as the number of transactions grow into the millions, or the number of locations grow into the thousands. Reporting and analysis is cumbersome. Despite having sophisticated ERP systems to run operations, most managers still rely on spreadsheets packages like Microsoft Excel or Lotus 123 to do their number crunching. However, both of these tools are limited to less than 100,000 records.
The situation is bleaker if you are trying to do profitability analysis. This is an area of great importance to large institutions, because management lacks visibility into what is truly driving profits. To do this analysis, companies look to plug-and-play ABC software packages. Historically, these solutions have not been very scalable. They cannot model the entire company due to limitations on the number of activities and difficulties manually gathering time estimates. Furthermore, the database underneath the package was not built to run millions of transactions. High transaction volume companies have been forced to decide between two unacceptable trade-offs: (1) take an aggregate view; or (2) create separate spreadsheets / models for each location.