Professional Documents
Culture Documents
Abm Present
Abm Present
identification and
analysis of key
characteristics of the
activities
Identifying the Major Opportunities for Cost
Reduction
Determining the Real Causes of Non-Value-Added
Costs
Developing a Program for Reducing Costs
Measuring Performance
Identifying the Major Opportunities
for Cost Reduction
Value (or activity) analysis is a method that
classifies activities as value-added and non-
value-added activity.
Non-value-added can be
eliminated by clearly
understanding of the way work
is done in an organization
Developing a Program for
Reducing Costs
The Business
fundamental process
rethinking and reengineering
radical redesign to achieve dramatic
of business improvement in
process critical areas of
performance such as
cost, quality and
delivery.
Measuring Performance
Measure to monitor the effectiveness of cost
reduction effort, customer value
Managers could obtain feedback on their
performance
3 Steps in Activity
Based Management
Step 1:
Identify activities required to
complete products.
Step 2:
Determine whether activities
are value-added or non value-
added.
Step 3:
Continuously improve the
value added activities and
minimize or eliminate non
value-added activities.
Benefits of ABM
Pricing Decision Improve pricing by identifying more
accurate product costs
Product Mix Market the higher profitability product;
Decision shift the product mix away from less
profitable products
Cost Cutting Analyse costs in value-chain;
Decision value engineering (value-added, non
value-added)
Planning & Uses the costs of activities to create
Control budget;
compare with actual activities to see if
Disadvantages of ABM
Highly expensive to implement
The Impact of ABM
Customer Satisfaction
Improves Profitability -------------------------
-------------------------- -
-- Enabled the company
Providing the more to monitor and
accurate product costs, improve quality and
which provided reliable delivery of the
basis for strategic products and services.
decision making