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ACTIVITY BASED COSTING/MANAGEMENT
Activity based management
is both a mindset and a tool for managing market driven business that is
grounded in the work being performed.
An understanding of your
true cost structure is an important first step toward managing resources to
their greatest effect. It is about understanding what drives your costs.
Often an ABC
project begins with an ABC study. Typically it is PC based and the scope,
depending on the size and your objectives, can be limited to a segment of your
business. It can be said that the 80-20 applies, that is that with 20% of the
work one will get 80% of the benefit. Therefore the study approach is often
adopted over a systems change.
Benefits of ABC
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Internal and external benchmarking
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Cost-benefit and make v. buy analysis
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Proactive management of costs through cost
driver analysis
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Assurance that resources are be directed
toward strategic goals
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Building blocks for ABM/performance and
zero-based budgeting
If Cost Containment is a Priority at Your
Business, Then ABC is a Priority for Your Business.
Sample ABC
Results
Large Utility - United Kingdom
An ABC analysis revealed an
unfavorable profit profile for a customer segment.
Large Utility - United States
An ABC analysis allowed for this
utility to decide whether to spin-off a business unit and make
internal/external work management decisions.
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