Just as a workflow model is important to understanding a business process and its component activities, so an Activity-Based Cost (ABC) model provides strategic and operational insights into the costs consumed or incurred by those activities. Activity-Based Management (ABM) leverages the cost data derived from an ABC model to enable better management decisions. ABC/M doesn't replace the accounting system. It simply restates the data in a context that more effectively supports decision-making at all levels.
ABC departs from the historical approach of assigning costs to departments (such as the Production department, the Finance department, the Sales and Marketing department, etc.). Cost-containment efforts of the past focused on lowering expenses in a given department, but offered no information on how to achieve the cost reduction targets. ABC provides direct insight into this by revealing the costs consumed or incurred by individual activities as they are being performed. As a result, a truer picture of the cost of doing business emerges, and the cost of activities that add little or no value are pinpointed.
At Hilton Consulting, we conduct client-specific ABC workshops and use ABC modeling tools to assist our clients with a variety of objectives, including:
- Cost modeling, reduction, and estimation
- Analyzing the cost of value-adding vs. non-value-adding activities
- Quantifying cost savings from business process reengineering
- Identifying the cost impact of outsourcing decisions
- Product costing
- Cost and price benchmarking
- Price modeling and sensitivity analysis
- Profitability analysis
- Performance measurement
Contact us to learn how we can help you gain control of your costs and identify and implement strategic and operational improvements.
