Basic ABM Questions & Answers
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16 August 2013 - 23:00, by , in Activity-Based Cost Management, No comments
  1. Why should I improve my cost system?

“Why did it take eight consultants to help the old man across the street? Answer: Because he did not want to go across the street.”

You cannot successfully force a new cost system on your organization. Your management and employees must “want and need” improved cost information. You should improve your cost, budgeting and performance measurement system if your organization needs to:

  • improve profitability
  • better understand product, service and customer profitability
  • improve pricing decisions
  • improve the budgeting and planning process
  • eliminate waste
  1. What new costing method should I evaluate?

“What is right is not always popular and what is popular is not always right.”

Activity Based Cost Management (ABM) has been selected by a broad consensus of worldwide experts as the best practice method to support continuous improvement and improved decision making:

  • Peter Drucker states that “ABM will be the standard within the next ten years.”
  • Charles Horngren and George Foster, noted Stanford University professors and authors of the most widely used college textbook, state ” “.
  • Practitioners in manufacturing, service and government all recommend ABM. The automotive, food and healthcare industries have all standardized on ABM.
  1. What is ABM?

“ABM is organized common sense.”

Activity Based Management is based on a simple principle … Activities consume costs. ABM reports provide a powerful new basis to analyze Value vs. Non-Value added costs, define cross-functional business processes and benchmark best practices across industries. ICMS uses spreadsheets to explain ABM.

  1. What is ABC?

“What does your CEO want … improved product cost (ABC) or improved product profitability (ABM)?”

ABM focuses on the reduction of cost. ABC focuses on the allocation of costs. ABC is a cost allocation method based on a simple principle … Products, Services and Customers consume Activities. For example, labor and overhead costs are traced to products using a Bill of Activity. Service organizations use the same Bill of Activity method.

  1. How can I implement ABM and ABC?

“You can’t learn how to play golf by watching Arnold Palmer. You’ve got to swing the club and hit the ball yourself.”

There are two options to implement ABM and ABC …either hire a consultant to do the work for you or self-implement using books, software and an experienced ABM trainer/coach.

Self-implementing ABM has become very popular for three primary reasons:

  • Self-implementing costs less than a consultant
  • Self-implementing insures you understand ABM
  • Self-implementing is less threatening than a consultant
  1. Who can help me self-implement ABM/ABC?

“You can get anything you want in life by simply helping people get what they want.”

Integrated Cost Management Systems, Inc. (ICMS) has helped hundreds of organizations during the last 10 years successfully self-implement ABM and ABC.

ICMS is not a consulting firm. ICMS is a coaching, training and software organization with a team of talented, experienced, creative employees totally focused on helping you successfully self-implement ABM and ABC.

  1. What can ICMS do for me?

Have you been “leveled” ?

Level 1 Investigating ABM

Level 2 Initiating a Pilot Project

Level 3 Pilot to Practice

Level 4 Integrating ABM

ICMS has products and services for every level of your needs. After listening to your specific needs, ICMS will quickly provide you a free, no obligation, recommended plan for you to evaluate. ICMS has the booksactivity dictionariestool kitstraining manualssoftware, and trainers and coaches to meet your self-implementation and training needs.

  1. What do customers have to say about ICMS ?

“Anyone can sell you ABC software. But it takes an experienced, talented, creative person to teach you what to put in the software and how to read, interpret and use the reports that come out.”

“I would like to thank you for the excellent coaching and continued support that we have received from ICMS. Your software was an important factor in our project’s success.”
Lori-Anne Lang-Puls
Corrin Produce Sales, Inc.

“The cost reduction workshops which you conducted for us provided the missing ingredient on our Activity Based Cost Management implementations.”

Fred Wszolek
Ford Automotive Operations

“Before beginning our pilot project, we researched many ABM consulting firms before we decided on ICMS. We were impressed with coaching techniques and your promise that when the pilot was over, we would know how to continue the implementation throughout the company. We do not regret our decision.”
George Wilson
Rexroth

  1. What results can I expect?

“Wow! I didn’t know that” is a typical response of all employees when you first publish your ABM findings.

While the specific results of ABM and ABC differ from organization to organization, you can initially expect to find:

  • 20% – 30% non-value added costs
  • overcosting of your high volume products, services and customers
  • numerous cost improvement ideas that will provide a payback on your ABM/ABC implementation.

 

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Tom Pryor
TomPryor@ICMS.net
(817) 475-2945

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