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based
management
Paramjit Sharma
Few Activities ?
Which takes more time than required Which are not making much value addition Which can be eliminated Which cannot be eliminated Which can be substituted Which cannot be substituted Paramjit Sharma
Paramjit Sharma
Paramjit Sharma
What is ABM?
ABM
Manages activities to improve the value of Products and Services to Customers and increase firms Profit
Paramjit Sharma
What is ABM?
Using ABM management can. Through Improve operations Reduce Costs Increase Value to customers
Paramjit Sharma
It increased Prices of products Priced below Redesigned Parts to minimize Manufacturing cost Modified Equipments to Reduce Costs
ABC Cost
Paramjit Sharma
ABM
Improves management focus on the firms Critical success factors and enhances its Competitive advantage
Paramjit Sharma
ABM
Operational ABM
Strategic ABM
Paramjit Sharma
Operational ABM Enhances operational efficiency Efficient Assets utilization Lowers Cost Focus on doing things Right Performing activities Efficiently Use Management techniques
activity management business process reengineering total quality management performance management Paramjit Sharma
Strategic ABM
Attempts to alter the demand for activities and increase profitability at the current or improved activities efficiency
Paramjit Sharma
Strategic ABM
Focus on appropriate activities, eliminate non essential activities for the operations Improve profitability by reducing unprofitable activities
Paramjit Sharma
What do we do?
Performance Measurement
Bench Marking, JIT processes, performing Process redesign, eliminating low value added activities
Paramjit Sharma
ABM - tools
Pareto Analysis
Performance Measurement
Paramjit Sharma
ABM tools
Paramjit Sharma
ABM tools
Paramjit Sharma
ABM tools
Cause and Effect Diagram It maps out causes that affect an activity, process, stated problem or desired outcome.
Paramjit Sharma
ABM tools
Pareto Analysis
Is a histogram of cost drivers that contribute to the total cost. It show that 20% of cost drivers are responsible For 80% of the cost incurred
Paramjit Sharma
ABM tools
Performance Measurement Identifies the work performed and the result achieved by an activity, process, or organizational unit. Measures both Financial and non financial results
Paramjit Sharma
Activity Analysis
A firm performs an activity because it is Required to meet specification of the product/service Required to sustain the Organisation Deemed beneficial to the firm
Paramjit Sharma
Activity Analysis
A firm must assess each of its activities for their Need for customer or product Efficiency & Value content
Paramjit Sharma
Activity Analysis
Selected Activity
Is the activity required to meet the specification of the product or Service or Satisfy Customer demand
Does the activity Yes Contain low-value Added NO Tasks? Can the driver Frequency be Reduced?
NO
No
NO
Yes
No
NO Yes Yes
Eliminate low value Added Activity To reduce cost
Yes
Yes
Eliminate activity To reduce the cost
DONE
Paramjit Sharma
A high value added activity increases the Value of the product or service to the customers
Inserting flange into a part Pouring molten metal into mold Preparing field for planting Installing anti virus software Designing, Processing, delivering products and Services After Sales Service
Paramjit Sharma
HV Added
A high value added activity is one that, if eliminated, would affect the accuracy and effectiveness of the news cast and decrease total viewers as well as ratings for that time slot.
Paramjit Sharma
TNB HV Added
Paramjit Sharma
TNB HV Added
- Efficient electronic journalism to ensure effective taped segments - News cast story order planned so that viewers can follow one story to the next. - Field crew time used to access the best footage possible - Meaningful news story writing - Contents to the newscast planned so that viewers get the best possible package of stories
Paramjit Sharma
Low Value Added Activity consumes time, Resources, space but adds little in satisfying customers needs . If eliminated, customer value or customer satisfaction may not decrease or remains unchanged
Paramjit Sharma
1Activities that generate excess - Developing stories not used in a newscast - Assigning more than one person to develop each facet of the same news story
Paramjit Sharma
2.
- Newscast not completed on time because of one or more inefficient processes. - Too many employees on a particular shift or project.
Paramjit Sharma
Activity
HV Added
LV Added
Designing Product Setting up Waiting Moving Processing Reworking Repairing Storing Inspecting Delivering product
X X X X X
X X X X
X
Paramjit Sharma
Can be eliminated without affecting the form, fit, or function of the product or service; Begin with prefix re (such as rework or returned goods);
Contd
Paramjit Sharma
Result in waste and add little or no value to the product or service Are performed due to inefficiencies or errors in the process stream;
Contd
Paramjit Sharma
Are duplicated in another department or add unnecessary steps to the business process; Are performed to monitor quality problems; Are performed due to a request of an unhappy or dissatisfied customer;
Produce an unnecessary or unwanted output; and - If given the option, you would prefer to do less of.
Paramjit Sharma
Paramjit Sharma
Profitability Matrix
Type of Customers High Champion Product/service is crucial Good trading partner Demander Pays top-shelf price Costly to serve
Product Margin
Losers
Low
Very Demanding
Allows Managers to
Paramjit Sharma
Accountants
Engineers
Manufacturer
Operations
Paramjit Sharma
Top Management support Linkage to competitive strategy Linkage to Perf evaluation and Compensation
Training
Ownership by Non Accountants Adequate Resources Consensus & Clarity in ABC/M Objectives
Paramjit Sharma
Paramjit Sharma