What is activity based cost management (ABCM)?
ABCM ensures that costs are taken to the right services and right products and Peter does not subsidise Paul, be it a service, product or transaction. ABCM is a performance monitoring and enhancing culture that allows companies to exit from unprofitable transactions, products, geographies and customers. It is important to do an ABCM for effective strategic decision-making. Simply put, it addresses and focuses on the indirect cost and overheads of a company and helps it work their way around or eliminate these to plump up the bottomline. Why are companies not aware of it or not implementing this technique? Awareness is the key issue here. Top management often has a blind spot when it comes to recognising and taking critical decisions on operations. For example, post-manufacturing expenses and outbound supply chain are known to make perfectly good products unviable. Viable and unviable products get costs apportioned to them with non-acceptable drivers such as sales, number of people and
