Activity-based Management Research Articles

Activity-based management for electronic commerce

This paper explores the application of Activity-Based Costing and Activity-Based Management in ecommerce. The proposed application may lead to better firm performance of many companies in offering ...

Activity-Based Proactive Data Management in Mobile Environments

Most users in a mobile environment are moving and accessing wireless services for the activities they are currently engaged in. We propose the idea of complex activity for characterizing the continuously changing complex behavior patterns of mobile users. For the purpose of data management, a complex activity is modeled as a sequence of location movement, service requests, the cooccurrence of location and service, or the interleaving of all above. An activity may be composed of subactivities. Different activities may exhibit dependencies that affect user behaviors. We argue that the complex activity concept provides a more precise, rich, and detail description of user behavioral patterns which are invaluable for data management in mobile environments. Proper exploration of user activities has the potential of providing much higher quality and personalized services to individual user at the right place on the right time. We, therefore, propose new methods for complex activity mining, incremental maintenance, online detection and proactive data management based on user activities. In particular, we devise prefetching and pushing techniques with cost-sensitive control to facilitate predictive data allocation. Preliminary implementation and simulation results demonstrate that the proposed framework and techniques can significantly increase local availability, conserve execution cost, reduce response time, and improve cache utilization.

Activity‐based management system implementation in higher education institution

PurposeThe purpose of this paper is to discuss how activity‐based costing (ABC) technique can be applied in the context of higher education institutions. It also discusses the obstacles and challenges to the successful implementation of activity‐based management (ABM) in the higher education environment.Design/methodology/approachThis paper adopts a combination of case study and survey approaches. It also uses SAS ABM software to transform the ABC model into a working model.FindingsThe results demonstrate that, using SAS ABM software, implementation of ABC technique can result in improved information of benefits to the university administrators. However, several obstacles and challenges especially those relating to supporting information systems may hamper the success of ABM system implementation.Originality/valueThis is the first paper that investigates the feasibility of ABM system implementation in higher education institution in Malaysia. It is also the first to use specific software to transform the ABC into a working model.

Breeden Security, Inc. (A)

DO NOT EDIT CONTENT OF THIS CASE. IT MUST MATCH THE CAMBRIDGE BOOK VERSION (2009) EXACTLY. FORMATTING MAY BE UPDATED AS NECESSARY. Marlene Baer, the controller of Breeden Security USA, recognizes that grouping all manufacturing overhead costs together and allocating them to Breeden’s two products is not very accurate. She groups overhead costs by activity and then allocates them to the two products. The system resembles a simple activity-based costing system. It introduces the definition of activities, costing those activities, and computing product cost based on their use of the activities. The revised product costs are considerably different, and analyzing what causes the differences is important for discovering where ABC can provide valuable information. In addition, at the end of the year, profits have been reduced by the need to take care of a growing and increasingly complex packing and shipping activity. Baer defines a new activity (order handling), computes the cost per order, and begins to revise the data on product profitability and to develop data on customer profitability. Having discovered the high cost of handling each order, she now has good reason to work on activity-based management and the notion of customer profitability making that process more efficient, and perhaps more customer friendly. This is the second in a series of two cases that can be used to explore the evolution of cost systems. The main issues of the two cases are as follows: In the A case (UVA-C-2307), the company uses a traditional costing system. The main questions relate to breakeven analysis and the effect of inventory buildup on profit. The B case introduces the use of an activity-based costing system to allocate costs so that the company can assess both product and customer profitability. The two cases can be used in two classes or together in one class.

Activity-Based Management in a Medical Practice: A Case Study Emphasizing the AICPA's Core Competencies

ABSTRACT: Activity-based management uses information from an activity-based costing (ABC) system for both recurring and nonrecurring management decisions. In this case study, an ABC system that assigned only indirect costs to the final cost objects has already been created and students must expand this ABC system to include the assignment of direct costs to the cost objects, and then compare these total unit costs to the revenue collected for each cost object. Students then analyze this cost and revenue information to give advice to management about case mix, capacity constraints, and mergers. In the health care industry, most medical practices have little control over customer demand for services or the amount that a practice will be reimbursed for its services. Students are asked to comment on the ethical and social implications of this fact, in the context of the results of their profitability analyses for a particular thoracic surgery practice. This case assists students in the development of a large number of competencies found in the AICPA Core Competency Framework.

Research on mining cost of coalbed methane based on activity management—Field study of mining with pressure-releasing in Yangquan minefield

Recently, on the background of energy-saving and emission reduction, coalbed methane (CBM) as an important new type of clean energy is paid more and more attention to. However, the current research mainly focuses on the technology level of CBM mining, and the research on mining cost and other economic evaluation has been absent, which is a disadvantage for industrialization of the CBM resources. In this paper, the cost of CBM mining with pressure-releasing in Yangquan minefield was investigated and analyzed through spot investigation firstly, and the advanced activity-based cost management (ABM) was implanted. The results show that the mining cost of CBM structure is closely related with the activity-based cost driver, and the correct division of the activity-based cost driver is the key to accurate cost measurement. Through comparing the mining cost of No. 3 Mine with that of No.5 Mine, it is found that there is a significant effect of mining method, mining technology, and the exploitation time on the mining cost of CBM. The research not only has laid a foundation for the analysis about mining cost level, composition and influencing factors, but also provided the basis for the government to make the relevant economic policy of CBM mining project.

Activity-based management and traditional costing in tourist enterprises (a hotel implementation model)

Nowadays, Greece is a country blessed with many archeological monuments and sightseeing of great interest and we have to mention the thousands of beaches and ideal places for tourism. Thus, one of the main sources of income is tourism. The growth of Tourist Sector in Greece consists of well organized hotels and apartments similar to the best of the world. Hence, the need of information about costing is essential and crucial. The cost methods used are similar to the ones used in other sectors such as product industry. But, the service sector need more care because the bad cost information will set a higher price for the rooms and fewer tourists will visit Greece, less income for the economy, more advertisement expenses, and less free advertisement from those that will not arrive. The method of Activity-Based Management along with new technologies in computing can provide huge amount of information for the present situation, pinpointing all the problematic areas. The scope of this article is to discuss the outcome of implementing both Traditional Costing and Activity-Based Management models in a high level hotel enterprise. We start the method by drawing a schematic plan of the flow of costs in the hotel. It pictures the departments, the sections, the functions and the activities that take place in the company. Next, sets the cost objects (such as the cost of services provided) and the questions to be answered such as which services are profitable. The analysis continues with the understanding of the general ledger that determines how we will assign costs to activities setting also the level of detail required during activity data collection. We then categorize the activities and the cost information; we assign costs to activities, and get the Activity Data. The data acquired can feed management with information for the organization structure, and help overtake current bottlenecks and boundaries. Also, it can concern budgeting or benchmarking, or to be used in simulation models of other scenarios for expanding the business. The outcome is based on the Activity data and can be versatile according to how will use this information.

Apprentissage Organisationnel et Contrôle de Gestion : Une lecture possible de l'ABC/ABM ?

Resume Cet article consiste a utiliser la conception « penrosienne » de l’apprentissage organisationnel et de la connaissance pour ouvrir des pistes de recherche en controle organisationnel et controle de gestion. L’idee principale reside dans la comprehension des systemes de controle de gestion non comme des outils objectifs mais davantage comme des technologies de nature cognitive et sociale. Le probleme de l’elaboration de methodes plus perfectionnees de controle de gestion ne releve pas uniquement de techniciens maitrisant les outils comptables, mais aussi d’une interaction avec les acteurs de l’entreprise directement concernes par les processus d’appropriation, et d’evolution de ces methodes. Cette approche requiert un effort d’autonomisation des acteurs de l’entreprise sans que celui-ci soit incompatible avec l’existence d’un processus d’orientation entrepreneuriale des comportements des equipes manageriales. Au niveau des methodes comptables, cette approche souligne les insuffisances de la comptabilite de gestion traditionnelle, pour repondre a une approche de l’entreprise fondee sur une orientation penrosienne. Dans ce contexte, notre contribution souligne les avancees, mais aussi les limites de la methode ABC (Activity Based Costing) et propose une comprehension de l’ABM (Activity Based Management) en sa qualite d’approche manageriale. L’ABM semble ainsi plus apte a tenir compte des combinaisons et de la coordination entre les differentes activites d’une organisation, en mettant notamment l’accent sur la gestion des processus.

A Business Process Intelligence System for Enterprise Process Performance Management

Business process management systems traditionally focused on supporting the modeling and automation of business processes, with the objective of enabling fast and cost-effective process execution. As more and more processes become automated, customers become increasingly interested in managing process execution. This paper presents a set of concepts and a methodology toward business process intelligence (BPI) using dynamic process performance evaluation, including measurement models based on activity-based management (ABM) and a dynamic enterprise process performance evaluation methodology. The proposed measurement models support the analysis of six process flows within a manufacturing enterprise including <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">activity</i> <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">flow</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">information</i> <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">flow</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">resource</i> <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">flow</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">cost</i> <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">flow</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">cash</i> <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">flow</i> , and <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">profit</i> <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">flow</i> , which are crucial for enterprise managers to control the process execution quality and detect problems and areas for improvements. The proposed process performance evaluation methodology uses <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">time</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">quality</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">service</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">cost</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">speed</i> , <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">efficiency</i> , and <i xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">importance</i> as seven evaluation criteria. A prototype system supporting dynamic enterprise process modeling, analysis of six process flows, and process performance prediction has been implemented to validate the proposed methodology.

Breeden Electronics (A)

Breeden Electronics USA is a start-up division of a German company. It plans to produce two products, both electronic signaling devices. Herman Klein, the division president, has asked his controller, Marlene Baer, to compute several breakeven sales figures as they assess the sales level that is necessary to meet the profit target established by the parent company. Baer must conduct several breakeven analyses and consider the impact on profit if production exceeds sales. This is the first in a series of three cases that can be used to explore the evolution of cost systems. The main issues of the three cases are as follows: in the A case, the company uses a traditional costing system. The main questions relate to breakeven analysis and the effect of inventory buildup on profit. The B case (UVA-C-2200) introduces the definition of activities, costing those activities, and computing product cost based on their use of the activities. The revised product costs are not dramatically different, but analyzing what causes the differences is important to discovering where ABC can provide valuable information. The C case (UVA-C-2201) takes place after the end of the year, when profits have been reduced by the need to take care of a growing and increasingly complex packing and shipping activity. The controller defines a new activity (order handling), computes the cost per order, and begins to revise the data on product profitability and to develop new data on customer profitability. Having discovered the high cost of handling each order, the controller now has good reason to work on activity-based management: making that process more efficient, and perhaps more customer friendly. The three cases can be used in three classes, or the A and B cases together in one class and the C case in a second class.

Organizational Founding, Strategic Renewal, and the Role of Accounting: Management Accounting Concepts in the Formation of the “Penny Post”

ABSTRACT: Organizational strategies, processes, and procedures may become institutionalized during the early history of an organization, leading to dysfunctional rigidities when the environment changes. The postal system worldwide is under significant pressure to change its business model, including rescinding the provision of universal service and uniform pricing, as the posts are privatized and opened to competition. Cost accounting has become a key mechanism to achieve reform in the postal system. But is the introduction of a cost-based logic new to the design of post office reforms? Were the core policies of the post office originally developed without reference to cost? This paper analyzes the key document in the creation of the current postal business model: Rowland Hill's (1837) “Post Office Reform: Its Importance and Practicability.” The pamphlet shows a basic understanding of economic concepts including the elasticity of demand and opportunity costs as well as implementing practical accounting techniques that we now call value chain analysis, cost behavior analysis, activity-based costing and activity-based management, and target costing. This paper provides an analysis of Hill's logic from the perspective of current management accounting techniques and terminology. It illustrates the use of management accounting in the reformation of social institutions and provides a rare example of the early decision-making use of management accounting concepts.

Activity-Based Management Systems in Higher Education

Financial pressures facing UK universities have increased the demand for good financial management information. The government wants higher education institutions to adopt standardized full economic costing. This article describes an activity-based management (ABM) model which has been successfully used to cost institutions' activities down to appropriate levels of focus, linking the activities to income streams and arriving at a form of value added. The model is extremely flexible allowing information to be collected for different levels of focus: faculty, department, programme, module/project or support unit.

A strategic sustainability justification methodology for organizational decisions: a reverse logistics illustration

The concept of sustainability has become increasingly important for organizations and has permeated a number of managerial and organizational decisions. Sustainability, as defined by its ‘triple-bottom line’ factors of economic, environmental, and social dimensions, is the underlying framework we use to develop and apply a strategic justification tool for project evaluation with sustainability implications. An activity-based management methodological framework is used as a vehicle to frame decisions using corporate sustainability. An illustrative application of this technique demonstrates how an organization could select between two competing reverse logistics providers. This process requires that we introduce issues relevant to three major sustainability factors (and their sub factors) and how they are influenced by a reverse logistics provider decision. The dual contribution of this paper includes investigating the design and development of the strategic sustainability evaluation framework and introducing the relationships of reverse logistics to economic, environmental and social sustainability dimensions.

Using CRM to Manage Marketing Productivity

The appropriate tool for measuring and managing marketing productivity is the present value of the total dollar contribution produced, divided by the total dollar value of the marketing effort expended to produce it. This ratio is referred to as the contribution return on marketing effort or CRM ratio. CRM integrated with activity based costing (ABC) and activity based management (ABM) systems, value analysis and value engineering (VA-VE) techniques offer a viable and practical foundation for managing customer relationship efforts and linking them to customer- and share holder value. The article offers a systematic approach for integrating contribution return on marketing (CRM) with customer relationship management (CRM).

Enabling integration to create value through process-based management accounting systems

Corporate expansion and globalisation cause firms to become more responsive to customers, suppliers and other partners and become more efficient through integrated business processes. At the same time, they need to integrate existing systems with new technologies to enhance efficiency and reduce costs. This paper aims to focus on the managerial dimension of business integration. The mission is to introduce a framework for enterprise integration by using Activity-Based Management (ABM) and Value-Based Management (VBM) as process-based management accounting techniques that support value creation through process integration. The main objective of this paper is to give a detailed framework emphasising the importance of synergy created by the concurrent usage of ABM and VBM to support process integration within the extended enterprise approach. Also, a conceptual model was performed to visualise the relationship and synergy between ABM and VBM.

Attributes of innovation and the implementation of managerial tools: an activity-based management technique

Adopting Rogers' diffusion model and the modified diffusion model presented by Askarany, this paper examines the level of association between perceived attribution of innovations and the diffusion of one managerial tool: Activity-Based Management (ABM) in organisations. Addressing the five main categories of attributes of innovations: 'relative advantage', 'compatibility', 'complexity', 'trialability' and 'observability', the findings suggest that the diffusion of ABM is significantly associated with the specified attributes of such innovations. The findings shed light on some factors influencing the diffusion of recently developed techniques and innovations in organisations.

Integrating activity-based costing and revenue management approaches to analyse the remanufacturing outsourcing decision with qualitative factors

This paper integrates the Activity-Based Costing (ABC) approach, Revenue Management (RM) approach and the theory of non-competitive behaviour to discover the sufficient and necessary conditions of the remanufacturing outsourcing decision. The solution shows that the more the firm is uncertain about the costs and the inputs of materials, unit- and batch-level activities, the more it might benefit from the information of costs transferred by the outsourcing partner. The qualitative factors show how the information obtained from ABC can bring more comprehensive solutions for management decisions in detailed cost and input levels, which contribute to the qualitative interpretations in quantitative analysis. Further, the result also demonstrates that RM still benefits profits under outsourcing based on sorting mechanism and setting a separate price for each market segment.

A methodology for dynamic enterprise process performance evaluation

In order to manage enterprise businesses effectively, enterprise decision makers need to understand enterprise business processes from various perspectives using sophisticated process simulation and optimization tools. Evaluation of enterprise processes is the basis of enterprise process simulation and optimization research for business process re-engineering. This paper proposes a methodology for dynamic enterprise process performance evaluation with metric measurement models based on Activity-Based Costing and Activity-Based Management (ABC/ABM) for six types of process flows within manufacturing enterprises, including activity flow, product information flow, resource flow, cost flow, cash flow, and profit flow. The proposed methodology uses time, quality, service, cost, speed, efficiency, and importance as seven criteria. A prototype software system has been implemented to validate the proposed methodology.

Common cents: how to succeed with activity-based costing and activity-based management

This is the book that revolutionized ABC/ABM; updated with new systems, strategies, and an expanded focus on service and government organizations. Praise for Cents: 'Common Cents is a great resource for all high level managers to reflect upon as they try to focus on results and customer satisfaction' - Keith Barnes, Chairman and Chief Executive Officer, Electroglas, Inc. 'Peter Turney uses his plain-talking style to illustrate why time-tested principles remain at the cutting edge of management initiatives worldwide. Any organization hoping to streamline business processes, cut costs, or improve profits can benefit from a little more Common Cents' - Chris Pieper, Chairman and Chief Executive Officer, FormRouter, Inc. 'A remarkable book by a remarkable author. Cents puts activity based costing in terms anyone can apply to their situation. Had government started operating this way with Peter Turney's first book 15 years ago, it is certain taxes would be lower today!' - Roxanne Rice, Director of Fiscal and Public Assistance, South Dakota Department of Transportation. 'Peter Turney is one of those rare authors who make complex subjects simple and easy to understand. Cents is a must read for successful executives' - Roger Nagel Wagner, Professor at Lehigh University and Emeritus Director of the Iacocca Institute, Author, Agile Competitors and Virtual Competition. 'Businesses that apply Peter Turney's principles will discover new opportunities for driving growth. They will become adept at manoeuvring their strategic levers to maximize profitability of products, services and customers, thereby building significant shareholder value' - Laura Black, Managing Director, Needham & Company. When designed and executed correctly, cost information programs alert decision makers about problems to overcome and opportunities to take advantage of. The difficulty is, conventional sources of financial information often do just the opposite - they hide or misrepresent problems, fail to identify opportunities, and lead to solutions that are ineffective and potentially perilous. Cents, Second Edition, reveals how Activity-Based Costing (ABC) and Activity-Based Management (ABM) can help you make the right decisions about customer and product mix, marketing channels, and performance improvement. Originally written and now revised and updated by ABC/ABM pioneer Dr. Peter B.B. Turney, this book walks you through each step of the process, giving you the tools to more accurately identify, assign actual costs to, and report on the elements of each customer, product, or service, increasing your organization's process efficiency and profitability. Cents encompasses manufacturing, service, and government organizations. It describes how Deluxe, the U.S. Army, Tektronix, Hewlett-Packard, General Electric, the South Dakota Department of Transportation, and literally hundreds of other organizations achieved the 'ABC performance breakthrough'. Using real-life examples in sectors from financial to telecom, software to healthcare, and transportation to the military, this results-driven book explores: what ABC is, and why it has proven to be so effective at accurately revealing problems and opportunities; how ABC and ABM have improved bottomline performance in manufacturing, service, and government organizations; how ABC and ABM create value in procurement, supply chain, customer support, call centers, operations, shared services, and other areas; latest developments in ABC, including resource planning, capacity management, activity-based budgeting, performance budgeting, decision simulation, and time-based ABC; proven tools of ABM, including customer profitability analysis, strategic analysis, value analysis, cost analysis, storyboarding, life-cycle costing, and target costing; and, an eight step plan for successfully implementing ABC/ABM as a proof of concept or enterprise-wide solution. Whatever business you're in, ABC and ABM can help transform your organization from average to world-class. Cents reveals the hidden opportunities to improve profitability or reduce cost, and shows you how to position your resources and direct initiatives to achieve maximum results.

Design and implementation of an activity‐based costing system in a pharmaceutical drug discovery environment

AbstractResearch and Development investments in the pharmaceutical industry are continuously increasing, resulting in mounting pressure to improve efficiency in terms of output versus cost. Overall, traditional cost accounting methods do not improve effectiveness of pharmaceutical development activities. In drug discovery, cost control is often not based on any objectively measured data. This study describes the design and implementation of an activity‐based costing (ABC) system related to drug discovery activities in a large pharmaceutical company. Both the theoretical model adapted to the specifics of drug discovery as well as the outcome of the data collection during one quarter are described. The methodological approach is based on a two‐step allocation process: allocation of resource costs to the actual processes (activities) using these costs based on resource drivers, and allocation of activity costs to the cost objects (projects) based on activity drivers. Activity‐based management (ABM) has been applied to the collected data. ABM refers to the entire set of actions and decisions that can be taken with activity‐based cost information. Major and unexpected cost differences per project were observed. Causes for these cost differences are project stage, project type, activity type, complexity of the project, number of employees involved, and type of molecular target. The cause analysis on cost differences guides management decisions such as strategic project portfolio management based on project cost, benchmarking, identifying value‐adding versus non‐value‐adding activities, outsourcing, and budgeting decisions. In conclusion, the ABC methodology secures cost and time reductions, guides project prioritization decisions, and improves cost effectiveness. Drug Dev. Res. 67:107–118, 2006. © 2006 Wiley‐Liss, Inc.