Performance Management

Activity-based Management

We are a focused partner for SAP BO PCM and we deliver process centric ABC implementation services to our clients.

Activity - based Management is a new level of information which is derived from the combination of financial and operational information in a way that both can be used to improve decision making. It is not just a replacement for cost of sales and inventory valuation on the financial statements.

It is a management information tool, not a financial statement valuation method. To fulfill this purpose requires the information system takes into account both the operational processes of the organization and the resources costs as represented in the financial system. These then must be combined in such a way that they reflect how the organizational process consumes resources and flow costs, and absorbs total the costs in the financial system to insure the financial integrity of the model.

The process starts with an operational flow model of the business process and then attaches costs to the resources. Costs accumulate in relation to the flow of activities. Costs are applied directly to the resources that consume these costs; therefore the costs do not need to be decomposed. Costs flow through activities to cost objects (products, services, etc.).

Activity based costing and management is widely adopted because it provides a more complete picture of the profits and costs of doing business than traditional cost accounting. Understanding true product profitability, customer profitability or customer life time value in any industry fundamentally requires Activity Based Management.

Value-based Management says “the key to increased shareholder value lies in the integration of strategic planning, performance measurement and compensation”.

In order to achieve Value-based Management, managers will need to bring their company's diverse business units, processes and employees together into a cohesive whole, where all elements work toward the same goal - the creation of value.

The more we discuss on this value flow and value drivers across the enterprise, the more challenging it gets.

From our experience, we are indeed convinced that the organizational Change Management process within the deployment and process introduction is the key for the project success. We recommend incremental deployment as pilots within the enterprise before a global view.