Activity-based management
Activity-based management uses ABC data to improve processes rather than just to cost products; it identifies value-added activities customers pay for and targets non-value-added activities — waste — for reduction or elimination.
FrameworkActivity-based costing
See it move
Activity-based management sorts activities into two groups. Value-added activities, such as machining a component or assembling the product, are ones a customer would explicitly pay for. Non-value-added activities, such as moving materials between workstations, inspecting for avoidable defects and holding excess inventory, consume cost without adding value and become the target for reduction.
Check yourself
A supermarket chain uses ABC data to analyse its distribution centre. Having identified that re-labelling of supplier deliveries consumes significant resources without customers noticing or valuing it, management eliminates the activity by requiring pre-labelled deliveries from suppliers. What does this example illustrate about the distinction between ABC and ABM?