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Case
Study 1:
Activity Based Management
Case Study in Distribution
This organization is in the soft drink
industry. Market growth year to year is very small. To survive and thrive
in their market, management recognized that distribution and customer
service were critical. The controller recommended to the president that
an ABM Pilot Project be implemented to document and quantify distribution
and related business processes.
Joint
effort of Office and Warehouse Employees
ICMS was hired to educate,
train and "coach" a seven person ABM Pilot Project implementation team
through the process. CMS-PC 4.0 software was used to support the analysis. The
project leader, a Management Information Services (MIS) manager, was assisted
by accounting, marketing, human resources, a delivery driver, a warehouseman,
and shipping. A total of 27 departments were included in the project scope. Hourly
workers said, "ABM is common sense. What took so long?"
A
total of 81 significant activities were defined during activity analysis. Linking
the activity inputs and outputs, the team identified ten business processes. Included
were the Service Process, Distribution Process, and Sales Order Process. The majority
of non-value added activity costs were associated with the Service and Distribution
Processes. Hourly workers on the Implementation team commented that they and their
peers had identified improvement ideas that would reduce the non-value added costs.
One team member stated, "The simple verb + noun ABM reports give me the payback
information that I've been looking for to present to management for approval." Mapping
the Process for Re-Engineering
Employees from six departments
met for two days to map the "As Is" Distribution Process. The employees
commented during the session that while they realize they all had something to
do with distribution, they had never had a Distribution Process meeting before
the ABM mapping workshop. The team defined a "To Be" process on the
second day along with 14 ideas to improve and innovate the process. Post
Audit
Management and employees all agreed to continue ABM. The
MIS manager was assigned to ABM on a permanent basis to continue the roll-out
of ABM to all organizational functions. Process improvement teams have been formed
and meet on a regular basis. Teams are benchmarking with other companies, with
the common denominator being activity information. The ABM software model is updated
every 3 months to measure progress. |