Activité basée sur le management (ABM) (document en anglais).

Activity Based Management (ABM) is a methodology to manage your business. It is like various management techniques that have emerged over a period of time like Management by Objectives (MBO), Management by Exceptions (MBE) etc. Let us see the definition of ABM: it is the method to manage your business with managing your activities to improve operational excellence (internal) or value provided to the customer (external). ABM is calculation of costs with the ABC method then analyze the data and take action on it to improve your business performance.

ABM can be used to understand and improve the performance at all the levels in the organization. It can be used to take decisions about the products, customers etc (Strategic use). It can also be used by a head of the department to manage her portfolio of products or customers (tactical use) or to improve certain processes (operation use). Based on these uses few people have segregated it as ‘Strategic ABM’ and ‘Operational ABM’.

Strategic ABM – ABM can be used for the purpose of taking strategic decisions like adding or retiring products, acquisition or retentions of customers etc. These decisions are based on the profitability information calculated using ABC method. This information is historical information of profitability. This historical information coupled with the future trends, competition etc can help the organization to take the decisions. In other words it is ‘doing the right things’.

The ideal way of performing for an organization is to sell best of their products to best customers. For this the organization has to understand which their best products are and who their best customers are. ABC helps the organization to find their best products and customers as per the profitability. Once the organization has to find out the profitability, it can then group them into deciles (make 10 groups according to their profitability numbers). Each of deciles can be analyzed for products and customers as to what are the reasons for those to fall into that category. Then various action plans can be taken to move them from lowest of the deciles to the highest. As I said this is a historical data of profitability, one has to look for the potential future trends and couple them with current (and historic) data to take the strategic decisions.

ABM models for Strategic ABM are at a comparatively gross level. The activities are defined at almost a process level. Now a day we can calculate the profitability of the products even at SKU (stock keeping unit) level, in the hierarchy LOB-Product Group-Product-SKU. We can also calculate the profitability at account level in banks, subscription level in telecom. This can be grouped at the customer level, household level or other customer segments.

Operational ABM – In this case the use of ABC information is for improving the performance of various operations (processes) in the organization. The process is nothing bust various activities performed in a sequence by one or more functions in the organization. In this case various activities are tagged as ‘value add- non value add’ or ‘core, discretionary or sustaining’ and based on the analysis the activities are eliminated. Here I remember a methodology explained by Gary Cokins as:

a) See if the activity is required by the customer (internal or external).

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