Activity Based Costing (ABC) and Activity Based Management (ABM)

These management disciplines were originally pioneered in the United States prior to the Second World War. The growth of computing power in the 1980s significantly boosted the potential of these techniques to provide timely and relevant management information to business executives for whom the traditional financial accounts came too late or offered too little information of business relevance.

ABC essentially reorganizes the way cost information is presented to managers in order to improve the accuracy of business and product costing, and enhance managerial understanding of the nature and composition of those costs. This enables managers to find better ways of doing business.

ABM adds performance measurement to the ABC cost picture, enabling businesses to examine the trade-off between cost and performance. With this critical information available, organizations are better placed to improve their profitability by positioning themselves in the market, recognizing both the performance and cost components of their businesses.

Pilbara Group’s experience with ABC and ABM began in 1996 with the development of an ABM model for the Royal Australian Navy (RAN). Key staff in what is now Pilbara Group were separately engaged on that project to develop an approach that would provide business management answers in one of the most complex organization types in existence. Defense organizations do not fit the normal pattern of business enterprises, and the team had to develop entirely new approaches to determining the data requirements, implementing appropriate algorithms, coding the required software and presenting the results to senior management. Based on the successes achieved in implementing ABM in the RAN, ABM Technologies and Data Management Solutions were formed and Pilbara Group was formed in 2002 after ABM Technologies Australia won a number of key ABC implementation contracts in the United States.

Cost Model Implementation - Pilbara Group can design and implement ABC, ABM and other costing systems in organizations ranging in size from thousands of employees with billions of dollars managed to mid-size businesses employing under a hundred personnel. Pilbara Group has developed a set of core principles that give its cost models the flexibility to support most business.

Advisory - Pilbara Groups' experience in implementing and managing costing systems allows our staff to provide valuable, impartial advice about your own business' current or proposed ABC, ABM or other costing system. Given that the vast majority of ABC implementations fail, expert advice is critical to determining the best system for your business. Will your proposed costing model provide the answers you want? What should it cost to implement and run? Will the costs of development outweigh the benefits to be gained? Is your business ready for a full-blown ABM system? What benefits could ABM bring to your organization? What additional functions can your current system support? Pilbara Group can help you answer these and other crucial questions before you commit to implementation.

Software Tools - Pilbara Group uses a number of carefully designed software tools to make cost models easier to manage. Pilbara Group believes that if the time consuming data processing tasks are handled by well designed applications, then staff are empowered to make better use of the information provided by your cost model. Pilbara Group can develop and supply cost effective, desktop compatible, tools to:

• Collect required information from your staff,
• Provide pre-set or customized management reports to your management team,
• Process your existing management data for input to your costing system.