Major Issues in Activity Based Management (ABM)

This article discusses the major issues in Activity Based Management (ABM) and their impact on stakeholders. It explores the importance of ABM in understanding organizational activities and evaluating business efficiency. The article also provides recommendations for improving ABM practices.

Running Head: MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
Major issues in regard to Activity Based Management (ABM)
Name of the Student
Name of the University
Author’s Note

1MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
Table of Contents
1. Introduction..................................................................................................................................2
2. Discussion....................................................................................................................................3
Issues regarding the Activity Based Management (ABM)?........................................................3
Context of performance evaluation.................................................................................................4
Context of supply chain management..............................................................................................5
Context of quality management.......................................................................................................6
Context of environmental sustainability..........................................................................................6
3. Importance of Activity Based Management (ABM) for stakeholders?.......................................8
4. Recommendations........................................................................................................................9
5. Conclusions................................................................................................................................10
References......................................................................................................................................11

2MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
1. Introduction
ABM is a method for the identification of the activities that take place within the
concerned organisational premises. On the other hand, it is one of the effective tools to
understanding how the various activities in the sub-departments of the organizations are being
carried out. On the other hand, it is also being considered in evaluating the value chain
management and that of the analysis regarding business efficiency. Besides, the use of the
Activity Based Management (ABM), is also undertaken for the sole purpose of the reengineering
process. This reengineering process is being carried out with the vision hat a positive change will
be observed.
The importance of Activity Based Management (ABM), it focuses more on the
responsibility and the set of accountability for completing a particular task. On the other
perspective, it is the tool by which maximization of the overall performance is being targeted
rather than maximizing the efficiency of an individual body. It undertakes the business as a
whole. Besides, it is also a tool of measurement that measures the amount of the cost that is
being spent by each of the performing individual within the organisational premises.

3MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
Figure: Activity Based Management (ABM)
Source: (future-tech.co.uk, 2019)
2. Discussion
Issues regarding the Activity Based Management (ABM)?
Most of the organisation does not care to look at the activities regarding the business
process. This is lack of maintenance and lack of management skills regarding ABM (Activity
Based management). On another aspect, the cost regarding each of the activity is required to be
calculated before proceeding for the next activity. This manner helps in the estimation of the
over-cost; this evaluation helps in the next process such that deficit in cost can be met within the
operating time. On the other, hand there is a requirement for the valuation of the various drivers
for each of the cost activity, like calculation of the direct labour cost, overhead cost,
miscellaneous cost, and much more. Evaluation of this cost helps in the better planning process

4MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
for the distribution of the equal amount of profit among the various stakeholders. There is an
immense requirement to have an immense focus upon the initial stages of the ABM; they are as
follows:
1. Identify the activities that are being performed by the organisation.
2. Each activity cost is required to be calculated.
3. Identification of the cost driver for each activity.
Context of performance evaluation
Besides, there is a requirement to hire professional experts who have sound knowledge
regarding that of the financial activities. Financial reports are being carried out upon having
professional knowledge regarding various cost structures. The lack of professional experts is
another reason for the failure of positive ABM (Activity Based management) (Janamian et al.,
2016).
The internal management bodies of the organisation are one of the primary reasons for
the failure of the business prospects of the firm. On the other contrary, the top and that of the
middle management body fails to understand that there is a requirement of the periodically based
check-up. This periodic routine based check-up helps in understanding the dynamic changes that
take place within the organisational premises. These changes are to be adopted by the internal
employees of the organisation by making use of the training programmes. On the other hand,
there is a requirement that this body may communicate with that of the external employees as
formulating communication channel with that of the external employees will help in
understanding the level of personality and that of how they undertake their business activities
(Larson et al., 2018).

5MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
Figure: Activity Based Management (ABM) costing model
Source: (future-tech.co.uk, 2019)
Context of supply chain management
In the other hand, there is a need to understand the difference among the over-production,
and that of the estimated production. Over-production not only incurs extra cost for the
concerning organisation but also leads towards the negative act of the concerning business firm
(Tortorella et al., 2014). The aim should be toward making use of the right amount of the
resources and at the right quantity and within the right place of time. The author also added that
there is a requirement for the back office team to keep track of the business activities and that of
the business process. This will help in the elimination of the extra labour force along with that of
the overproduction criteria.

6MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
Context of quality management
Another author (Goetsch et al., 2014) proposes that there have been major issues within
the accounting department as well. The finance department is required to make sure that the
various cost channels are being calculated and linked with that of the various aspects of the cost
drivers. The formulation of the financial reports helps in the predictions of the cost that is going
to be incurred for various organisational business activity. This activity of report generation
helps in dealing with that of the crisis regarding the financial report. Moreover, comparison of
this report with one another helps in better understanding of the areas where cost can be
minimised by effective use of the capital resources. Hence, much of the cost can be secured by
the firm which can be used for various other purposes.
There are some professional along with that of the concerning business firm who
do not care much towards the quality management of their end outputs. Such that this
professional only aims at the production in bulk amount but does not undertake measure towards
sustaining this output. They should understand that there is an immense to have a concern
towards the output or end products as there are several situations which might lead towards the
hampering of this end products. The author also added that this specific issue could be overcome
by making use of the professional experts who g making use of the charts and predictions graph
can understand the production scenario of the concerning firm.
Context of environmental sustainability
By taking the initiative towards the CSR programme, it helps the concerning firm to
formulate a positive image in the eye of the general public. This image being formulated helps in
the creation of future business prospects for the firm. It is the faith of the public that is the sole

7MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
requirement for any concerning business. By obtaining their faith, it helps the firm to generate
revenues and profits by undertaking trade activities with that of the potential consumer market.
The author supported its statement by stating that communication and getting engaged
with that of the professional experts help in the better understanding of the external business
factors along with that of the internal business factors. On the other side, getting engaged helps
in the outcome of the new business-related ideas. This specific business idea can be implemented
in the future activities of the concerning business firm.
Figure: Activity Based Management (ABM) strategy model
Source: (future-tech.co.uk, 2019)

8MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
3. Importance of Activity Based Management (ABM) for stakeholders?
Another issue within the organisational premises is the lack of official ABM (Activity
Based management), this management activity provides basic tools. Moreover, it helps in having
an appropriate assessment regarding that of the company’s expenditures. Activity-based
management (ABM) is the only system that provides the basic tools to perfectly assess the
outflow involved regarding that of the tightly knit supply chain and enables understanding not
only of the total cost of ownership (TCO) but also how these costs should be allocated (Oseifuah
et al., 2014). Supply Chain Cost Control Using Activity-Based Management discusses the
competitive advantage that cost analysis and management can bring to companies within a
supply chain.
Addressing the numerous number of strategies for the sole purpose of evaluating
the total cost inherent in a customer-supplier relationship, ANM makes use of the TCO, activity-
based costing (ABC), and that of the ABM (Activity Based management), for the sole purpose of
analysing and controlling the supply chain costs. ABM (Activity Based management) is a tool
that makes use of the industry survey data to examine the cost structure, process structure, supply
chain and that of quality of the workflow.
Moreover, it serves as an assessment tool in determining which factors affect the usage
regarding that of the supply chain and whether they are producing results (Delic et al., 2014).
The author further supported its statement by stating that cost reduction should be one of the key
strategies for competitive business environments.
Supply Chain Cost Control Using Activity-Based Management shows the importance of
partnerships in applying ABM principles to suppliers and demonstrates the positive results that

9MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
ABM can have on elements of the TCO. There is an issue regarding that of the profit sharing
ratio of the concerning business firm. This profit sharing ration is being formulated in a manner
that hampers the ego of another stakeholder (Robert et al., 2014). Hence, there is an immense
requirement of formulating this profit sharing ration in the presence of each of the individuals.
The profit sharing ration is to be redesigned according to the individual requirements criteria;
this is to be done to reduce the future clash that might take place among the different set of the
stakeholders.
Figure: Activity Based Management (ABM) costing model
Source: (future-tech.co.uk, 2019)
4. Recommendations
Before the distribution of the profit takes place there is a requirement of the introduction
of the profit sharing ration in the presence of the individual concerning employees. Both

10MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
internally and those of the external stakeholders. On the other, perspective there is an urgency of
the introduction of the formal agreement that outlays each of the statement regarding that of the
profit sharing ratio. This agreement is to be signed by each of the individual stakeholder parties
such that any clash within the future period will be eliminated. This specific formal agreement
will act as legal proof in the future era of time. Thus it helps in dealing with the conflicts. This is
one of the formal and basic strategic moves that most of the corporate firm fails to make use of.
5. Conclusions
Thus, it is being concluded that the planning stage is the primary stage for any concerning
the business firm. It is the planning phase that decided the entire future business prospects of the
concerning business firm. The planning stage should be undertaken under the supervision of the
top professionals and is not a task of one particular body or that of the task of one particular sub-
departments of the company. As such that this planning stage is required to be formulated in the
supervision of the top professionals and that of the professional marketing experts. It is very
often found that the sole motive of penetrating the international market is failed because of the
lack of knowledge that stays within the hand of the concerning business firm.
One of the major reason for the conflict among the stakeholders both internally and that
of the externally is because of the lack of market penetration within the consumer market. The
author further added that there is a requirement for the constant innovation product such that the
potential rival firms fail to obtain any competitive advantage upon the concerning business firm
(Dixon-Woods et al., 2016). On the other hand, the market always seeks for a new product
offering they have certain expectation from that of the specific set of the business firm. It is their
level of satisfaction that pulls the consumer back towards the concerning business firm.

11MAJOR ISSUES IN REGARD TO ACTIVITY BASED MANAGEMENT (ABM)
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