Activity Based Management (ABM)

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Definition: Activity Based Management (ABM)

Activity based management is the managerial tool to increase the efficiency and effectiveness of business processes. It uses Activity based costing to measure the costs related to different activities and then compare the costs to those in other plants. If the costs are high, attempts are made to improve the activities. It also follows a 4 step process.

Example: In the example discussed in ABC model above, suppose the inspection costs are coming out to be higher as compare to the same in other plants. The possible reason may be that more inspections are being done than required. Then to reduce the costs, managers try to find out the ways to reduce the number of inspections to be done.


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