Table of Contents

Foreword xi

Preface xiii

Acknowledgments xv

PART ONE 30 Pitfalls of ABM and How to Overcome Them

1 Getting Off to the Right Start: Pitfalls No. 1 to 10 3
Steve Player and David Keys

2 Developing the Pilot: Pitfalls No. 11 to 20 26
Steve Player and David Keys

3 Moving from Pilot to Mainstream: Pitfalls No. 21 to 30 52
Steve Player and David Keys

PART TWO Case Studies

4 Distribution: Knowing What It Takes—and What It Costs 73
Hewlett-Packard—North American Distribution Organization, Santa Clara, California
Steve Player, Cathie Wier, and Craig R. Collins

5 A Process Manufacturing Company’s Prescription for Profitability 83
Hoffmann-La Roche, Inc., Nutley, New Jersey
Robert G. Cummiskey and Chuck Marx

6 Using Storyboarding to Develop an ABM System 90
Johnson & Johnson Medical, Inc., Arlington, Texas
Mark A. Moelling

7 Using ABM to Support Reengineering 96
Pennzoil Exploration & Production Company, Houston, Texas
Craig R. Collins and Angela A. Minas

8 Continuous Implementation Yields Deeper Results 104
Current, Inc., Colorado Springs, Colorado
Robert C. Thames and Joseph W. Bagan

9 Multiple Project Roll-Out Creates Leverage 111
The Marmon Group, Chicago, Illinois
John F. Vale and Chuck Marx

10 Using ABC for Process Analysis, Customer Profitability, and Manufacturing Flexibility 120
Bliss & Laughlin Industries, Inc., Harvey, Illinois
Chuck Marx with Jason Balogh

11 Using ABC to Increase Revenues 130
TTI Inc., Fort Worth, Texas
Steve Player and Michael B. Kramer

12 Using ABC for Shared Services, Charge-Outs, Activity-Based Budgeting, and Benchmarking 138
American Express Travel-Related Services, New York, New York
David M. Aldea and David E. Bullinger

13 Using ABM to Understand Telecommunications Maintenance and Provisioning Processes 146
Telecommunications Corporation
Richard Storey and Ellen Fitzpatrick

14 Advanced Use of ABM: Using ABC for Target Costing, Activity-Based Budgeting, and Benchmarking 152
AT&T Paradyne Corporation, Largo, Florida
Jay Collins

15 Increasing Customer and Stakeholder Satisfaction, and Supporting Benchmarking and Performance Measurement with ABM 159
AT&T Business Communication Services, Manassas, Virginia
Terrence B. Hobdy

PART THREE Future Weapons: The New Wave of Lessons

16 Customer Profitability Puzzle: Seven Steps to Profitability Planning 171
Joe Donnelly and Chuck Marx
Vignette: Columbia Pipe & Supply
Karen Schreiber

17 Using Activity-Based Management to Grow Revenues Profitably 182
James W. Gibson and Max Locke
Vignette: Boise Cascade Office Products
Steve Player

18 Elements of a Performance Management System 193
Craig R. Collins and Marieta Gundova
Vignette: Implementing Performance Management in an Information Technology Department
Mark T. Miller

19 Target Costing: Profit Planning for New Product Development 208
Randolf Holst and Joseph P. Donnelly
Caterpillar
John Dutton with Reid Dalton and Joe McNeely

20 Reporting ABC Information: Asking the Right Questions Gets You to the Right Answers 228
Cathie Wier and Billie Gayle Lewis

21 What the Future Holds 240
Steve Player

APPENDICES

A. Pitfalls Encountered (with Translations) When Launching an ABM System 245

B. Activity-Based Costing Criteria for Selecting Successful Pilot Sites 247

C. Stages of Cost and Performance Measurement Systems Development 251

Glossary 253

Index 261

About the Author

STEVE PLAYER, CPA, a partner and firmwide director of cost management for Arthur Andersen, develops activity-based management systems, and provides leadership for industry and professional groups. His clients include the Covey Leadership Center, Hewlett-Packard, Texas Instruments, NordicTrack, American Express, Rhône-Poulenc Rorer, Chemical Leaman, and Tyson Foods. An author of three books, Steve serves on the board of directors and as treasurer for the Consortium for Advanced Manufacturing-International (CAM-I). In addition, Steve serves as a resource for publications, including Investor's Business Daily, Forbes, Business Finance Magazine, Financial World, Global Finance, and International Journal of Strategic Cost Management.

DAVID E. KEYS, CMA, CPA, is Household International Professor of Accountancy at Northern Illinois University. He writes for publications including Management Accounting, Journal of Cost Management, and Accounting Review. He has received several awards for excellence in teaching and has consulted with numerous companies.