Caterpillar Abm Essay

428 Words2 Pages
Accounting 321 February 25, 2013 Caterpillar ABM Caterpillar used ABM to help cut costs and increase profits in many divisions. One such division was their marketing and product support division. The base cost structure of this department was proving to be ineffective and needed to be updated. The implementation of ABM in conjunction with the addition of 6 Sigma was the direction that management decided to head to. To put ABM into action, the company needed information on how the changes would affect their processes. They chose to go outside the company and hire an external consultant. Working with the consultant, the company was able to simulate different scenarios and their outcomes. The company had to decide which processes to keep doing themselves and which ones to source to other dealers and the customers themselves. They were trying to cut out as much wasted time and resources as possible to save money. They started with value stream mapping, finding out what went into each job presently and how each task was performed. They then broke down each activity into the costs that went into each task. In essence, they were matching up who and what the costs were related to. This came down to an hourly rate per task and the number of hours each task took to complete. The company had to look at changes in the processes and how those changes would affect other areas. They did not want to create more problems. They, along with the external consultant, found the key performance indicators that showed why the MPSD tasks were being performed. The task of MPSD was the creation of parts books and product service literature. They looked at why this was important. Manuals help customers know more about the parts that they are ordering. The company used the consultant’s model to assign importance ratings to the activities in the department. They could then go through and
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