Integrating Activity Based Costing and Process Simulation for Strategic Human Planning

Abstract

This paper presents a method of integrating activity-based costing (ABC) and process simulation in human planning. Our studies have already proposed a method of integrating ABC and process simulation in business process reengineering (BPR) and showed a case study of a chemical plant. Some studies have also already showed some examples of various aspects in manufacturing systems. Although a large number of studies have been made on product-mix/machine loading or scheduling, little is known about human planning. In this paper, effective BPR methodologies to achieve dramatic improvements in business measures of workers' skills and costs based on ABC are discussed. First, two important tools: process simulation method and ABC analysis that can be customized by organizations for their own BPR are shown. As these tools have been separately used, a unified approach of process simulation and ABC analysis for process redesigns based on simulation. Secondly, a method of process simulation design is shown. It is repeated to consider working ratio and running time of resources. Thirdly, a method of ABC analysis that can be customized by organizations is shown. It automatically shows the data that has been gathered from many sources. By utilizing the data, the process simulation is implemented, and the result of simulation gives the data to ABC analysis. Lastly, this paper shows a case study in BPR and the effectiveness of our method.

Identifying potential bottlenecks through activity under-utilization cost

“…Kataoka et. al [40] combines simulation and ABC analysis to propose a unified approach for process redesign in business process re-engineering. The issue of capacity under-utilization has been discussed by relatively fewer authors.…”