Process Improvement using Activity-Based Costing

Question: How activity-based costing (ABC) can be used as a process improvement tool to integrate with existing simulation techniques? Purpose: The purpose of this paper is to explore how ABC can be practically used for construction process improvement with the support of discrete event simulation (DES) technique. Research Method: We apply a hypothetical case study on pipe installation inspection task to test our claims and proposed method. Findings: The research proposes using activity hierarchy to integrate the ABC with existing simulation technique. Through combining with two techniques, companies can not only better manage process change and develop strategic plans for process improvement, but also predict the performance outcomes in a more accurate way. Limitations: Additional and extended case studies on diverse conditions and relations between ABC and process simulation model should be done to demonstrate the readiness for broad industry deployment. Implications: Current environments in the construction industry demand effective process management to enhance the productivity and management efficiency. However, construction projects are found to have a limited number of tools for process management in construction area. The research is expected to contribute the knowledge and practice in process improvement study. Value for authors: The proposed approach can contribute to facilitating easy and practical process control on a basis of more accurate cost information.