Logistics and Supply Chain Management, 6th Edition

Cost drivers and activity-based costing

As we indicated earlier in this chapter, there is a growing dissatisfaction with conventional cost accounting, particularly as it relates to logistics management. Essentially these problems can be summarised as follows:

• ●There is a general ignorance of the true costs of servicing different customer types/channels/market segments.
• ●Costs are captured at too high a level of aggregation.
• ●Full cost allocation still reigns supreme.
• ●Conventional accounting systems are functional in their orientation rather than output-oriented.
• ●Companies understand product costs but not customer costs.

The common theme that links these points is that we seem to suffer in business from a lack of visibility of costs as they ...