Supply Chain Costing and Performance Management, 2nd Edition

Appendix: Additional Process and Productivity Tools for Supply Chain Costing

AT THE OPERATIONAL LEVEL, organizational managers often focus primarily on reducing costs and on avoiding future costs. These managers are interested in understanding what can be changed, how to identify opportunities, and how to compare and differentiate high‐impact opportunities from nominal ones. Tasked with productivity improvement challenges, they typically focus on streamlining processes, on reducing waste and low value‐added work activities, and on increasing asset utilization. Tools that fall into this area include Six Sigma quality initiatives, lean management principles, and just‐in‐time (JIT) scheduling techniques. Each of these tools is a useful adjunct for improving supply chain costing throughout the value chain.

Operations managers and employee teams ideally should achieve a mastery of (or at least reasonable proficiency in) understanding the properties applied in assigning their department's expenses (e.g., general ledger accumulations of spending) into their calculated costs—the uses of the spending of resources needed for processes and their outputs. In short, costing is modeling. It models how the demands on work and resources are uniquely consumed and reported. Costs measure effects. Using this knowledge, operational employee teams can use managerial costing for productivity and process improvement.

What follows is a brief introduction to several additional tools that may be useful ...