Supply Chain Costing and Performance Management, 2nd Edition

CHAPTER 1The Supply Chain Costing Journey: Why You Need to Take It

Understanding the supply chain's role in the profitability of your company, and the ability to use that knowledge to your company's advantage, can be your best weapon in the economic battles ahead.¹

COST VISIBILITY ACROSS A supply chain can open new opportunities for driving cost reductions and improving performance. Many internal costs are driven by external trading partners' behavior and business practices. Improved cost visibility enables managers and executives to better understand how supply chain relationships drive costs within their firm and with each trading partner. Visibility would also facilitate more effective cost trade‐offs and optimized networks within the firm and across a firm's network of trading partners. Despite the importance of externally driven supply chain costs, managers and executives currently have very limited visibility of their trading partners' costs and little insight into what actually drives their costs. Tremendous potential exists to achieve significant cost reductions and higher levels of performance within the supply chain. The visibility and management of costs across trading partners can take supply chain management to a higher plateau of value creation.

Many companies may find it near impossible to track supply chain costs, but it is a requirement for properly tracking, reporting, and measuring item performance. And it is a true prerequisite for advance supply chain ...