Supply Chain Costing and Performance Management, 2nd Edition

CHAPTER 4Developing a Foundational Understanding of Strategic Supply Chain Cost Management

AGREEING ON THE DEFINITION of the supply chain, its processes, supply chain management, and supply chain costing is a critical first step in the supply chain cost management journey. Progress through this costing journey requires that several obvious, but too often overlooked, foundational elements be in place. This chapter discusses the need to establish the importance of supply chain costing and supply chain decisions. It emphasizes the need for a common understanding of the environment in which the firm operates and where the firm is currently positioned strategically, operationally, and within the supply chain.

Each of these elements represents foundational understandings that are essential to strategic supply chain costing. Without these elements in place, firms do not have an appropriate commitment to or direction for their supply chain costing efforts. Managers in the firms that have progressed furthest on the supply chain costing journey generally understand these foundational elements rather well. However, many of their trading partners currently do not “get it,” and there is a need to educate them on the foundational elements summarized in this chapter.

IMPORTANCE OF SUPPLY CHAIN COSTING

Supply chain professionals reading this book almost certainly already understand the importance of supply chain costing for their firms. The key question is whether top management, other ...