Supply Chain Costing and Performance Management, 2nd Edition

CHAPTER 5Why Supply Chain Cost Systems Differ from Traditional Cost Systems

SUPPLY CHAIN COST SYSTEMS should support a firm's strategic and production choices as well as the broad variety of decisions related to supply chain processes that executives and managers need to make. The importance of restructuring cost systems so the information they provide more effectively supports supply chain management is made repeatedly by supply chain executives. Information needs should drive the design of supply chain cost systems, and the information should provide insights and support the decisions managers make at the strategic, tactical, and operational levels.

Supply chain costing is complex and many choices exist to assist firms in better managing supply chain processes. The identification of what cost information is needed and the selection of the appropriate tools for measuring, reporting, and analyzing supply chain costs are key challenges. The next several chapters can assist executives in making these choices. This chapter provides a structural foundation for the more explicit discussion of the costing tools. Modern supply chain cost information must match costing methods and tools with the time frame and nature of the decision, while thinking outside the box of functional and internal costs to include costs across trading partners in the supply chain. Firms must adopt a strategic perspective for managing supply chain costs and managers must understand how modern supply chain ...