Supply Chain Costing and Performance Management, 2nd Edition

CHAPTER 13Accept the Challenge of Improving Supply Chain Costing

THE CONCEPT OF COST visibility across an entire supply chain has considerable intuitive appeal for most managers. Conceptually, few would argue against having a better understanding of what drives supply chain costs and better cost visibility with reasonable cost accuracy by not applying cost allocations that violate costing's causality principle. If this is indeed true, then why have not more managers and firms made significant progress toward implementing supply chain costing? A straightforward answer is that implementing supply chain costing is difficult and poses significant challenges. A less direct answer is that managers will have to employ multiple strategies to overcome the many challenges encountered during implementation.

Some of the challenges are primarily technical and include failures to define or capture needed information or an inability to make reasonable cost estimates. Although significant, supply chain managers can overcome these challenges by applying the costing strategies and tools leading‐edge firms already successfully use internally to implement supply chain costing. These internal implementations represent a significant challenge, but an even larger challenge lies in the ability to distribute these improved technical skills throughout the remainder of the supply chain.

The most daunting challenges to improving supply chain costing are related to the organization's behavior and culture ...