Supply Chains: A Manager's Guide

Measuring Cost

The second major category of measures deals with costs, which come in a wide variety of types. Compared to the simplicity of measuring time, measuring cost is considerably more difficult, and complex issues can arise when you try to mix or combine different types of cost. Figure 9.6 provides examples of five different types, but these are only meant to illustrate some of the ways in which costs can arise. There are certainly other kinds of costs you will need to consider, and the ones shown are not mutually exclusive. For example, most periodic costs are also indirect costs, and the expense of correcting an error might include costs of every other type in the list.

Figure 9.6. Measuring Cost

Direct costs, the first type, are those ...