Throw Out Fixed and Variable Cost Thinking—Bring In Activity-Based Costing for Distribution Decisions
- Topics:
- Strategic Management Tools
- Tags:
- ABC Inc.,
- Tools & Techniques,
- Strategy,
- Strategic Management,
- Mindset,
- Managerial Accounting,
- Management,
- Leadership,
- Finance,
- Decision,
- ...
- Source:
- Value Associates
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Overview: This article suggests a new way of thinking about costs in distribution management. It defines that distributors need cost information, not to track the cost of manufacturing operations, but to make strategic management decision for example decisions on pricing, unbundling value-added services, customer profitability, vendor profitability, and automating processes. This article also explains the customer driven costs and activity based costing. It also describes that these decisions with a fixed cost/variable cost mindset, we will be flying by the same dumb decision-making rules that the airlines use every day. ABC offers one a new mindset—one which starts with customer requirements and ends with the “cost to serve” those needs. It suggests to adopt the ABC approach to strategic cost management as a tool for decision-making and throw out fixed cost/variable cost thinking.
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Format: PDF | Size: 207KB | Date: Jan 2003 | Pages: 6
