Root Cause — Clarity

Activity-based costing is a form of language that has been developed to describe certain laws of nature the laws of nature that relate to cost behavior. If the language becomes obsolete, the laws of nature will not change. 

This chapter addresses lack of clarity as a root cause for too-high cost in the supply chain. In keeping with the scope of the topic, this chapter is quite long and uses detailed examples. However, most decisions about the supply chain must evaluate cost somewhere in the process. So this chapter describes helpful tools and concepts to achieve clarity in the supply chain cost picture. 

long standing habits that demand hard negotiations are likely to persist. So openness is not necessarily the norm. However, understanding costs and the limitations of current ways of reporting them is an important SCM skill. In this chapter, we explore potential solutions and how they apply to supply chains. Decisions might include some of the following  

One needs to xmderstand how a set of numbers has originated. So we dedicate space here to a review of the basics. The understanding includes not only the timing of the numbers and its effect on our ability to take effective action but also knowing what s behind the numbers and what we can learn from them about root causes of cost in the supply chain. This chapter describes tools for using cost information to uncover tirese root causes. 

We also provide a case study involving a cost-driven research and development effort that addresses cost accoimting in multi-company environment. This is in tire belief that such an approach will be increasingly important to partners marrying up in supply drains. 

Pathway to effective supply chain cost measurement. 

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