Supply chains in need of greater costing accuracy, study reveals

Costing accuracy within supply chains must improve, a study by APICS and IMA has revealed.

The results of a survey found that supply chain managers agreed, on average, that the benefits of improving their costing systems exceed the investment.

When asked what prevents them from utilising current costing information, 44% of supply chain managers cited a lack of operational data. Instead, costing information is often reported in exclusively financial terms, making it more difficult to leverage.

According to respondents, the secondary and tertiary barriers to useful costing information are inadequate technology and software (39%) and a resistance to change by accounting and finance personnel (30%).

According to the report, there are three root causes of why supply chain professionals are not receiving adequate costing information:

An overreliance on external financial reporting systems:

Many organisations rely on externally-oriented financial accounting systems that employ oversimplified methods of costing products and services to produce information supporting internal business decision making.

Using outdated costing models:

Traditional cost accounting practices can no longer meet the challenges of today’s business environment, but are still used by many accountants.

Accounting and finance’s resistance to change:

With little pressure from managers who use accounting information to improve data accuracy and relevance, accountants are reluctant to promote new, more appropriate practices within their organisations.

The report details various steps supply chain professionals can take to improve costing systems within their organisations.

One strategy presented is for supply chain managers to strengthen their relationship with accounting and finance to foster greater information flow between the two departments.

Read more at Supply chains in need of greater costing accuracy, study reveals

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Supply Chain Impact on Shareholder Value: A Performance Paradigm?

If you ask a supply chain leader how they impact their company’s performance, the response is almost muscle memory, ‘reduce cost and inventory while improving service.’ If you ask the same leader how they impact shareholder value, there is often a long pause.

To shed some light on the subject, the APICS Supply Chain Council conducted a live poll during its jointly hosted Best of the Best S&OP Conference in June. Two poll questions were developed to examine attendee perception regarding shareholder value. Almost two-thirds of the respondents reported that they had some form of supply chain scorecard. Conversely, only three-percent reported that they linked supply chain performance to shareholder metrics.

This dialogue with supply chain leaders has sparked a number of research questions, especially in light of the fact that supply chain executives share a seat in the C-suite, including:

1. What are the key shareholder metrics that matter?

For a publicly traded company the ultimate measure is earnings per share or stock price. For privately held companies, the focus tends to be on the attributes that relate to earnings per share: growth, profit, and return.

2. What are the supply chain performance levers that intentionally add to shareholder value?

The Growth attribute is the conundrum that keeps supply chain leaders up at night. Traditionally, the assumption was that great service level, including both lead-time and reliability, didn’t lose sales and potentially helped grow share of customer’s ‘shelf space’ by having predictable availability.

3. How does that affect your supply chain strategy?

The correlation between supply chain excellence and earnings per share certainly is intuitive, but there is data to suggest that even the best supply chain companies still are not maximizing potential shareholder value.

Read more at Supply Chain Impact on Shareholder Value: A Performance Paradigm?

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