Supply Chain Engineering - Activity Based Cost Management

Jimmy Anklesaria proposed eight step model to use activity based cost management in his book Supply Chain Cost Management.

The eight steps can be stated as:

1. Deciding to do supply chain cost industrial  engineering - Deciding to manage costs of supply chain
2. Identifying critical costs, secondary costs and tertiary costs
3. Measuring costs using activity based costing.
4. Defining costs drivers and options to manage cost drivers.
5. Eliminating and reducing activities of a product. Reducing cost of activities.
6. Implementing the recommendations of activity based cost industrial engineering team.
7. Verifying the plans and results with cost measurement systems
8. Repeating the cycle for continuous improvement using total industrial engineering approach

Details of the steps will be covered in future.

It is important to state that interorganizational cost management was covered by Robin Cooper in his book on Cost Management in 1995.

Supply chain has a distribution chain, production chain and procurement chain. Hence supply chain industrial engineering has distribution chain industrial engineering, production industrial engineering and procurement chain industrial engineering as sub components.  Supply chain leader needs to develop industrial engineering expertise in his operations and then provide leadership to other partners in the supply chain.