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Monday, April 17, 2006

Accounting and Logistics Costs an Impediment to Supply Chain Effectiveness

"The responsiveness required to keep the inbound supply chain flowing with materials and products and to keep store shelves filled is demanding. SCM requires reducing costs, increasing inventory velocity and compressing cycle time; and these three may not be compatible or consistent.

Doing all this-and doing it well-takes creativity and management skill. However there is a factor that limits the design, development and implementation of such supply chains. That factor is accounting and how it recognizes and treats logistics costs. Accounting is an impediment for logistics whether for supply chain management, both international and domestic, for lean and for outsourcing.

These differences make it difficult to develop meaningful performance metrics for supply chain management that are recognized in the board room and that are aligned with the company strategic plan. Financial metrics, while commonly used, have limited application to supply chain management performance improvement."

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