Strategic Cost Management in Supply Chains, Part 1: Structural Cost Management
Posted: 12 Mar 2009 Last revised: 3 Aug 2015
Date Written: March 11, 2009
Strategic cost management is the deliberate alignment of a firm's resources and associated cost structure with long-term strategy and short-term tactics. Although managers continue to pursue efficiency and effectiveness within the firm, increasingly, improvements are obtained across the value chain: through reconfiguring firm boundaries, relocating resources, reengineering processes, and re-evaluating product and service offerings in relation to customer requirements. In this first paper in a two-part series on strategic cost management in supply chains, we review structural cost management. Structural cost management employs tools of organizational design, product design and process design to create a supply chain cost structure that is coherent with firm strategy. In the second part of the series we will consider executional cost management, which employs measurement and analysis tools (e.g., variance analysis, cost driver analysis, supplier scorecards) to evaluate supply chain performance. Using selected studies in accounting, operations management and business strategy, we provide an overview of strategic cost management in supply chains, highlight contemporary developments, and suggest directions for future research.
Keywords: supply chain management, value chain, cost management, supplier
JEL Classification: L20, L23, M40, M46, M11
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