The cost of a firm’s services and products are accounted for by a significant share of purchased services and materials. Recent surveys show that snowballing services and product complexity, growing and increasingly volatile input prices, and the availability of sophisticated supply chain management tools have influenced strategies in the supply chain (Anderson and Dekker, 2009). Relative to strategic cost management, structural and executive cost drivers are the two cost drivers that enable a business to depict the interplay between competitive and market analysis. When it comes to executional cost management, supply chains include familiar accounting elements that monitor and measure performance and its data to enhance the dynamic use of production (Anderson and Dekker, 2009). Transactions between any two firms require a significant technical uncertainty that can measure and define performance and are responsible for distinguishing each organization’s influence on interdependent results.
When supply transactions become financial performance measures, traditional cost accounting and performance estimates become the cause of problems. The challenge associated with adopting the terms of condition approach is identifying a particular supplier’s hidden costs (Anderson and Dekker, 2009). However, risk mitigation is at the center of structural cost management resulting in research challenges when addressing how residual risk is incorporated into more routine performance evaluations that impact executional cost management. When supply transactions become nonfinancial performance measures, businesses develop scorecards that support supply chain management strategies (Anderson and Dekker, 2009). And when used as a measure to monitor, provide feedback, and improve performance, supply transaction becomes part of structural cost management and focuses on the role of accomplishment estimate in improving productivity (Anderson and Dekker, 2009). Therefore, businesses can use executional cost management in supply chains in evaluating their sustainability and influence how supplier health is assessed.
Reference
Anderson, S. W., & Dekker, H. C. (2009). Strategic Cost Management in Supply Chains, Part 2: Executional Cost Management. Accounting Horizons, 23, 3, 289-306.