Supply Chain Accounting 1 Flashcards
Supply Chain Management Origin
Outsourcing
Agency Theory
Vertical Integration
Market Costs - Transaction Cost economics
Definition of SCM
Management of the flow of goods & Services, involves the movement & storage of raw materials, of work in process inventories, and of finished goods from point of origin to point of consumption.
Supply Chain Accounting
Refers to the use of accounting information beyond organisational boundaries (inter-organisational environment)
Advantages of SCM
Cost Reduction
Profit Maximisation
Quality Improvements
Disadvantages of SCM
company may benefit at others expense
Power asymmetry
Lack of trust
Appropriation concerns
Examples of SCA
Open Book Accounting
Target Costing
Value Chain Analysis
Total Cost Control
Why use SCA
To adapt to the new competitive business environment
To maximise opportunities for increasing the competitiveness of the supply chain and contribute to solving appropriation concerns along the supply chain.
To develop a supplier selection strategy.
to analyse customer profitability and value creation
To contribute to the development and achievement of the organisation’s strategy.
Total Cost Control
Cost of the item plus cost of activities associated with the purchase of the item, such as service costs, inspection, losses, administration and maintenance.
Manufacturing side of production
Benefits and Limitations of TCC
Benefits:
improved cost information for strategic decisions
not only to identify the costs, but also to reduce some of them.
Limitations:
May be more useful if supplier and customer work together.
Open Book Accounting
Involves sharing cost and strategic information about relevant processes across organisations.
Why use OBA
- Cost information will influence ongoing management of partnerships
- OB agreements should reduce the scope for squeezing margins/or suppliers to exploit temporary competitive advantage.
- Changes may be agreed and the improvement in the transaction atmosphere allows a process fo continuous improvement.
Factors Influencing the use of OBA in practice
- Outsourcing
- Trust
- Customer/supplier power
- importance of product
- Volume of transactions
- Quality of the supplier internal costing system
- Familiarity and expertise of the customer in the supplier processes
- Ability of suppliers to devote resources to potential improvement systems
- Sharing non financial manufacturing/operational/technical information.
OBA Chalenges (Kjuter and Kulmala 2005)
- Suppliers experience no extra benefit from openness
- Suppliers think that accounting information should be kept in house
- Network members cannot produce accurate cost information and see no sense in sharing poor cost data
- Suppliers are afraid of being exploited if they reveal their cost structure.
- Network members cannot agree on how to implement OB practices.
Value Chain Analysis & Value Chain Costing
Michael Porter’s Value Chain Framework
The term ‘Margin’ implies that organisations realise a profit margin that depends on their ability to manage the linkages between al activities in the value chain.
In other words, the company is able to deliver a product/service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain.
VCA & VCC Primary Activities
Primary Activities
- Inbound logistics (receiving and warehousing of raw materials, and their distribution to manufacturing as they are required.
- Operations: the processes of transforming inputs into finished products and services.
- Outbound Logistics: the warehousing and distribution of finished goods.
- Marketing & Sales: the identification of customer needs and the generation of sales.
- Service: the support of customers after the products and services are sold to them.
