Strategic Cost Management in the Supply Chain

Abstract

Abstract Companies increasingly face challenging economic times, where it is not uncommon to see revenues decline or remain stagnant. This can strain business viability and reduce the return on investment for shareholders. To increase the return on investment and favorably impact profitability, organizations focus on cost reduction efforts. Cost management should be both holistic and purposeful, while taking a supply chain perspective. This is often not the case because the cost reduction efforts tend to be internal and short-term focused and do not consider the supply chain implications of decisions. Strategic cost management takes a supply chain perspective and includes several tools that can help facilitate cost management. This chapter provides a definition of strategic cost management with supporting examples. It also discusses some tools, including total cost of ownership, target costing, and supply chain finance, that can be used to holistically and strategically manage supply chain costs. The chapter closes with a discussion around the growing role of supply chain finance in cost management.