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Obstacles to Economic-Chain Costing

Switching to economic-chain costing requires uniform accounting systems along the entire chain.

The real cost is the cost of an entire process, in which even the biggest company is just one link. Companies are therefore beginning to shift costing from including only what goes on inside their own organization to costing the entire economic process, the economic chain. There are obstacles in implementing economic-chain costing. For many businesses it will be painful to switch to economic-chain costing. Doing so requires uniform or at least compatible accounting systems of all businesses along the entire chain. Yet each one does its accounting in its own way, and each is convinced that its system is the only possible one. Moreover, economic-chain costing requires information sharing across companies; yet even within the same company, people tend to resist information sharing. Whatever the obstacles, economic-chain costing is going to be done. Otherwise, even the most efficient company will suffer from an increasing cost disadvantage.

ACTION POINT: Identify the obstacles to implementing economic-chain costing, overcome them, and implement economic-chain costing in your organization.

Management Challenges for the 21st Century
From Data to Information Literacy (Corpedia Online Program)

* Source: The Daily Drucker by Peter F. Drucker

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