Study Reveals Need for More Accurate Costing Information in Supply Chain

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IMA (Institute of Management Accountants)

16 Feb, 2018, 11:00 IST

BANGALORE, February 16, 2018 /PRNewswire/ --

New report from APICS and IMA offers solution to widespread costing failures 

APICS, the premier professional association for supply chain management, and IMA® (Institute of Management Accountants), the association of accountants and financial professionals in business, published the findings of a joint research report, 'Working Together to Enhance Supply Chain Management with Better Costing Practices.' For this report, APICS and IMA surveyed upper management supply chain professionals to assess the impact of issues relating to costing systems and practices. The report uncovers common barriers to creating useful costing systems and presents a solution that more closely aligns the supply chain and accounting and finance business units.

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"Supply chain professionals rely on cost information when making decisions, but have indicated a need for that information to be more accurate and effective," said, APICS CEO, Abe Eshkenazi, CSCP, CPA, CAE. "This report highlights the necessity for supply chain and finance departments to work more closely and adopt costing practices that are progressive and focused on informing internal decisions."

The survey is part of an initiative by IMA's Strategic Cost Management Task Force to improve costing practices by gathering feedback from professionals who use costing information.

"From the supply chain perspective, an effective managerial costing system has clear value. It enables better make-or-buy decisions, defines landed versus delivery costs and determines the realistic cost of holding inventory," said, IMA Vice President of Research and Policy, Raef Lawson, Ph.D., CMA, CPA.

Costing information also plays a critical role in sales and operations planning. Among those surveyed, supply chain managers agreed, on average, that the benefits of improving their costing systems exceed the investment.

When asked what prevents them from utilizing current costing information, 44 percent of supply chain managers cited a lack of operational data. Instead, costing information is often reported in exclusively financial terms, making it more difficult to leverage. According to respondents, the secondary and tertiary barriers to useful costing information are inadequate technology and software (39 percent) and a resistance to change by accounting and finance personnel (30 percent).

According to the report, there are three root causes why supply chain professionals are not receiving adequate costing information:

  1. An overreliance on external financial reporting systems: Many organizations rely on externally-oriented financial accounting systems that employ oversimplified methods of costing products and services to produce information supporting internal business decision making.
  2. Using outdated costing models: Traditional cost accounting practices can no longer meet the challenges of today's business environment, but are still used by many accountants.
  3. Accounting and finance's resistance to change: With little pressure from managers who use accounting information to improve data accuracy and relevance, accountants are reluctant to promote new, more appropriate practices within their organizations.

The report details various steps supply chain professionals can take to improve costing systems within their organizations. One strategy presented is for supply chain managers to strengthen their relationship with accounting and finance to foster greater information flow between the two departments. Other solutions call for greater IT infrastructure and increased demand from top-level management for updated costing practices.

To read the full report and learn more about costing barriers and strategies to overcome them, visit: apics.org/costingsurvey or imanet.org/scmcosting

About APICS 

APICS is the association for supply chain management and the leading provider of research, education and certification programs that elevate supply chain excellence, innovation and resilience. The APICS Certified in Production and Inventory Management (CPIM); APICS Certified Supply Chain Professional (CSCP); APICS Certified in Logistics, Transportation and Distribution (CLTD); and APICS Supply Chain Operations Reference-Professional (SCOR-P) designations set the industry standard. With more than 45,000 members and approximately 300 channel partners, APICS is transforming the way people do business, drive growth and reach global customers. For more information, visit http://www.apics.org/.

About IMA® (Institute of Management Accountants) 

IMA®, named 2017 Professional Body of the Year by The Accountant/International Accounting Bulletin, is one of the largest and most-respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) program, continuing education, networking, and advocacy of the highest ethical business practices. IMA has a global network of about 100,000 members in 140 countries and 300 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe, and Middle East/India. For more information about IMA, please visit www.imanet.org.

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