Article review of “Activity-based costing in a supply chain environment”

Article review of “Activity-based costing in a supply chain environment”

 

How to present this article in Harvard reference format?

Schulze, M., Seuring, S. and Goldbach, M., 2012. Applying activity-based costing in a supply chain environment: A case study in facade components manufacturing. International Journal of Production Economics, 135(2), pp.716-725.

 

What are the key research issues the article wants to address?

The key research issues the article aims to address are:

1.    How can activity-based costing (ABC) be conceptualized in a supply chain setting to support the effective configuration and operation of the supply chain?

2.    What exploratory insights can be gained about the validity and practical applicability of using activity-based costing across supply chains based on a single case study?

These research questions stem from the observation that traditional intra-firm cost accounting tools are inadequate for inter-firm supply chain cost management due to the lack of standardized cost definitions, and that existing ABC models focus mainly on efficiency in dyadic partnerships rather than the broader supply chain context

 

Describe two main theories employed in this article.

The two main theoretical foundations employed in the article are:

1.    Activity-Based Costing (ABC): The article extensively builds on the theory and methodology of activity-based costing, which assigns costs to activities based on their use of resources, and then assigns these costs to products or services based on activity consumption. ABC has been widely discussed in manufacturing and production management contexts and has been applied to improve decision-making in areas like holding cost determination, transport, product design, modularity, and process reengineering. The article reflects on how ABC can be extended from intra-company to inter-firm supply chain cost management to reflect the total cost across multiple organizations in the supply chain.

2.    Supply Chain Management (SCM) and Process Integration Models: The article references supply chain management frameworks such as the SCOR (Supply Chain Operations Reference) model for standardized process mapping and analysis across companies. The integration of SCM theory focuses on collaborative process modeling, cost driver definition, and performance measurement across supply chain partners to enable better coordination and optimization for supply chain-wide efficiency rather than individual company efficiency. It draws on transaction cost economics and cooperation structures to emphasize how inter-firm relationships and cooperation types influence the applicability and design of inter-firm ABC systems.

Together, these theories underpin the development of a conceptual ABC model tailored for supply chain management that addresses both cost efficiency and effective supply chain configuration.

 

Describe 3 main claims of the article in terms of Toulmin's model of argument.

Using Toulmin's model of argument, which includes Claim, Data/Grounds, and Warrant (plus qualifiers, backing, and rebuttals where applicable), the article’s three main claims can be summarized as follows:

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Claim 1:

Traditional intra-firm cost accounting tools are insufficient for supply chain management, necessitating inter-firm activity-based costing approaches.

• Data/Grounds: Traditional cost accounting lacks standards for defining and composing costs across different firms, making cost data exchange and comparison infeasible. Increased outsourcing and supply chain complexity require coordination across multiple firms (Page 1).
• Warrant: Effective supply chain coordination and optimization require transparent and standardized cost information shared among all supply chain members, which intra-firm tools do not provide. Inter-firm ABC addresses this by enabling detailed cost assessments at every supply chain level.

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Claim 2:

Existing activity-based costing models for supply chains focus mainly on dyadic relationships or isolated processes and do not comprehensively address multi-firm supply chains or integration of different company accounting standards.

• Data/Grounds: Literature review shows most ABC models cover only two-tier partnerships or specific processes like logistics or product development, lacking in chain length, holistic process coverage, and standardization of accounting data (Table 1).
• Warrant: Without addressing multi-tier supply chains and collaborative cost standardization, models fail to support effective network-wide cost transparency and supply chain optimization, thus limiting their practical applicability.

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Claim 3:

A two-step, iterative activity-based costing model integrating standardized process mapping (e.g., SCOR) and collaborative cost driver definition can effectively support supply chain strategy configuration and operation.

• Data/Grounds: The authors propose a conceptual ABC model involving supply chain mapping during product design, followed by detailed cost calculations during production phases, tested and refined through a single case study of a multi-tier supply chain for façade components (Page 6).
• Warrant: This approach overcomes previous models’ limitations by addressing both the strategic configuration and operational cost evaluation stages, promoting iterative refinement and collaboration among supply chain partners for cost-efficient decisions.

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These claims are supported by literature review, conceptual development, and empirical case study evidence presented in the article.

 ** references:  a collection of management accounting notes; a useful generative AI tool./ also consider another generative AI tool.