In today’s complex and competitive business environment, the relevance of traditional costing approaches relating to managing product profitability is often questioned by marketers, logisticians, and management accountants. Target costing adopts a customer-focused perspective for establishing a product’s target price to generate value for the customer and deliver a significant return for the organization.
Enhanced organizational financial performance can be achieved if decision makers take an interorganizational perspective to engineer costs out of their supply chain operation. Adopting target costing requires organizations to take a different perspective on their supply chain. A holistic approach needs to be taken to cost management across a product’s entire supply chain. Today, it is essential that organizations develop relationships with internal and external partners that can facilitate the exchange of information, which can in turn deliver enhanced value for all collaborating partners and returns for their stakeholders.
Using target costing in conjunction with business process reengineering can be applied within an organization to manage costs. These relationships include the business-to-customer interface, internal cross-functional relationships, and external business-to-business relationships between a company’s suppliers.
However, the potential cost synergies that target costing can contribute will only be achieved if collaborating partners, both internal and external, understand the importance of exchanging knowledge, expertise, and experiences. Aligning processes and systems is important, but developing supply chain relationships based on trust will generate value and returns for all collaborating partners.
So how do you deliver value to your customers and improve your company’s overall financial performance? The Accenture Academy course Adopting Target Costing to Generate Value and Deliver Returns
will help you to understand the positive contribution that interorganizational costing approaches, such as target costing, will have on the financial performance of your organization, your customers, and your suppliers.