Strategic Cost Management Don R. Hansen/ Maryanne M. Mowen

Strategic cost management is a framework for incorporating cost information in to decision made in support of an organization's strategic plan. SCM has a long run orientation, focusing on structural cost drivers or organizational cost drivers. SC integrate strategy and cost system in a meaningful way. Mainly in traditional cost management failed due to using board cost cutting; fail to recognize the difference in customers; information may be misleading for strategic plan, etc. SCM is required to be implemented due to channel proliferation, now customers have sufficient knowledge regarding market, pressure from financial market and emergence of product category killers. The value chain and activity based costing are main tools and techniques of SCM. Under value chain system costs are identified and analyzed for value producing activities and non-value producing activities are eliminated for cost reduction. Under activity based costing activity cost drivers are identified for assigning cost of activities to cost objectives and unnecessary activities are eliminated to reduce the cost of production /service. SCM can be applied for product costing, make or buy decisions, marketing channel decisions, product design decision and activity analysis. But for successful application of SCM proper methodology should be used, like where you need to be, deploy cost and resources to maximize customer's value and move with a bias of action, etc. The article is followed by a case study of ABC Limited (A Hypothetical bank) in which decision of closing the bank branch is changed due to using SCM instead of traditional cost accounting method. This is because under SCM an analysis of different segment of Bank's customer's and value has been followed. Keywords: cost, management, product, service, strategic. Strategic cost management is a framework for incorporating cost information in to decision made in support of an organization's strategic plan. SCM has a long run orientation, focusing on structural cost drivers or organizational cost drivers. SC integrate strategy and cost system in a meaningful way. Mainly in traditional cost management failed due to using board cost cutting; fail to recognize the difference in customers; information may be misleading for strategic plan, etc. SCM is required to be implemented due to channel proliferation, now customers have sufficient knowledge regarding market, pressure from financial market and emergence of product category killers. The value chain and activity based costing are main tools and techniques of SCM. Under value chain system costs are identified and analyzed for value producing activities and non-value producing activities are eliminated for cost reduction. Under activity based costing activity cost drivers are identified for assigning cost of activities to cost objectives and unnecessary activities are eliminated to reduce the cost of production /service. SCM can be applied for product costing, make or buy decisions, marketing channel decisions, product design decision and activity analysis. But for successful application of SCM proper methodology should be used, like where you need to be, deploy cost and resources to maximize customer's value and move with a bias of action, etc. The article is followed by a case study of ABC Limited (A Hypothetical bank) in which decision of closing the bank branch is changed due to using SCM instead of traditional cost accounting method. This is because under SCM an analysis of different segment of Bank's customer's and value has been followed. Keywords: cost, management, product, service, strategic.