Application of the TDABC model in the logistics process using different capacity cost rates
Abstract: The understanding of
logistics process in terms of costs and profitability is a complex task and
there is a need of more research and applied work on these issues. In this
research project, the concepts underlying Time-Driven Activity Based Costing
(TDABC) have been used in the context of logistics costs.
Design/methodology/approach: A Distribution Centre of wood and carpentry
related materials has been studied. A multidisciplinary team has been composed
to support the project including the researchers and three employees of the
company responsible for accounting, logistics and warehousing. The design and
implementation of the costing model asked for a deep understanding of the
different tasks and processes that should be considered. Accordingly, a TDABC
model for the logistics function was developed.
Findings: The cost model presented here is supported on a series of time
equations designed for the logistics function which allow the analysis and
discussion of costs and profitability of different cost objects namely,
products, clients, distribution channels, processes and activities. The cost of
unused capacity and the effectiveness of logistics processes are also
highlighted in this model.
Research limitations/implications: In a case study, results and
implications cannot be directly or immediately generalized. Nevertheless, the
proposed time equations and cost model can be easily adapted to explain other
types of logistics functions and it gives the foundations or other TDABC models
with more than one capacity cost rate.
Practical implications: The TDABC model developed in this case study can
be used in similar cases and as a basis for the analysis of logistics costs in
other logistics processes. Furthermore, managers can rely on the proposed
approach to analyze products’ profitability and logistics cost structure.
Originality/value: In this case, different capacity cost rates were
computed in order to reflect appropriately the logistics function which was presented
in two different processes: internal logistics and distribution. These
processes have specific resources allocated and should be measured differently.
This is in line with Kaplan and Anderson (2004, 2007) who have suggested a more
complex TDABC model with more than one capacity cost rate for these situations.
Keywords: Logistics Costs,
Time-Driven Activity Based Costing (TDABC), Capacity Costs, Capacity Cost Rate,
Case Study
Author: Paulo Afonso, Alex
Santana
Journal Code: jptindustrigg160053
