From hindsight to foresight in strategic cost management
Abstract
Purpose
To show how we can turn cost management practices around and look forward, concentrate on managing risks and costs before they occur.
Design/methodology/approach
The paper expands my PhD work, which was a synthesis of three major ideas (life‐cycle costing, activity‐based costing and Monte Carlo methods), design of an approach and testing the approach in many real‐life cases. This paper is to show how this method adds utility in strategic cost management.
Findings
My research so far shows that the approach adds the intended value in cost management in general and in strategic cost management in particular.
Research limitations/implications
Since the method has been tested in many settings and rests on well‐tested theory serious limitations are avoided. However, future research should focus on how the method can be simplified and applied in budgeting, i.e. become more operational/tactical.
Practical implications
The main practical implication is that cost management practices need to become less historically oriented and more forward looking so that costs can be eliminated and not just reported. How this can be achieved is shown in practical application.
Originality/value
Both researchers and practitioners can benefit from this paper in that they can see how the merger of Monte Carlo methods, life‐cycle costing and activity‐based costing reduce the need for accurate numbers and improve the quality of cost management in general.
Keywords
Citation
Emblemsvåg, J. (2006), "From hindsight to foresight in strategic cost management", Handbook of Business Strategy, Vol. 7 No. 1, pp. 179-186. https://doi.org/10.1108/10775730610618792
Publisher
:Emerald Group Publishing Limited
Copyright © 2006, Emerald Group Publishing Limited