Supply Chain Target Costing — An Apparel Industry Case Study

The increasing interest in supply chain management needs the development of tools that help companies coordinate their activities starting at the beginning of the product design process, such as target costing. While the integration of suppliers into the target costing process has long been established, it mainly has been limited to setting cost targets to suppliers. The costs of building and maintaining relationships with suppliers have not been taken into account. Hence, it is necessary to develop an approach that integrates target costing and supply chain costing. This paper provides a short summary of target costing methodology and reviews the literature on its connections to supply chain management. Then, the three cost levels of supply chain costing, namely direct, activity-based and transaction costs are integrated into target costing. Finally, a case study from the apparel industry is presented to illustrate the concept of supply chain target costing.