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Modeling Logistics Costs using Time-Driven ABC: A Case in a Distribution Company

  • W. BRUGGEMAN

    ()

  • P. EVERAERT

    ()

  • S. R. ANDERSON
  • Y. LEVANT
Registered author(s):

    Purpose: The purpose of this paper is to study whether time-driven Activity-based Costing (ABC) is more appropriate to capture the complexity of logistics transactions than traditional ABC. Methodology: This paper explores the method of time-driven ABC and presents the results of a case study at a distribution company. Findings: The case shows that a traditional ABC was not appropriate. Almost 60% of the activities contained more than one subtask, with different time drivers. Ignoring this complexity resulted in a misallocation of 54% of costs. Splitting-up all the subtasks resulted in a traditional ABC model that was too complex. Contrary, the time-driven ABC model captured the full complexity of the logistics transactions through time equations that employ multiple time drivers. Research implications: This paper formulates the underlying mathematical model of timedriven ABC, leading to a better understanding of the time equations. Different types of complexities in logistics were identified in the case. Practical implications: The study explains the technique of time-driven ABC and provides some real company examples of time equations in logistics. Value of the paper: This is one of the first papers on time-driven ABC in a European context. The mathematical representation allows to a better understanding of this new costing technique and provides a new methodology to model complexity of logistics activities.

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    File URL: http://wps-feb.ugent.be/Papers/wp_05_332.pdf
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    Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 05/332.

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    Length: 51 pages
    Date of creation: Sep 2005
    Date of revision:
    Handle: RePEc:rug:rugwps:05/332
    Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
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    Web page: http://www.ugent.be/eb

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