APPLYING SUPPLY CHAIN COSTING TO ACHIEVE COMPETITIVE ADVANTAGE

Abstract

Purpose: This paper aims to investigate the impact of supply chain costing on obtaining competitive advantage in industrial economic units by considering Mas Iraq Cement Company as a practical case. The company is one of the five cement producing firms in Sulaymaniyah Governorate, Kurdistan Region of Iraq. Approach: The research adopts a deductive approach as far as the theoretical aspect is concerned as it uses the accounting, cost management and strategic management literature about supply chain effectiveness and competitive advantage. While as far as the applied aspect is concerned, it utilizes an inductive approach along with the analytical case study approach as it is based on the practical cost and financial data of Mas Company during the year 2023. In reclassifying the supply chain cost of the company on an activity basis, the cost items of the supply chain are arranged according to ten activities in two main categories. Four activities are considered as the main activities: procurement, production, storage and marketing. On the other hand, there are six other activities which are regarded as support activities: accounting, legal affairs, internal control and audit, planning and follow-up, the technical department/operational quality and the information technology. All the cost items are classified into effective (value adding) or not effective (not value adding). Results: Out of the total supply chain cost of ID 389,950,106,827 (ID = Iraqi Dinar) of the company, ID 345,992,792,200 (88.7%) are effective while ID 43,957,314,627 (11.3%) are not effective. As far as marketing and procurement are concerned, they recorded the highest percentage of non-effective cost: 35.6% and 20.7% respectively. While as far as the most efficient activities are concerned, they are the technical department/operational quality (0.4%) and the accounting (2.5%). The materials supplies are the dominating cost factor that makes 68.9% of the total cost of the activities. However, the production activity alone absorbs 87.9% of the total cost of the ten activities. Implications: Activity cost analysis provides Mas Company's management with an effective cost rationalization strategy especially the marketing and procurement activities that target non-effective cost without reducing the cost related to the quality and customer related activities. Originality/Value: It is among the few applied studies in Iraqi cement industry that reclassify the supply chain cost on an activity basis in order to obtain competitive advantage.