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

W. Bruggeman (), P. Everaert (), S. R. Anderson and Yves Levant

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: 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.

Keywords: Conceptual Paper and Case Study; Logistics; Time-driven Activity-based Costing; time equations; mathematical model; complexity (search for similar items in EconPapers)
Pages: 51 pages
Date: 2005-09
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://wps-feb.ugent.be/Papers/wp_05_332.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:05/332

Access Statistics for this paper

More papers in Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Verhaeghe ().