Yes, yes, I know. In cybertime, 1993 is ancient history. But in management time, consider Peter Drucker's staying power.

In my humble opinion, this book is much like a voice crying in the wilderness. All the talk and attention is on activity based costing (ABC). All fine and good, but what if your COSTS are BASED on the wrong ACTIVITIES? It's certainly not difficult to understand why the concept hasn't caught on. In this age of silver bullet fixes, one-minute solutions, and leadership by walking around, I can see why simple ABCs are much more compelling.

Strategic Cost Management -- Definitely not your typical bed-time novel. This book is best read with pen/pencil and calculator.

An example: Chapter 12, entitled "Using and Abusing the ABC Concept - A Case Study." The case is a Siemens AG plant, Electric Motor Works (EMW) in Germany, using information taken from two published case studies of the plant. What the authors conclude is that a conventional product costing system (i.e. ABC) yields useful management information when a product line is relatively simple, i.e. when most products use the same mix of factory resources. However, when the product line becomes differentiated by complexity, reliance on ABC will often mis-cue managers by masking the true margins of different products. Cross-subsidization of apparently-profitable

The authors contrast traditional cost management vs. strategic cost management practices. One particularly rousing observation is the logical outcome from the commonly-accepted use of overhead variance to evaluate performance. What typically happens when management focuses attention (particularly compensation attention) on overhead costs? Production volume goes up to reduce per-unit overhead costs, i.e. make the numbers.

What about quality level...or market demand? Nope. Not important. Just make the numbers.

What eventually happens to the organization? Major re-work costs, increased scrap volume and cost of disposal, bloated inventories, lost investment opportunities, adoption of the wrong technologies...

If strategic issues don't enter into the cost equation and your boss hits the roof about the unfavorable "numbers," it's probably time to start some serious networking outside your organization. If you are the boss, study this book.