The Transformation from Traditional Management Systems to Supply Chain Management and Customer Relationship Management Systems

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Executive Summary
Traditional management systems rely on volume to allocate overhead. Indirect cost is allocated to items such as direct labor hours, units produced or the production of machine hours. Using only single cost drivers, potentially distorts cost estimates especially when dealing with high volume production. The implementation of Activity Based Costing serves as a solution to this downside in traditional systems. ABC utilizes various cost drivers both volume and non-volume related to estimate costs, providing more accurate estimations. Although this method benefits managers in providing the information needed for decision making and improving efficiency of business processes, it still is only limited to the internal aspect of the organization. Lack of technology within these systems caused limited coordination with the supply chain. According to Jiambalvo (2007) managerial accounting has to do with providing information to plan and control operations to make business decisions. He further states that understanding managerial accounting is a part of understanding the impact of information technology on competition, business processes, and the interactions companies have with suppliers and customers. With the utilization of technological advances, other management systems such as Supply Chain Management(SCM) and Customer Relationship Management (CRM) are implemented to integrate all organizations involved the supply chain that results in firms gaining a competitive advantage, adding value and improving efficiency to business processes, increasing profitability while reducing overall costs, and achieving customer satisfaction. With the limitations that traditional management systems present and the potential benefits of SCM and CRM systems, it would be beneficial for organizations to make the transition that would place them in more favorable operating positions in the global market. Gaining a competitive advantage through improved businesses processes,...
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