Farmers run the risk of failing to maximise their incomes because of a lack of understanding of their own costs. This issue is further compounded by the food retailers’ lack of understanding of the farmers’ perspective, and the short-termism forced on farmers as a direct result of the poor co-ordination throughout the agri-food supply chain. In a report launched through CIMA, the Chartered Institute of Management Accountants, addresses the issues surrounding cost management faced by the agri-food sector and suggests that a system based upon Target Cost Management (TCM) could be a solution.
‘Gate To Plate’ (see www.cimaglobal.com/gatetoplatereport) draws upon international research and a series of CIMA focus groups. The report addresses the inherent and sector specific barriers farmers face when it comes to implementing a collaborative costing system and also considers food security and wastage.
The report concludes that strategic management accountancy, and approaches such as Target Cost Management, have the potential to address a number of these issues, to encourage visibility of costs throughout the supply chain and better understanding between participants.
Naomi Smith, Research and Product Development Specialist at CIMA, comments:
“Farmers simply haven’t focused on cost management before. This is partly because of a reliance on subsidies which has meant they frequently don’t understand their costs. This is putting them at a severe disadvantage – especially when dealing with food retailers which have a professional and sophisticated understanding of their own costing systems.