The article by Jan Jansen  True Costing in Logistics & Supply Chain Management: How do we make decisions based on True Economic Trade-Offs (T-ETOs)? (free .pdf)

Published: 2024

Journal: Proceedings of London International Conferences

Summary of the Article

The article argues that logistics and supply chain decisions are still dominated by traditional cost-price accounting, which ignores externalities—the social and environmental impacts of business activities. As a result, companies make decisions that appear financially optimal but are economically incomplete.

The author proposes True Costing and True Economic Trade-Offs (T‑ETOs) as a more comprehensive decision-making framework. This approach integrates traditional financial costs with monetised externalities using shadow pricing and Lagrange multipliers (λ). Several case studies illustrate how including external costs can significantly change the perceived attractiveness of logistics choices, such as selecting between diesel and electric truck-tractors.

Key Points

1. Traditional Costing Is Incomplete

2. True Costing Integrates Externalities

3. Monetisation of Externalities

4. True Economic Trade-Offs (T‑ETOs)

5. Case Studies

• The article references multiple case studies from the past decade.
• These illustrate how including externalities can reverse or significantly alter optimal decisions.

6. Key Challenge: Measurability

• The biggest barrier is making external effects measurable.
• Without reliable data, companies cannot confidently integrate externalities into decisions.

7. Implications for Logistics & Supply Chain Management

• True Costing supports:
  • Sustainability
  • Circularity
  • Long-term value creation
• It aligns with emerging frameworks such as:
  • Integrated Profit & Loss
  • True Price methodologies
  • ESG and double materiality reporting

Making-decisions framework based on True Economic Trade-Offs

Decision Problem

      ▼

Traditional Costs (Internal)

      ▼

External Costs (Environmental + Social)

      ▼

Monetisation (Shadow Prices + λ)

      ▼

True Costing (Integrated)

      ▼

True Economic Trade‑Offs (T‑ETOs)

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Final Decision

How to Cite (APA)

Jansen, J. (2024). True Costing in Logistics & Supply Chain Management: How do we make decisions based on True Economic Trade-Offs (T-ETOs)?. Proceedings of London International Conferences, (10), 15–48. https://doi.org/10.31039/plic.2024.10.217

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