Activity‐Based Costing and Management applied in a hybrid Decision Support System for order management

This article introduces a new Cost Management and Decision Support System (DSS) applicable to Order Management. This model is better fit and compatible with today's competitive, and constantly changing, business environment. The presented Profitable‐To‐Promise (PTP) approach is a novel modeling approach which integrates System Dynamics (SD) simulation with Mixed‐Integer Programming (MIP). This Order Management model incorporates Activity‐Based Costing and Management (ABC/M) as a link to merge the two models, MIP and SD. This combination is introduced as a hybrid Decision Support System. Such a system can evaluate the profitability of each Order Fulfillment policy and generate valuable cost information. Unlike existing optimization‐based DSS models, the presented hybrid modeling approach can perform on‐time cost analysis. This will lead to better business decisions based on the updated information.