Accounting in Networks by Håkansson Håkan;Kraus Kalle;Lind Johnny;

Author:Håkansson, Håkan;Kraus, Kalle;Lind, Johnny;
Language: eng
Format: epub
Tags: Economics, Finance, Business & Industry
Publisher: Taylor & Francis Group
Published: 2010-04-15T00:00:00+00:00

The Structural Thread

A second line of research concerns structural studies directed at an academic audience (Carr and Ng 1995; Gietzmann 1996; Ellram 2000, 2002, 2006; Cooper and Slagmulder 2004), where a central issue is the empirical and theoretical investigation of supplier dyads. An early example is that of Gietzmann (1996). Studying Japanese companies and drawing on agency theory and transaction cost economics, Gietzmann proposes three types of supplier dyads. The first of these is for standard off-the-shelf components. Without customisation, interaction is minimal and traditional accounting involving price comparisons is suitable. However, when supplier dyads include product development, price alone is inadequate and information sharing needs to be more sophisticated and intense. The second and third types, therefore, involve a higher degree of joint design. Complex components are developed in “design approved” relationships, which are long-term ones characterised by high levels of trust. Even though Gietzmann (1996) is often overlooked within the target costing literature, he (p. 619) particularly emphasises the importance of target costing and value engineering: “Of particular interest is DA [drawings approved] suppliers, which have been less prevalent in Europe and the USA … by using value engineering and target costing procedures, the assembler can forgo much of the development cost of component parts for new vehicle models while still maintaining an influence on final specification and cost.”

A similar, but more detailed, study is provided by Cooper and Slagmulder (2004). When they, too, used transaction cost economics, they found that supplier dyads are linked to target costing clusters. Starting with standard components, a first cluster is called “Functional-PriceQuality Tradeoffs”. This cluster involves a modest interaction which is associated with a fairly restricted ability to affect the design. Typically, costs are reduced by just 0–5 per cent. Continuing with more complex components, major suppliers use “Inter-organizational Cost Investigations” (Cooper and Slagmulder 2004). Here, the interaction is more intense and there is a greater scope for development. For example, a close relationship is established between the product design and the production processes, with the result that costs are typically reduced by 5–10 per cent. Finally, suppliers can be considered to be family members which belong to a cluster called “Concurrent Cost Management” (CCM). Family members are long-term suppliers characterised by high levels of interaction and trust. Typically, costs are reduced by 10–15 per cent. Cooper and Slagmulder (2004) describe the usage of CCM by the Japanese manufacturer Komatsu and its supplier Toyo. The challenge was enormous: to increase product capacity by 40 per cent, while only allowing costs to increase by 18 per cent. To succeed, Toyo, a single-source supplier, was invited to participate at a stage when it was possible for the technical design to be changed. In contrast to situations exemplifying lower levels of involvement, Komatsu set a target cost for the entire cooling system and then let Toyo decide the target cost for individual components. Because of the long-term focus, both parties shared strategic information about future products and borrowed key resources from one another. Cooper

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