Controlling Case study

Topics: Management, Control engineering, Control theory Pages: 67 (17854 words) Published: October 5, 2013
Faculty of Business and Economics

Management control of supplier relationships in manufacturing: A case study in the automotive industry
Eli Pernot and Filip Roodhooft

DEPARTMENT OF ACCOUNTANCY, FINANCE AND INSURANCE (AFI)

AFI_0717

Management control of supplier relationships in manufacturing: A case study in the automotive industry

Eli Pernot*
Aspirant of the Funds for Scientific Research Flanders
Katholieke Universiteit Leuven
Naamsestraat 69
3000 Leuven - Belgium
E-mail: [email protected]

and

Filip Roodhooft
Katholieke Universiteit Leuven &
Vlerick Leuven Gent Management School
Naamsestraat 69
3000 Leuven - Belgium
E-mail: [email protected]

*

Corresponding author

Management control of supplier relationships in manufacturing: A case study in the automotive industry

Abstract
This paper studies management control design of supplier relationships in manufacturing, a supply chain phase currently under-explored. Compared to supplier relations during procurement and R&D, which research found to be governed by a combination of formal and informal controls, supplier relations in manufacturing are more formal, so that they could be governed by more formal and less informal controls. To refine the management control system and influencing contingencies, we propose a theoretical framework specifically adapted for the manufacturing stage. This framework is investigated by an in depth case study of the supplier management control of a Volvo Cars production facility. We identify three types of suppliers visualizing the associations in the framework and illustrating the framework’s explicative power in (automotive) manufacturing. Furthermore, the case contradicts that supplier relations in the manufacturing phase are governed by little informal control, because the automaker highly values the role of trust building and social pressure. Most notably, a structured supplier team functions as a clan and establishes informal control among participating suppliers, which strengthens the automaker’s control on dyadic supplier relations.

Keywords: Management control; Supplier relationships; Manufacturing; Contingency theory; Case research; Automotive

2

1. Introduction
In the current economic environment, characterised by globalisation and enhanced levels of competition, companies require an effective supply chain with inter-organizational relationships (IORs) to strive for sustainable competitive advantage. Not surprisingly, studies show that IORs have a high potential impact on organization performance (e.g. Anderson & Dekker, 2005). Literature, however, also argues that many IORs do not provide the expected benefits and are often terminated because of managing difficulties (Ireland, Hitt & Vaidynanath, 2002). Academics often propose that lack of coordination and opportunistic behaviour of partners are the two main reasons for the relatively high relationship failure rate (e.g. Dekker, 2004). Hence, management control systems (MCSs) are argued to play a critical role in preventing such failure, by establishing governance mechanisms to control the relationship (Ireland et al., 2002). The fundamental goal of MCSs is to influence decision making in attaining strategic objectives (Nixon & Burns, 2005). In an inter-organizational setting, this implies creating bilateral incentives to pursue mutual goals. Already in the mid-nineties, scholars started calling for more attention for this topic (e.g. Hopwood, 1996; Otley, 1994), and have not stopped since (e.g. van der Meer-Kooistra & Vosselman, 2006). Consequently, inter-organisational MCSs have been studied from several angles, including outsourcing (e.g. Anderson, Glenn & Sedatole, 2000), inter-organizational cost management (e.g. Cooper & Slagmulder, 2004), partnerships (e.g. Seal, Berry, Cullen, Dunlop & Ahmed, 1999), strategic alliances (e.g. Dekker 2004), networks (e.g. Kajüter & Kulmala, 2005) and joint ventures...

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