OBA, IOCM and Their Impact on Supplier Relationship Satisfaction: Inter-Organisation Cost Management and Open-Book Accounting Are Two of the Tools Being Employed by Management Accountants to Support Supply Chain Cost Information, as Well as Share and Control Cost Accounting Information

By Moller, Klaus; Windolph, Melanie | Financial Management (UK), October 2012 | Go to article overview

OBA, IOCM and Their Impact on Supplier Relationship Satisfaction: Inter-Organisation Cost Management and Open-Book Accounting Are Two of the Tools Being Employed by Management Accountants to Support Supply Chain Cost Information, as Well as Share and Control Cost Accounting Information


Moller, Klaus, Windolph, Melanie, Financial Management (UK)


Nowadays, supply chain optimisations usually go beyond organisational borders. To gain a competitive advantage, firms are increasingly focusing on core competencies, while outsourcing their non-core functions and activities. Consequently, organisational success has become highly dependent on the efficiency and effectiveness of their supply networks (Cooper and Slagmulder, 1999; Kulrnala et al, 2002). To address the emerging issues in supply chain cost management, management accountants needed to widen the scope of cost and management accounting. Techniques such as inter-organisational cost management (I0CM) and open-book accounting (OBA) have evolved to support the availability and effective use of supply chain (cost) information, as well as the sharing and control of relevant cost accounting information

Both IOCM and OBA are inter-firm cost management techniques that cross the organisational boundary between buyer and supplier to ensure better control of the product and supplier costs. For management accountants, these techniques are important, enabling them to expand their view on optimising costs and move the focus from their own organisation towards a more holistic view of the whole supply chain. By doing so, management accountants may avoid partial-optimal solutions in favour of an overall cost-optimal supply chain design (Cooper and Slagmulder, 1999).

While IOCM refers to firms' joint efforts to reduce costs, OBA involves the exchange and/or disclosure of cost-relevant data to the partner firm. Therefore, the degree and quality of cost-data disclosure differ widely. OBA is frequently used by management accountants, not only for cost-data disclosure, but also for the exchange of cost-relevant information, such as sales forecasts (Mouritsen et al, 2001). Similarly, OBA may refer to the disclosure of relatively unspecific cost data, as well as to the direct, unmodified disclosure of detailed cost data from the internal accounting system (Axelsson et al, 2002). In contrast, IOCM has been specified as "a structured approach to coordinate the activities of firms in a supplier network so that total costs in the network are reduced" (Cooper and Slagmulder, 1999, pp. 145-146). Thus, IOCM involves a widening of the buyer's standard cost management perspective beyond the buyer's cost accounting border.

Using this method of transparent collaboration, management accountants seek to identify and realise mutual cost-saving opportunities by increasing coordinated action between the buyer and the supplier. In many cases, this is only possible if cost data is disclosed (Cooper and Slag-mulder, 1999; Kajueter and Kulmala, 2005). Generally speaking, the more transparent and open the information exchange is between partner firms, the higher the cost-saving opportunities.

IOCM can be put into operation during three supply chain stages: product development, product manufacturing and at the buyer-supplier interface. As original equipment manufacturers (OEMs) increasingly outsource the R&D development processes of main product components, much attention has been focused on product development. Thereby, IOCM offers four techniques to management accountants to better control costs: chained target costing, functionality-price-quality tradeoff, inter-organisational cost investigation, and concurrent cost management (Axelsson et al, 2002; Cooper and Slagmulder, 1999; Cooper and Yoshikawa. 1994):

* Chained target costing (CTC): In a first step, the maximum price that can be demanded from the market must be defined. Thereafter, the potential revenue is divided according to the product component contributions to the various supply chain members. Each member must then find their own way to adapt their development and manufacturing costs to stay below their dedicated target price without interfering in the product design. Compared to the other techniques, CTC does not require an intra-organisational teamwork of product designers and exchange of technical product specification. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

OBA, IOCM and Their Impact on Supplier Relationship Satisfaction: Inter-Organisation Cost Management and Open-Book Accounting Are Two of the Tools Being Employed by Management Accountants to Support Supply Chain Cost Information, as Well as Share and Control Cost Accounting Information
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.