Management Accounting Research 14 (2003) 1–23
Value chain analysis in interfirm relationships: a field study Henri C. Dekker∗
Amsterdam Research Center in Accounting (ARCA), Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands
Received 20 October 2001; accepted 4 December 2002
Interfirm relationships introduce new challenges for management accounting. One such challenge is the provision of information for the coordination and optimization of activities across firms in a value chain. According to the literature, a value chain analysis (VCA) is a useful tool to meet this challenge. However, little empirical evidence has been published on the use of this analysis in practice. This paper presents a case study on the use of an activity-based costing (ABC) model by a large UK retail firm and a group of suppliers for supporting their supply chain management (SCM) practices. This cost model was based on the principles of value chain analysis and integrated cost information across the supply chain. It was used to improve supply chain operations by performing benchmark analyses, strategic what-if analyses and cost monitoring. An interpretation of the case findings is provided using organizational theory and transaction cost economics.
© 2003 Elsevier Science Ltd. All rights reserved.
Keywords: Interfirm relationships; Control; Value chain analysis; Case study
Interfirm relationships and networks are an indispensable part of business relationships, yet in the past they have gained little attention on the agenda of management accounting researchers. Only recently more attention towards this issue has been called for in the accounting literature (Hopwood, 1996; Munday, 1992; Otley, 1994; Scapens and Bromwich, 2001). Due to the recognition of the implications for organizational design and management control within and between organizations, the topic currently is drawing increasing research interest. Specific issues addressed by the accounting literature are the make-or-buy decision and outsourcing of activities (Anderson et al., 2000; Gietzman, 1996; Mouritsen et al., 2001; Van der Meer-Kooistra and Vosselman, 2000; Widener and Selto, 1999), inter-organizational cost management (Carr and Ng, 1995; Cooper and Slagmulder, 1999), supply chain relationships (Frances ∗
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and Garnsey, 1996; Ittner et al., 1999; Seal et al., 1999), alliances and business networks (Dekker, 2003; Tomkins, 2001) and value chain analysis (VCA) (Shank, 1989; Shank and Govindarajan, 1992, 1993).
This paper focuses on the use of value chain analysis in buyer–supplier relationships for coordinating supply chain interdependence. In the management accounting literature the VCA is regarded as a core analytical tool of strategic management accounting (SMA). This method to analyze the value chain for strategic improvement was introduced by Porter (1985) and in the management accounting literature further developed by Shank (1989) and Shank and Govindarajan (1992, 1993). The core idea of the analysis is to break up “the chain of activities that runs from basic raw materials to end-use customers into strategically relevant segments in order to understand the behavior of costs and the sources of differentiation” (Shank and Govindarajan, 1992, p. 180). The development of VCA in the literature, however, has primarily been conceptual and anecdotal, and mainly from an intrafirm perspective. Little empirical evidence of its use in practice is available, which has been a reason for criticism on the relevance of the concept for practice (Lord, 1996). In addition, although a VCA conceptually spans the entire value chain,...
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