ABSTRACT
Interorganizational cost management is a disciplined approach to managing costs through the cooperative actions of firms in a supplier network. The objective of interorganizational cost management programs is for firms to find lower-cost solutions, through coordinated actions with their buyers and suppliers, than would be possible if the firms attempted to reduce costs independently. Interorganizational cost management, to be effective, must be a highly disciplined process that operates on two dimensions—network and product. The first way to apply interorganizational cost management is during product development. Here, interorganizational cost management is a structured approach to coordinating the product development activities of firms in supplier networks so that the products and components those firms produce can be manufactured at their target costs. Additional opportunities for cost reduction occur during the manufacturing phase. The final application of interorganizational cost management occurs when buyers and suppliers cooperate to find ways to make the interfaces between their firms more efficient.
