ABSTRACT
Interorganizational kaizen costing starts when the buyer transmits the cost-reduction pressure it faces in the marketplace to its suppliers by telling them how rapidly it expects their selling prices to fall over time. Like many interorganizational cost management techniques, kaizen costing interventions can be initiated by either the buyer or the supplier. For buyer-led interventions, the buyer is either augmenting the cost-reduction capabilities of the supplier or giving it access to cost-reduction opportunities that it cannot access on its own. In supplier-led initiatives, the supplier finds new ways to manufacture components that lead to lower overall costs in the supply chain. The interactions between buyers and suppliers that lead to effective interorganizational kaizen costing during manufacturing rely heavily on the stable, cooperative, and mutually beneficial nature of lean buyer-supplier relations. The need for cooperation lies at the heart of interorganizational cost management.
