Incentives for Cost Transparency Implementation: A Framework from an Action Research

Abstract

The aim of this research is to develop a framework to support cost transparency implementation. Though cost transparency is a well-known practice in supply chain management literature, there is a lack of guidelines supporting managers to effectively implement it. The study has been developed using empirical findings from an action research, the authors conducted in close collaboration with an Italian manufacturer of modular kitchens and 19 suppliers. This research discusses a methodology to support (1) the selection of those customer–supplier relationships worth being developed into cost transparency, and (2) the identification, for each of these relationships, of appropriate forms of actions/incentives to stimulate suppliers to share cost information. The key outcome lies in the theoretical framework emerging from on-field empirical evidences supporting managers in cost transparency implementation. The proposed model fills some gaps found in supply chain literature and explicitly addresses an unusual variable to be considered in the suppliers’ selection phase: the buyer’s interest. From a managerial point of view our model provides a framework buying companies use to select and classify the subset of suppliers willing and worth being engaged in cost transparency initiatives, and to identify appropriate actions to implement cost transparency. The findings of a single action research cannot be generalized to the overall population of manufacturing entities. Large sample data collection efforts will be needed to test the proposed findings and make our prescriptions more robust. Additionally, the proposed model could be tested in other industries outside the modular kitchen industry.