Strategic cost management across boundaries of firms

In recent years, increasing attention has been placed on how purchasing strategies may contribute to the efficiency of firms. In this paper, a case study illustrates how one firm implemented a supplier base reduction to enable a high involvement strategy in relation to appointed key suppliers. The effects of this change in purchasing strategy were extensive cost rationalisations. The main change in this process was a redefinition of the unit of analysis from individual transactions to buyer-supplier relationships. However, the costs in the relationship are driven not only by internal factors on the two sides of the relationship but also by how the focal relationship relates to other relationships. Therefore, the ways in which the costs are affected by other parties, such as the supplier's supplier, the supplier's other customers, the customer's other suppliers, and the customer's customers, need to be included in the analysis. (C) 2003 Elsevier Science Inc. All rights reserved.