Collaboration in Practice: The Cost Reduction (Incremental Innovation) Waltz
It has become standard practice for OEMs to expect annual cost reductions from the suppliers to whom they have increasingly devolved production and design responsibilities, often by selectively borrowing target costing techniques originally developed in Japan. These techniques are designed to ensure the protection of supplier margins need not translate into wage reductions or even into immediate changes in the organization of production, given the numerous and imaginative ways in which suppliers and OEMs can jointly develop incremental innovations of product and process to reduce total costs. This chapter uses this idea of ‘cost reduction’ as a point of entry to explain the relational intertwining of incremental innovation and interfirm collaboration.
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