Description
Pro-active supply chain practices in manufacturing have been affected by general features of institutionalized
reflexivity whereby production activities are disembedded by firms whose actions have been enabled by abstract systems
such as accounting and quality management. A new consciousness of the centrality of the supply chain creates
increased tensions between the trust constructed through abstract systems and the risk associated with the increased
reflexivity of supply chain actors. Eschewing traditional distinctions in accounting between the inside and outside of the
organization, a structuration approach shows how inter-firm transactions and accounting may be analysed through the
duality of structure. The theory is explored through a case of a supply chain initiative in UK electronics manufacturing.
The case company set up the cost management group (CMG) which evolved into a semi-autonomous team dominated
by accountants. Drawing on the wider institutionalization of supply chain practices involving outsourcing and partnering
projects, the CMG became a locus of institutionalized reflexivity. As an important source of financial and cost
information in supply chains, the accounting practices espoused by the CMG contributed to both dis- and re-embedding
processes.
Disembedding the supply chain: institutionalized re?exivity
and inter-?rm accounting
Willie Seal
a,
*, Anthony Berry
b
, John Cullen
b
a
Department of Accounting, Finance and Management, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, UK
b
School of Business and Finance, She?eld Hallam University, She?eld S1 1WB, UK
Abstract
Pro-active supply chain practices in manufacturing have been a?ected by general features of institutionalized
re?exivity whereby production activities are disembedded by ?rms whose actions have been enabled by abstract sys-
tems such as accounting and quality management. A new consciousness of the centrality of the supply chain creates
increased tensions between the trust constructed through abstract systems and the risk associated with the increased
re?exivity of supply chain actors. Eschewing traditional distinctions in accounting between the inside and outside of the
organization, a structuration approach shows how inter-?rm transactions and accounting may be analysed through the
duality of structure. The theory is explored through a case of a supply chain initiative in UK electronics manufacturing.
The case company set up the cost management group (CMG) which evolved into a semi-autonomous team dominated
by accountants. Drawing on the wider institutionalization of supply chain practices involving outsourcing and part-
nering projects, the CMG became a locus of institutionalized re?exivity. As an important source of ?nancial and cost
information in supply chains, the accounting practices espoused by the CMG contributed to both dis- and re-embed-
ding processes.
#2003 Elsevier Ltd. All rights reserved.
Introduction
Accounting is implicated in two trends of con-
temporary industrial organization. One trend is
driven by calls on managers to strive for greater
levels of outsourcing and corporate unbundling
(e.g. Hagel & Singer, 1999) while the other urges
managers to develop closer relations with inde-
pendently owned suppliers through strategic alli-
ances or partnership sourcing (e.g. Lamming, 1993).
The conjunction between these two seemingly
contradictory trends is that, while activities are
being moved outside the ?rm, there is often an
expectation that close links will still be maintained
through contractual and other non-hierarchical
mechanisms. Techniques of inter-?rm accounting
such as target costing and open book accounting
are portrayed as enabling ?rms to maintain con-
trol over outsourced activities (e.g. Mouritsen,
Hansen, & Hansen, 2001).
We submit that a fruitful way of understanding
inter-?rm accounting is to see it as involved in the
wider changes in the social relations of production
that are characteristic of modernity (Giddens,
1991a, 1991b). According to Giddens, one of the
features of modernity is disembedding which he
de?nes as ‘the ‘‘lifting out’’ of social relations from
0361-3682/03/$ - see front matter # 2003 Elsevier Ltd. All rights reserved.
doi:10.1016/S0361-3682(02)00055-7
Accounting, Organizations and Society 29 (2004) 73–92
www.elsevier.com/locate/aos
* Corresponding author. Fax: +44-1206-873598.
E-mail address: [email protected] (W. Seal).
local contexts of interaction and their restructur-
ing across inde?nite spans of time-space’ (1991a,
p. 21). Relating these concepts to industrial orga-
nization, we submit that if corporate unbundling
and outsourcing often involve disembedding, then
strategic alliances and partnership sourcing may
be interpreted as attempts to reembed production
relations. By focusing on the possibilities for
reembedding relations by synthesizing the institu-
tionalist and managerialist approaches,
1
we sub-
mit that inter-?rm relations may be analysed as
the outcome of a process of interaction between
?rms’ strategies and the institutional environment
of their industries. In constructing their supply
chains, ?rms may both draw on existing abstract
systems and build their own more localized versions.
In this paper we focus speci?cally on inter-?rm
accounting as an expert system that is produced and
re-produced through the interactions between sup-
ply chain actors and wider institutional in?uences.
Although both the academic and practitioner
literatures on supply chains have grown quickly in
recent years, there are still some major de?-
ciencies. First, there is a disjunction between a
managerialist perspective with its emphasis on
action by one party, predominantly the customer
?rm, and an institutionalist approach, which is
more concerned with the wider institutional ante-
cedents of successful inter-?rm collaboration. As
examples of the latter approach, research on the
nature of the legal framework and on networking
organizations such as industrial associations has
been used to explain international di?erences in
inter-?rm relations (Amin & Thrift, 1994; Lane,
1997; Lane & Bachmann, 1996). In the contrasting
managerialist view, dominant ?rms adopt deliber-
ate strategies of partnership and dependence
among their suppliers (Akacum & Dale, 1995;
Dyer & Ouchi, 1993; Kanter, 1994; Kearney, 1995;
Lamming, 1993; Lere & Saraph, 1995; Mohr &
Spekman, 1994; Rajagopal & Bernard, 1993;
Rognes, 1995; Venkatesan, 1992). Yet the man-
agerialist approaches, which often draw on supply
chain exemplars such as Toyota, have not always
recognized the unique historical and institutional
circumstances of 1950s Japan that forced the
development of the Toyota model (Edwards &
Samimi, 1997). More generally, as Willmott poin-
ted out, there is a ‘hiatus’ between behavioural and
institutional accounts where studies ‘abstract the
activities of individual managers from the institu-
tional arrangements in and through which they act’
(1987, p. 249). Arguably, institutional arrangements
are even more important in supply chains where
managerial action takes place outside or between
conventional hierarchical organizational structures.
The second, and related de?ciency, is portrayed
by confusion over the roles of trust and control in
inter-?rm relations. In the managerialist literature,
the nurture of trust in business relations is seen as
not only desirable but as a feasible strategy irre-
spective of the institutional environment of the
supply chain. In the institutionalist literature, a
growing interest in the ‘institutional production of
trust’ (Gambetta, 1988; Zucker, 1986) has led on
to an explicit consideration of the relationship
between trust and power in inter-?rm relations.
Drawing on the neo-functional analysis of Luh-
mann (1979), trust and power/control are pre-
sented as functional alternatives (see, e.g.
Bachmann, 2001). Neofunctionalist views on trust
and control suggest that it is possible to preserve a
dichotomy ‘between normatively-based trust and
politically-based control’ (Reed, 2001, p. 202).
However, such a dichotomy is unsustainable
because as Reed points out:
. . .(T)rust is often based on manufactured
distrust and the ‘expert’ power-dependency
relationships that it generates. In turn, forms
of collective regulation and discipline based
on unequal control over strategic political,
cultural and economic resources often rely on
the social, as opposed to material, capital
accrued through institutionalized values and
relationships to provide them with a greater
‘naturalness’ and stability than they would
otherwise enjoy (Fukuyama, 1995; Powell,
1996) [2001, p. 202].
Avoiding the psychological and moral baggage
that seems to haunt discussions on trust between
1
Our interpretation of the forces contributing to reembed-
ding is broader than that put forward in Giddens who empha-
sizes the importance of ‘facework’ (1991a, p. 88).
74 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
independently owned ?rms, we propose a per-
spective that focuses on the more generalized sort
of trust that is routinely placed in expert systems.
As Giddens puts it:
Trust in a multiplicity of abstract systems is a
necessary part of everyday life today . . . .
Traditional systems of trust were nearly
always based on ‘‘face-work’’. . . The dis-
embedded characteristics of abstract systems
mean constant interaction with ‘‘absent oth-
ers’’—people one never sees or meets, but
whose actions directly a?ect features of one’s
own life. (1994, 89–90).
Generalized trust in abstract systems has in?u-
enced the whole apparatus of modern production.
Accounting is one such abstract system but other
systems, especially quality assurance, have also
played an important role lending a growing con-
?dence in increased specialization and out-
sourcing. Debates on the origin of the factory
(Braverman, 1974; Williamson, 1985), remind us
of the problems of pre-industrial outsourcing or
‘‘putting-out’’. For example, Braverman argued
that factory production developed because early
systems of putting-out were ‘plagued by problems
of irregularity of production, loss of materials in
transit and through embezzlement, slowness of
manufacture, lack of uniformity and uncertainty
of the quality of the product’ (1974, p. 63).
Developments in expert systems in areas such as
quality management sustain the belief that mod-
ern systems of ‘‘putting out’’ are less likely to suf-
fer from the same problems as their pre-industrial
revolutionary predecessors.
A third de?ciency in the supply chain literature
is more speci?cally a problem in the usual por-
trayal of the special techniques of inter-?rm
accounting. Paradoxically, lengthening the histor-
ical perspective reveals the disembedding role of
accounting. Thus while the advocates of target
costing, open book accounting and sanction bud-
gets have emphasized their use in collaborative
partnerships and closer inter-?rm relations, they
have obscured the more signi?cant and long-
standing role of accounting in enabling trans-
actions that are distanced through space and time.
Certainly, accounting information may be used to
build collaborative networks as new information
and information technologies enable closer ties
between ?rms that are independently owned but
operationally linked (Birnberg, 1998). Yet the
information generated through target costing or
internet searches may also be used re?exively to
squeeze suppliers by threatening them with com-
peting sources of supply. In short, as we shall
show in our case study, there is an inherent ten-
sion in the application of these techniques. Para-
doxically, a capacity to share intimate knowledge
of cost and other commercial information within
the supply chain may enable the ‘‘open archi-
tectures’’ that threaten the survival of the original
equipment manufacturers (OEMs) as much as the
component suppliers.
2
The ‘juggernaut of moder-
nity’ (Giddens, 1991a) does not arbitrarily grind to
a halt for the convenience of particular supply
chain managers—relations are inherently fragile as
new information is re?exively absorbed by supply
chain participants.
With these de?ciencies in mind, the paper pro-
poses to put ‘Giddens into action’ (Whittington,
1992) by developing a new theoretical approach to
supply chain analysis that combines institutional
in?uences with strategic conduct. Rather than the
traditional distinction between the inside and out-
side of the organizations in accounting, a theo-
retical approach is presented that argues that the
key focus should be on how various inter-?rm
accounting techniques are part of ?rms’ institu-
tionalized practices. Drawing on structuration
theory to show how inter-?rm transactions may be
analysed through the duality of structure, an
application of the theory is demonstrated through
a case study on a company called Dextron (an
assumed name) that empirically illustrates the dif-
ferent modes of inter-?rm accounting. The com-
pany had set up a multifunctional team known as
the Cost Management Group in order to actively
manage its supply chain with the initial aim of
reducing costs. As the new approach matured, the
2
Hagel and Singer (1999) argue that it was the Apple II’s
open architecture that ‘created opportunities for many new
companies that specialized in producing speci?c hardware and
software components. . ..’(p. 147). In contrast, the vertically
integrated giants such as IBM began to struggle.
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 75
company attempted to enrich the links in its sup-
ply chain through a policy of micro-corporatism
that drew on wider regional networks that had
been encouraged by central government initia-
tives. These developments were, however, under-
mined by the ‘dialectic of the local and the global’
(Giddens, 1991b, p. 22) which is the ever-present
‘oppositional interplay between local involvements
and globalising tendencies’ (Giddens, 1991b, p.
242).
The paper is organized as follows. The next
section presents a new theoretical approach to
inter-?rm accounting based on structuration and
institutionalized re?exivity. The approach is then
applied to a case study drawn from the UK elec-
tronics industry. The ?nal sections interpret the
empirics in the light of the theory drawing some
conclusions on the role of accounting in supply
chains.
Accounting and the institutionalization of supply
chain practices
Production and accounting as inter-?rm activities
Although the ?rm de?es easy de?nition (Putter-
man, 1986), in the in?uential markets-and-hier-
archies view, it has evolved speci?c contractual
and managerial devices that are explicitly intended
to promote intra?rm co-operation and/or com-
pliance (see e.g. Williamson, 1975, 1985). In con-
trast, in the same theoretical model, inter-?rm
behaviour may be characterized by considerable
opportunism as, under the ideology of competitive
capitalism, independently owned ?rms would be
expected to ‘‘shop around’’ in their business-to-
business relations. Thus while the labour contract
within the ?rm may be intentionally incomplete,
contracts with outside suppliers are expected to be
clearly speci?ed. Yet the neoclassical
3
view of the
?rm, both as the locus of production and posses-
sing a set of fully speci?ed contracts with suppliers,
is a myth.
4
In varying degrees, production is
coordinated beyond the physical and legal
boundaries of the ?rm. Furthermore, contracts
between businesses are often incomplete and/or
implicit rather than explicit (Macaulay, 1963)
with ?rms interacting and negotiating with each
other continuously.
As a corollary of abandoning the notion that
production is strictly an intra?rm activity, we need
to rethink conventional classi?cations in account-
ing that make a sharp distinction between the
‘‘inside’’ and ‘‘outside’’ of the ?rm with manage-
ment accounting concerned with the former and
?nancial accounting with the latter. From a supply
chain perspective, distinctions between the inside
and outside of the ?rm are unhelpful because the
predominant mental construct is a linked series of
processes that convert raw materials and inter-
mediate inputs into the ?nal product (Slack,
Chambers, Harland, Harrison, & Johnston, 1998).
Just as exchange and production activities extend
beyond the legal and physical boundaries of the
organization, so we may argue that accounting
transactions are similarly arrayed along the supply
chain and across organizations.
The suppression of the distinction between the
inside and outside of the ?rm with its parallel dis-
tinction between management and ?nancial
accounting, allows us to locate supply chain
accounting in the wider and more longstanding
social processes of dis- and re-embedding that
characterize late modernity. According to Gid-
dens, these processes are driven by a combination
of trust and risk. Trust enables the distanciation of
time-place relations and increasingly relies on a
faith in ‘the correctness of abstract principles
(technical knowledge)’ (1991a, p. 34). Of parti-
cular relevance to accounting, Giddens draws on
the work of Simmel (1978) arguing that as an
abstract symbol, money (and, by implication, the
recording of ?nancial debts through bookkeeping)
has contributed to the disembedding process.
Relations are also disembedded through trust in
expert systems that are ‘systems of technical
accomplishment or professional expertise that
3
Other contracting models of the ?rm such as agency have
always refused to de?ne the boundaries of the ?rm seeing it as a
‘nexus of contracts’ (Jensen and Meckling, 1976).
4
To be fair to Williamson, he has explicitly modelled what
he would call the hybrid between market and ?rm (Williamson,
1991).
76 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
organise large areas of the material and social
environments in which we live today’ (Giddens,
1991a, p. 27). Furthermore, trust in both
abstract symbols and expert systems is supported
by professionalized bodies of knowledge and
state regulation.
Just as it produces systems of trust, modernity
creates a new form of risk based on the re?exivity
of actors. Giddens states that ‘(T)he re?exivity of
modern social life consists in the fact that social
practices are constantly examined and reformed in
the light of incoming information about those very
practices, thus constitutively altering their char-
acter’ (1991a, p. 38). In the context of the supply
chain management, best practice means that ?rms
are expected to re?exively monitor their suppliers
and customers. In turn, the chronic or institu-
tionalized re?exivity creates unstable relations as
?rms are tempted to constantly change their cus-
tomers/suppliers based on the ever increasing
availability and speed of information generated
and transmitted through new information tech-
nologies such as the internet.
Trust also plays a role in the reembedding of
relations which as Giddens states is the ‘reappro-
priation or recasting of disembedded social rela-
tions so as to pin them down (however partially or
transitorily) to local conditions of time and place’
(1991a, pp. 79–80). In the context of supply
chains, the process of reembedding could be
interpreted as a sort of partnership sourcing. Thus
if accounting plays a role as an abstract symbol
and as an expert system in the disembedding pro-
cess, what role might it play in reembedding? We
submit that both the disembedding and reembed-
ding of transactions in supply chains may be ana-
lysed through the concept of the duality of
structure (Giddens, 1976, 1979, 1984) whereby
institutions are both the background for action
but may, in turn, be recursively modi?ed
through action. When structuration theory is
applied to the supply chain, the important con-
siderations are not whether transactions are inside
or outside the organization but the extent to
which they are institutionalized. In short, whe-
ther they are intra- or inter-organizational, sup-
ply chain activities are based on institutionalized
behaviours.
In structuration, business relations may be ana-
lized through the more general institutional
dimensions of signi?cation, domination and legit-
imation. Giddens uses the concept of modalities to
link action and institutions. According to Wil-
mott, modalities ‘provide ‘‘the coupling elements’’
whereby the analysis of the ‘‘dimensions of inter-
action’’—centred upon the communication of
meaning, the operation of relations of power and
the application of normative sanctions—is linked
to the analysis of the structural components of
social systems—where the analytical focus is upon
signi?cation, domination and legitimation’
(Wilmott, 1987, p. 259–260). In the context of busi-
ness relations between independently owned ?rms,
the more the rules of exchange are objecti?ed
through institutionalization, the lower the level of
overall uncertainty. Since recursive processes may
replicate or revise modalities, inter-?rm accounting
techniques are not static. Furthermore, inter-?rm
accounting may be viewed as a special sort of mod-
ality that varies and evolves between industries and
through time as business relationships also vary.
For example, over time, ?rms that employ target
costing may try to develop more trusting relations
that result in the more elaborate modalities of the
open book. Similarly, open book costing does not
rule out a target costing element in that ?rms may
share information as part of an attempt to achieve
target rates of return within market-driven pricing.
Fig. 1 shows the how the modalities of inter-
pretive schemes, resources and norms link struc-
ture with interaction. Crucially, as agents may
mobilize elements of the ‘vertical relations’ such as
power and sanction, structuration avoids the
dichotomy between trust and control. Fig. 1 also
shows notions of modernity, especially how the
more generalized trust in expert systems may be
related to the principles of structuration. Fig. 1 is
not intended to represent a strati?cation or ver-
tical ranking of institutions since the hierarchical
ordering of institutions and structural principles
depends on ‘the time-space extension of the prac-
tices that they recursively organize’ (Giddens,
1984, p. 17). For example, the fact that a supplier
is part of the global supply chain of an acknow-
ledged world-class manufacturer may carry more
credibility in inter-business relations than the
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 77
possession of o?cially sanctioned quality accred-
itation (Walgenbach, 2001).
Inter-?rm accounting practices as modalities
Although usually analysed in an intra?rm con-
text, modalities in accounting o?er clues as to the
nature of inter-?rm business relations. For exam-
ple, the most important modality in many situa-
tions will be entries in ?nancial accounts as even
the most casual suppliers are o?ered customary
trade credit whether or not they have a formal
contract. Other concrete traces of modalities in the
accounting domain include formal documents
such as business plans, budgets and ?nancial con-
tracts that have encoded more general insti-
tutional principles in speci?c social settings. If
supply contracts include speci?cations on quan-
tity, quality, delivery times and so on, details on
price alone may indicate quite distant relations. In
contrast, closer relations will be indicated if mod-
alities include the language of cost rather than
price; even closer relations may refer to margins or
rates of return. The implications of the latter are
that the customer may be concerned to take out
cost in its supply chain but also recognizes the
need for the supplier to make a pro?t (Seal, Cullen,
Dunlop, Berry, & Mirghani, 1999). Yet inter-?rm
relations cannot simply be analyzed through tan-
gible documents such as contracts. Even if such
formal legal documents exist they may be sym-
bolically ‘‘put away in a drawer’’. Thus, rather
than just inspecting the physical traces provided
by documentation,
5
an analysis of the modality of
interaction must try to identify how day-to-day
business relations are enacted.
Best practice by purchasing managers is now
informed by a ‘‘cost of ownership’’ approach that
explicitly calculates the complete costs of acquir-
ing a component (Baily, Framer, Jessop, & Jones,
1998). The piece price is only the most visible part
of cost with delivery, product support, quality
control, stock-holding, inspection and materials
handling all activities that contribute to total cost.
The recognition of the importance of these activ-
ities enriches the modalities of interaction in the
supply chain beyond price and quantity bargain-
ing with negotiations ranging over quantities,
quality, delivery timings, supply continuity, and
even product development (Seal et al., 1999).
Fig. 1. Modernity, expert systems and structuration.
5
Some researchers have argued that modalities are too
abstract and that the more tangible connotation of ‘scripts’ is
preferable (Barley & Tolbert, 1997).
78 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
While richer modalities imply a broader mobili-
zation of the structural principles of signi?cation,
domination and legitimation, the ability of com-
panies to draw on these resources may vary
between countries and between industries.
Although structural principles may vary between
countries (Lane & Bachman, 1996; Sako, 1992),
increases in the globalization of production have
highlighted di?erences between industries. These
latter di?erences are of more relevance to this
paper as we found that the structure of the perso-
nal computer industry is quite di?erent from that
pertaining in the car industry. In the latter indus-
try, the OEMs have tended to force year-on-year
cost reductions on component suppliers with
the result that the return on investment in the
components industry has become very low that
even long run relationships are under strain.
6
In
structuration terms, motor manufacturers have
mobilized power far more that they have com-
municated meanings and applied normative sanc-
tions. In accounting terms, rather than use the
richer modalities implied by open book account-
ing, car makers have relied far more on the
relentless application of target costing. As we shall
see in our case study, the relative power of the
component suppliers in the PC industry is much
greater than in the motor industry. In further dis-
tinction from the motor industry, there is an
industry norm of rapid technological change
that is controlled by the major component
suppliers rather than by the ?nal assemblers (Cho
& Neiman, 2002).
The distinction between the structural principles
of signi?cation and legitimation explains how
supply chain relations may become closer without
becoming more committed. Thus developments in
linking ?rms’ ERP systems and the use of intra-
and inter-nets may strengthen the modality of
communication but need not a?ect the funda-
mental norms of competitive capitalism. Indeed,
cheaper search and easier information exchange
may encourage greater ?uidity in sourcing rather
than long-term commitment (Holmstrom,
Hoover, Louhiltuoto, & Vasara, 2000).
Inter-?rm accounting: causes and intentions
Although managerial literatures generally focus
on intended action, it is evident that developments in
supply chain management and inter-?rm accounting
exhibit traits of both ‘unacknowledged conditions of
action’ and ‘unintended consequences of action’
(Giddens, 1984, p. 5). Firms may outsource
because they know that there are mechanisms for
retaining control over their supply chain. Alter-
natively they may outsource because of short-term
supply constraints and then ?nd that interaction
with suppliers results in new systems of control
through target costing and open book accounting
(Mouritsen et al., 2001). Even more unintended
consequences may result as the customer’s policy of
outsourcing results in internal changes within the
?rm as activities such as marketing and design
become more important (Mouritsen et al., 2001).
Structural contradictions and dialectics in the
supply chain
Inter-?rm accounting may be seen as a ‘system’
based on re?exive self-monitoring. The reproduc-
tion of the system is based on the ‘reciprocity of
practices’ (Giddens, 1984, p. 28) rather than any
notion of homeostatic control. Indeed, the system
is characterized by structural contradictions and
dialectical power relations. Con?ict arises because
the customer wants the lowest input cost subject
to maintenance of quality—the supplier wants
highest price possible. A collaborative or ‘‘win-
win’’ solution (at least from the ?rm perspective) is
suggested if cost is taken out of components
through better design or co-ordination, but the
temptation is always to go elsewhere. Instability
and implied threats are at the heart of power in
the supply chain. The norms of supply chain are
contradictory. More generally, as Wilmott puts it:
The existence of mutually incompatible or
contravening principles of system organi-
zation helps to explain why stability and
continuity in social systems is impermanent
and problematic and, relatedly, why con?icts
of interest arise and are worked out but rarely
resolved’ (1987, p. 264).
6
See Doig, Ritter, Speckhals, and Wooson (2001).
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 79
As in other social spheres, control in supply
chains is dialectical (Giddens, 1984). Thus even
the weakest of suppliers may be able to exert some
power over its customers. For example, even an
oppressive target costing regime may o?er oppor-
tunities for mutually bene?cial collaboration
between ?rms in order to explore ways of reducing
cost. In contrast, a more na?¨ve demand for price
cuts may merely invite short-run quality shaving
and long-run bankruptcy for suppliers that also
hurts the OEM (Lamming, 1993).
Having introduced a new theoretical approach
to inter-?rm accounting based on structuration
and institutionalized re?exivity, the paper now
goes on to present a case study. The ?eldwork was
gathered at a company in the UK electronics
industry which, in order to disguise its true iden-
tity, we have called Dextron.
Supply chain management in UK manufacturing:
Dextron and the cost management group
Case method
Our discussions with Dextron developed out of
a contact that was initially made at a CIMA
sponsored workshop
7
in February 1998. The case
study was written following three separate full day
visits made to the organization at Coletown dur-
ing 1998 and 1999. The visits included a full site
review and discussion with production managers,
interviews with members of the cost management
group (CMG), other accounting sta?, the produc-
tion manager and the senior site director. Inter-
views and discussions were also held with
managers of a Department of Industry Regional
Initiative on Supply Chains. Documentation
regarding the work of the CMG was made avail-
able and design, procurement, production and
shipping processes were observed. Further data
were obtained via follow up telephone calls and
independent archive searches. The case papers
were reviewed by members of the Cost Manage-
ment Group for factual correctness. Some data
were withheld as being commercially con?dential
and all names and places were disguised, but this,
it was agreed, did not materially a?ect the case
text.
In carrying out research into structuration,
Barley and Tolbert (1997) suggest sites should be
selected as a result of careful consideration of
‘‘factors apt to a?ect an institution’s boundaries
or that may impede or enhance organisational
change (p. 104)’’. In line with Barley and Tolbert’s
(1997) views, our method of ?eldwork was based
upon observation of change across boundaries
and data collection that involved the use of a wide
range of sources including semi-structured inter-
views, conversations during site visits, obser-
vations, documentary evidence, press cuttings and
workshops.
Company background
Dextron designed, assembled and built compu-
ters in a plant employing 300 people. The com-
pany had been in existence for some 30 years; its
head o?ce was based in the city of Midshire. The
research and development group, the product
design group and the marketing group were based
at the head o?ce. Production, procurement and
assembly of the machines took place in the town
of Coletown, some 200 miles from Midshire.
During the 1980s, when the personal computer
industry was fragmented, Dextron gained a high
market reputation for technical quality and relia-
bility. In later years, its competitors caught up
and, by the early 1990s, the company was taken
over by a Japanese conglomerate. The sales
growth of Dextron became so sluggish that by
1998 its production was less than 1% by volume
of the total European output of computers. The
market had become intensely competitive both in
terms of technical sophistication and price. The
major innovations had been in the technology of
the microprocessors and in the development of
software and operating systems. As a result of this
competitive environment, by the middle of 1998
the plant was operating below its break even level
and, indeed, a good percentage of the actual pro-
duction was being bought by the parent company
for its overseas o?ces.
7
The workshop was attended by around 30 accountants
from a variety of di?erent industrial sectors.
80 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
Product technology and the cost structure of the
business
Dextron had two main products: a personal
computer and a computer aimed at the business
market. The delivered machines consisted of four
main parts, the computer, a VDU, a keyboard and
some cabling. For both products, the micro-pro-
cessors and many assembled components such as
computer cases, hard drives, cabling and so on,
were bought in from outside suppliers. With a
high volume of UK and international production,
the VDU, the cabling and the keyboard had
become commodities and were subject to severe
price competition as were the parts for the com-
puter box. With the personal computer using a
bought-in motherboard, Dextron’s main design
contribution was the motherboard for the business
computer.
For both products, the bought-in chips were the
most expensive bought-in items, approximating to
50% of the total production cost of the machines.
Two factors were at work in the cost of chips.
First, changes in chip design and production cost
structure meant that the prices of chips were fall-
ing by about 30% per quarter. At the same time,
chip capability, both in processor speed (from
about 250 MHz in 1998 to an expected 1.5 GHz in
2001) and in capacity was being continually
increased. The capacity of the computers’ disc
drives was also increasing rapidly. Such a rapid
pace of technological change meant that Dextron
designers were faced with twin pressures of cost
reduction and product improvement. The poten-
tial for rapid obsolescence induced a speed-to-
market imperative that made cost management
techniques such as the sort of target costing often
found in car manufacturing of dubious value for
many parts of the product.
8
Another contrast with the car industry was that
Dextron could not hope to replicate that indus-
try’s pyramidal, multi-tier array of suppliers.
Dextron had three types of suppliers but they did
not ?t into a pyramidal model of descending
power and technological sophistication. At one
extreme, when dealing with international compa-
nies with very large markets, Dextron was a small
customer that had to be a price taker. For exam-
ple, although it supplied Dextron with chips, Intel
had much bigger customers such as IBM and
Compaq. Dextron was in a similarly weak posi-
tion in the software part of the supply chain in its
relations with Microsoft, whose industry standard
technology gave it considerable leverage over
issues of hardware compatibility. Dextron did
have some leverage in areas such as CD ROM
supplies and, at the other end of the dominance
spectrum, stood a third group of relatively small
local suppliers to whom Dextron was an impor-
tant customer both in terms of proportion of out-
put and as a technological leader.
Case study modalities
In the analysis of the case material in Section 4,
we will be using the idea of modalities (see Fig. 1).
In order to assist this analysis, the rest of the case
material will be located in three di?erent time
phases. Some of the description referred to here
came from conversations with Peter Thomas, who
only joined the company and the Cost Manage-
ment Group in 1996, but o?ered re?ections on
events before he joined.
Phase 1—up to 1995
Up to 1995, the purchasing organisation within
Dextron was rather ‘‘old style’’, with the purchas-
ing o?cers being expected to follow the demands
of the MRP system to get materials into the plant
to enable production to be continued. This task of
‘‘pulling the product in’’ did not include any for-
mal assessment of supplier performance, though
the o?cers did have considerable practical know-
ledge of the supply market. Peter considered that
‘‘the organisation had a great tacit knowledge
which was not available to it’’. The implication of
Peter’s view seems to be that, in this early phase,
the company had not developed systems and
practices that could e?ectively mobilize the tacit
knowledge of its employees. Paradoxically, the
company practised a curious variety of relationship
8
In another case study in the related telecom industry, we
were told that the speed-to-market imperative ruled out target
costing.
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 81
marketing with strongish bonds developing
between the suppliers and Dextron buyers.
Although the possible downside of relational pur-
chasing is seldom discussed in the management
literature, this relationship worked to the dis-
advantage of Dextron who was seen as an ‘‘easy’’
customer by many of its suppliers.
Phase 2—up to 1998
In 1995 Carl Kenson was appointed as Pro-
curement Director. This appointment followed a
review of the future of the company. It was clear
that the company had to become more ?exible in
market response for product design, development,
production and delivery. It also had to reduce its
costs. While it is true that the rapid growth and
technical speci?cation and cost reduction of pro-
duct was characteristic of this industry, it was so
‘‘because innovation in processor capacity and
speed was almost breathtaking; as was the reduc-
tion in processor prices’’ explained Peter.
Carl Kenson took the view that the company
needed an infusion of management from other
computer manufacturers. Mary Macnally was
hired from Digital as materials manager in order,
as Peter put it, ‘‘ to bring some high quality
expertise and current experience into the procure-
ment role’’.
Under severe market pressure, Dextron sought
to improve the e?ciency of its production through
the introduction of Supply Logistics Integrated
Management (SLIM). This project saw the crea-
tion of cross-functional teams with the aim of
increasing customer focus and breaking down the
former, rather compartmentalized, ‘‘silo’’ model
that had characterized the company’s production
processes. There was also a redesign and re-engi-
neering of the production plant with the resulting
Coletown E?cient Manufacturing (CEM) line
being brought into operation in 1995.
The development of the CEM line focused
attention on the supply of parts to the plant. Peter
explained that:
This new facility required more outsourcing
of components and sub assemblies than
before. The plant capacity was over four
hundred thousand units, in a single ?ow line,
with multiple assembly cells and product
quality control plant.
As well as these changes to the manufacturing
facilities, Dextron needed to drastically shorten its
product cycle. With a target of moving from a 9
months design and development cycle to a 9
months product life cycle, Mary Macnally was
working on the more e?ective integration of the
research and development, product design, manu-
facturing and procurement processes. Her view
was that:
The supply base had been stagnant and in
need of considerable attention in order to
reduce costs and remain competitive in our
demanding market place.
The new supply chain initiative began with an
analysis and then action on the supply of parts to
the motherboard production system. This parti-
cular area was chosen because it was the central
part of the machines that were developed,
designed and manufactured by Dextron itself.
Peter said that the new supply chain approach
‘‘meant that procurement needed new kinds of
buyers, with new skill sets, including bargaining
skills, data logging and supplier evaluation skills
as well as internal communication skills’’. Follow-
ing some sta? changes, not only were the neces-
sary new skills brought in, but the old cosy
relationship nature of procurement changed to a
more adversarial mode with the vigorous assertion
of Dextron’s interests.
The attack on the motherboard costs was seen
to be a considerable success and the question fol-
lowed: How can this new way of working be
applied to the other parts of the manufacturing
system at Coletown? The response was to estab-
lish, early in 1996, a Cost Management Group
(CMG). This group began with a Project Accoun-
tant, Sam Kennet, and a Project Engineer, Bill
Jones, working together on the task of cost man-
agement. The project accountant was encouraged
to manage the cost analysis and to track and
report upon the standard cost of product on a
monthly basis. The project engineer was charged
82 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
with the task of working closely with research and
development (R&D), and production in order to
design or engineer cost out of the product. How-
ever, as Sam Kennet explained:
This CMG orientation did not remain; the
group became the obvious locus and resource
for special project studies of manufacturing,
design and supplier changes. They could
work to the procurement director or to the
plant director as well as to the materials
manager, Mary Macnally.
While the accountant was a source of unique
expertise in the plant, the project engineer found
his role to be more di?cult. He was able to make
an impact upon the machine chassis designs and
cost. However, not only were the R&D and pro-
duct design groups several hundred miles away in
Midshires, but the manufacturing engineering
group at Coletown quickly took hold of any pro-
jects. Slowly, the role of the CMG project engineer
became that of an assistant. When Bill Jones left,
he was not replaced.
Peter Thomas joined Dextron and the CMG in
July 1996 bringing commercial (and purchasing)
expertise from previous roles in international
companies in the industry. It became clear to Sam
and Peter that they were working to ‘‘drag Dex-
tron up to industry standards’’. The purchasing
function was organised into two teams in order
to get focus and complementary learning and
expertise spread among the sta?. This focus led
to CMG being more project driven with many
projects initiated by Carl Kenson and Mary
Macnally.
In 1996, the CMG undertook projects on make-
or-buy decisions on components that resulted in
both more outsourcing and to the redesign of
parts into subassemblies, with consequent assem-
bly cost reduction. Time was also spent on
reviewing the lead-time given to suppliers for part
or component orders. Attention directed towards
the reduction of lead time resulted in the matching
of supply to ?exible production requirements with
a lower likelihood of having surplus parts and
stock write o? or extra stock holding. These
arrangements varied with the kinds of suppliers
and had to be negotiated without any price
increases.
By the end of 1997, the CMG was actively
involved in the reduction of supply chain costs
through the benchmarking of suppliers, value
engineering, identi?cation of total cost of owner-
ship, setting up hubs in appropriate geographical
locations, quality costs and the development of a
sophisticated Supplier Management Programme.
This last initiative represented a shift from an
operational focus on the costs of supply that had
been the previous work of the CMG to include a
managerial level analysis and consideration of the
whole management of supplier relationships.
Building on the SLIM project, the programme
introduced a supplier event log sheet system.
Managed by the buyers, this log sheet was
designed to provide the internal data for annual
supplier evaluation and, according to Peter Tho-
mas, to focus on the‘‘signi?cant and useful’’, to
elicit a response from the supplier in order ‘‘to
close the loop of the problem or issue’’. A second
feature of the programme was a quarterly supplier
newsletter to share information and progress.
Aware that they were now following best industry
practice, the CMG expected the buyers to pro-
mote the programme to the suppliers on the basis
of participation within a modernized supply chain.
As part of a gradual move towards phase 3 in
the early part of 1998, the CMG were beginning to
examine their suppliers’ suppliers to see how the
cost of parts and sub assemblies might be taken
forward. Sometimes this arose from a chance
encounter and suggestion to a supplier that they
might seek alternative quotations. In one episode
such a suggestion took $1 from the part cost, a
unit saving of over twenty percent. A similar
practice was then focussed on other costs such as
packaging and documentation.
In mid 1998, Sam Kennet left Dextron to take
up a post with another company in the region. He
was replaced by another accountant, Muir Smith.
Phase 3—1998 onwards
As Dextron’s supply chain initiative progressed,
some e?orts were made to move away from
adversarial forms of relationship to include some
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 83
collaboration for mutual advantage. The company
was aided in this new approach by the Depart-
ment of Trade and Industry’s (DTI) policy for
regional growth and development. The DTI had
encouraged the creation of regional networks of
?rms, commercial consultancies, Enterprise agen-
cies, Training agencies and University research
groups called, locally; Supply chain partnerships
for empowering Economic Development (SPEED).
These groupings were aimed to equip local ?rms
to cope with the demands of major inward inves-
tors for a network of local suppliers able to meet
the highest international standards.
The CMG had come to operate in a number of
modes; as providers of information and impetus
for change from their connection to SPEED; as
problem ?nders and solvers and as helpers in
implementation. Peter and Muir described them-
selves ‘‘as internal consultants for much of their
work’’. Although they originally had had an
agenda given to them, they had begun to set their
own agenda. As catalysts of change, they worked
both inside and outside the Dextron production
system stimulating new thinking within it. The
CMG, said Muir, ‘‘has begun to see the challenge
of the model of world class manufacturing but
Dextron could only do this in conjunction with the
parent organisation to have any impact on the
European or global levels’’.
The CMG had always produced a monthly Cost
Management Report. This report was very detailed
and included a line-by-line report on product costs,
an item by item report on parts and assembly costs;
a review of plant overheads, a comparison of the
previous month against budget, and a prediction
on costs over the next four months. The report also
contained an analysis of the reasons for variances
and expectations for cost improvements. In April
1998, the CMG cut the document’s length by
50%. Beginning with two pages of news with user
friendly text highlighting signi?cant cost issues, it
was now a focused document, tracking the costs of
particular products in considerable detail and
presenting costs trends (plan against actual) in
graphical forms together with a brief commentary
upon each product. This new presentation found
favour with the managers who liked to have a
short analysis before the detailed data.
At the beginning of phase 3, the CMG identi?ed
opportunities for a greater involvement with mar-
keting; further opportunities for benchmarking
and tear down analysis, a development of ERP
systems and a continued focus on the reduction of
inventories. Almost all of these initiatives implied
a switch from the initial ad hoc work of the CMG
to a greater systemic involvement of supply chain
ideas across all of the operations of the company.
By late 1998, Peter said that they had ‘‘worked
over the issues in operations of the supply system
and that the next steps would be more di?cult’’.
They were seeking to move up a level to consider
the management of the supply system. In this, they
noted that the progress they had made had been
through analysis and improvement in the plant at
Coletown, but also in the‘‘tougher minded and
more professional relationship with their suppliers
and with their internal customers’’, said Muir.
They had ceased being an easy customer, now they
were seeking to gain initiative in the management
process, to keep suppliers on their toes but to also
search for the bene?ts of a more open and colla-
borative relationship.
Some re?ections on the CMG and the evolution of
supply chain accounting at Dextron
Whilst it has been impossible to unravel the
e?ects of all the work undertaken, Peter said,
‘‘that their e?orts had led to total direct savings of
between $8 and $10 million dollars during the
previous two and a half years’’. The CMG did not
claim that this was due to their unaided e?orts:‘‘it
has been achieved by the consistent e?orts of the
whole team at Coletown, their willingness to make
new ideas work, the willingness of the senior
managers to listen, to support good ideas and to
clear paths for implementation of them’’ said
Peter. As well as substantial direct and indirect
cost reductions, there were reductions in working
capital (via inventory control), which produced an
improvement in product margins and asset turn-
over that fed directly into pro?tability. Some of
these virtuous e?ects had been masked (indeed
overwhelmed) by the losses made by Dextron as it
has operated at 50% below its break-even volume.
Realising that the concept of ‘‘relevant costs ‘‘ was
84 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
central to the make-or-buy decisions, the CMG
recognised that the standard cost model may not
meet all of the emerging needs for life cycle costs
in the rapidly changing product environment.
CMG were searching for a new cost model that
would more accurately re?ect the actual oper-
ations of the supply system.
While the Cost Management Group label accu-
rately described well their initial remit, it no longer
re?ected their thinking as they moved towards
phase 3. The role of the accountants in the CMG
was broadened as they took on extra production,
commercial, organisational, and change manage-
ment roles in addition to the substantive account-
ing contribution that they were making. Indeed,
over time, they extracted the cost monitoring and
control function from the ?nance function. The
marketability of these new skills was demonstrated
when the accountant who left Dextron was
appointed to a senior position at a clothing com-
pany on the basis of his work in supply with
CMG. Re?ecting on the expanded role of
accountants within the group, the CMG thought
that the relative dominance of accountants was
largely an accident of geography. The original
engineering role had not developed because of the
split site and the availability of manufacturing
engineering at Coletown. CMG members won-
dered whether there would have been signi?cant
di?erences in CMG approaches, sta?ng and
impact had they been located at Midshires.
Postscript: Just after the observation period,
Dextron closed its Coletown factory and pulled
out of the personal computer industry altogether.
Just as it had tried to relexively monitor its own
supply chain, Dextron’s major customer, a
national retail chain, had decided not to proceed
with a major contract. The chances of ever using
the capacity of the plant had completely vanished
and the best e?orts of the CMG were ultimately
unable to save the local industry from its global
competitors.
Interpreting the case through structuration theory
Structuration theory invites researchers to
explore both the institutional framework and the
in?uence of the strategic action of key players. At
the outset of our ?eldwork, we could identify
mimetic in?uences coming from the institutional
realm. CMG were not enacting totally new prac-
tices. Their initiatives had been encoded from the
supply chain philosophy of Dextron’s new Japa-
nese owners as well as from the procurement
executives that had been brought in to the com-
pany from outside. The receptivity of the company
to change was partly in?uenced by the change in
ownership, partly by the new plant con?guration
and partly by the abiding sense of crisis as the
company struggled to make a pro?t. Past practices
were relatively easy to ‘‘de-institutionalize’’ (Oli-
ver, 1992) with rapid technological changes and
?erce competition constantly challenging all
aspects of performance. It could be argued that
the challenge for Dextron was that although, as a
company, it was as highly re?exive as its more
sophisticated global suppliers, this re?exivity did
not extend to some of its local suppliers. Thus
these suppliers became a target for action by the
company and by the DTI as they both sought to
‘‘modernize’’ the local industrial region.
CMG began its approach through a number of
projects that were not always intended to be
replicated. The most obvious modality that did
become replicated was CMG’s monthly supply
chain report which itself went through a series of
revisions. Our case also suggests that we should
expect to ?nd a variety of modalities depending on
the relations with speci?c suppliers. Although we
have emphasized the role of strategic conduct by
CMG, we have shown that its ‘‘degrees of free-
dom’’ (Archer, 1982) depended on modalities of
domination that were in?uenced by market and
technological factors. Local ‘‘metal-bashers’’ and
cable makers could be cost-managed through
direct inspection with suggested changes to com-
ponents integrated into Dextron’s product cycle.
In contrast, CMG was forced to be passive in the
face of the resources and market power of the chip
and software giants. Neither physical inspection
nor open book costing could be on the agenda for
a customer of Dextron’s small size and technologi-
cal subordination. In any case, the chip producers
were regarded as being world-class manufacturers
who were quite capable of optimizing their own
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 85
product processes without taking advice from
their customers (Cho & Neiman, 2002).
Since the scope for strategic action was largely
limited to its smaller suppliers, Table 1 sum-
marises these supply chain practices using the
notion of modalities as shown in Fig. 1. Each box
represents a phase in the evolution of the supply
chain and should be viewed as a set of modalities
rather than a single modality. There seemed to
have been three main phases in supply chain
management at Dextron. Taking the pre-1995
period as phase 1, the transaction atmosphere was
characterised by cosy but arms-length procure-
ment in manufacturing. The institutional realm for
Dextron’s supply chain was notable for its laissez-
faire attitudes. Contract law was nominally the
main formal institution but as we have noted,
supply chains in UK manufacturing were custo-
marily governed on a non-contractual basis. In
this phase production was embedded within the
factory and through a network of local suppliers.
Although it was clearly modern in its product and
technology, Dextron was relatively unre?exive with
respect to its supply base. The main form of inter-
?rm accounting was a conventional set of ?nancial
accounting and ?nancial management practices.
The initial impetus for changes in supply chain
management was triggered by the installation of
new plant that involved an increase in out-sour-
cing. Under pressure from competitors and
encoding supply chain management developments
in other parts of manufacturing, Dextron enacted
new practices in the supply chain, particularly
value engineering and teardown analysis. The
changes involved a ‘tougher minded and more
professional relationship’ with their suppliers and
with their internal customers. Dextron ceased
being an ‘easy customer’ gaining the initiative in
the management process with the aim of keeping
‘suppliers on their toes’. The bene?ts of changes in
practice were appropriated by Dextron rather
than shared out with its supply chain ‘‘partners’’.
This phase was characterized by the disembedding
of both internal production and previous business
relations. Dextron became more re?exive in its
approach to its suppliers. Of course, it could also
become a victim of the re?exivity of its more
powerful suppliers and customers.
9
Referring back
to Fig. 1, the changes thus established in phase 2
involved the domination/power, signi?cation/
interpretive scheme and legitimation/norm dimen-
sions. The new plant lay-out and the new supply
relations were legitimated through reference to
changing industry norms of increased outsourcing
and process re-engineering. The recruitment of
executives from competitors served to reinforce
the mimetic nature of the changes.
Table 1
Case study modalities
modalities institutional realm key actors at ?rm-level
phase 1
arms length contracting price negotiation
?nancial accounting
common law buyers responding to
production demands
phase 2
closer relationship with suppliers/cost management
based on physical inspection of suppliers/monthly
CMG report/series of ‘‘one-o?’’ projects
Japanese owners/imitation
of competitors and practices
in other industries
CMG new sta? including
new Procurement Director
phase 3
more communication/consultation with suppliers
newsletters, etc. Supplier management programme/
SLIM
regional networks sponsored
by the DTI SPEED
CMG
9
For example, some of the over-capacity had resulted from
a failed contract with a major national retailer.
86 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
The third set of supply chain modalities at Dex-
tron in phase 3 involved a search for the bene?ts
of more open and collaborative relationships as
the CMG drew on the new institutionalized prac-
tices stemming from the DTI initiative. This phase
could be seen as an attempt by some entities in the
supply chain to reembed their business relations.
The intervention of the DTI opened up two new
possibilities in comparison with phase 2. First,
Dextron’s supply chain initiatives could be seen to
have a wider legitimacy with inter-?rm relations
sanctioned by third party, governmental media-
tion. No longer uniquely associated with the
assertion of power relations, the new practices
were legitimated to suppliers as the enactment of
new industry norms. Second, practices stood a
better chance of being replicated and routinized.
As well as monthly CMG reports, the supply man-
agement initiatives by CMG could be seen as being
driven by an on-going programme of continuous
change rather than just a series of one-o? projects.
The CMG as an expert accounting system
Drawing on Giddens (1991a), we have already
identi?ed some general properties of accounting as
an expert system in both dis- and reembedding
supply chain relations. We can now develop our
argument in the speci?c context of Dextron and
the CMG. As it evolved from its early remit, the
CMG eventually developed a special sort of
autonomy. Working as a small multi-functional
team that operated alongside the standard operat-
ing routines of the company, it became a source of
institutionalized change. The CMG’s autonomy as
‘‘internal consultants’’ enabled it to lead inno-
vation in the organization of its supply and pro-
curement. Freed from the time cycles of the
accounting and reporting structures in Dextron, it
was able to operate across boundaries both within
the organisation and outside it. The ability to
break out of a reporting time-frame appears to
have been crucial to the CMG for it was able to
take both a short-term project focus and a longer-
term development perspective. The CMG came to
be seen as a repository of expert knowledge and as
the centre of a network of supply chain practices
both within Dextron and with its suppliers.
In some respects, the CMG constituted an
accounting regime (Jones & Dugdale, 2001). Jones
and Dugdale interpret accounting as being ‘in?u-
ential in de?ning positions, reporting exchanges,
allocating resources, and thus shaping actors’
identi?cation of their interests’ (2001, p. 38). This
broad de?nition of accounting suggests possible
con?icts. More speci?cally in the context of a
supply chain, accounting is faced with a tension
between its role of identifying the competing
interests of individual capitals and its calculative
practices, such as life cycle costing, which may
demonstrate the gains of collaboration along the
supply chain.
The supply chain in manufacturing, in parti-
cular, with its technological interdependencies
between processes is generally reembedded
through engineering and operational management
including systems of quality assurance. It is thus
perhaps not surprising to ?nd that in other
empirical studies (see e.g. Seal et al., 1999), supply
chain partnerships in manufacturing tend to
?ourish better when the traditional accountant is
sidelined by the engineer. Di?erences between
?rms’ ?nancial and costing systems can generate
misunderstandings that are so serious that they
threaten those aspects of the partnership that are
genuinely collaborative. Open-book negotiations
between two private systems of accounting reg-
ulation may be hampered by primitive forms of
internal costing and cost control of procurement
(Kearney, 1995; Seal et al., 1999). While the
accountant is a somewhat ambivalent latecomer to
the bene?ts of a value chain perspective, the engi-
neer can access a knowledge base that is more
naturally focused on issues of product function-
ality, manufacturing processes and supply chain
logistics.
Although it tried to create and embrace a multi-
functional perspective, the CMG was hampered
by the lack of experts that could combine technical
and commercial concerns. In contrast to industries
such as the Japanese car industry (Lamming,
1993), the dominant professional in?uence on
supply chain management at Dextron was
accounting rather than engineering. It was perhaps
characteristic of an accounting orientation that in
phase 3, Dextron chose to tighten ?nancial controls
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 87
rather than introduce greater variety in perfor-
mance measurement. Thus although there was
increased legitimation of many new supply chain
practices, there was no parallel expansion in the
communicative role of accounting. With the
absence of other forms of expert knowledge for
largely geographical reasons, the accountants in
CMG were almost heroic in their e?orts to expand
their traditional accounting repertoires. Ulti-
mately, however, they were hampered by the nar-
rowness of their expertise and the lack of head
o?ce support.
Whatever the limitations of its knowledge base,
the CMG could still be seen as a prime source of
institutionalized re?exivity at Dextron. It devel-
oped an independent capacity to monitor cost and
product information both within and outside the
company. Through its attempted enactment of
best practices in the industry, the CMG e?ectively
routinized product and process changes through-
out Dextron’s supply chain.
Strategic conduct in PC supply chains
Our ?ndings on the increased disembedding of
PC production processes were consistent with
other research on UK manufacturing which has
found a signi?cant gap between the rhetoric of
partnership and the reality (Frances & Garnsey,
1996). The absence of industry standards and/or
any form of public regulation leads to a lack of
common standards about cost issues that then
have to be negotiated on a di?cult ad hoc basis
(Seal et al., 1999). Structuration theory can be
used to understand how ?rms may strategically
construct their own systems of regulation for their
supply chains sometimes acting through alliances
with other ?rms and public agencies (Hines, 1994)
and sometimes in a more autonomous and domi-
nant fashion (Frances & Garnsey, 1996). With the
globalization of industries such as PC manu-
facturing, the key structural principles are indus-
try- rather than country-speci?c. The industry
exemplar for PC manufacture is Dell Direct
(Kuglin & Rosenbaum, 2001). Dell has established
a make-to-order system that accepts that the main
direct innovation now comes from suppliers, that
the PC has a life cycle of 3 months to 2 years and
that 50% of pro?ts must be achieved within the
?rst 3–6 months of the life cycle. Deep discounting
when new processors, operating systems or mem-
ories are introduced, means that components
become obsolete very quickly. Supply chains are
no longer linear but networked
10
while ‘informa-
tion moves independently of product at internet
speeds’ (Kuglin & Rosenbaum, 2001, p. 59). The
key to success for the PC manufacturer is the
integration of sales and marketing with opera-
tional decision-making while synchronizing multi-
ple supply chain partners. From this perspective,
we can see that Dextron was playing ‘‘catch-up’’,
struggling to achieve the sophisticated co-ordina-
tion and strong marketing presence that was
rapidly becoming industry standard.
Conclusion
Adding to the literature on accounting and sup-
ply chains (Hopwood, 1996; Gietzmann, 1996;
Frances & Garnsey, 1996; Seal et al., 1999; Van
der Meer-Kooistra & Vosselman, 2000; Seal &
Vincent-Jones, 1997; Tomkins, 2001, Mouritsen et
al., 2001), the paper has developed an application
of structuration theory to inter-?rm accounting.
By adopting a structuration analysis, we have
shown the interplay between the realms of action
and institution over a period of time. Aided by
some governmental supply chain initiatives, our
case study company Dextron did try to broaden
its repertoire of supply chain relationships through
a form of microcorporatism. However, we found
that its ability to enrich the modalities in its supply
chain was heavily in?uenced by the power/dom-
ination nexus (Giddens, 1984). To some of its
suppliers, Dextron represented a very small player
that had to accept forms of accounting communi-
cation (price, quantity and a given quality) deter-
mined by the supplier. These suppliers were not only
large in market terms but they typically possessed
10
Signi?cantly, Kuglin and Rosenbaum (2001) argue that
industry networks include di?erent companies but also involve
governmental and ?nancial institutions. They do not elaborate
on their inclusion of such institutions but their view of net-
works is clearly consistent with the construction and main-
tenance of abstract systems and regulatory regimes.
88 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
sophisticated proprietorial knowledge that they
would not share with any of their customers. In
other relationships where it was the dominant
player, Dextron could require a much higher level
of disclosure involving issues on design, quality
and cost. Here again the domination was based as
much on technological sophistication as on mar-
ket power.
Although we have focused on structuration the-
ory, we have supplemented the model by arguing
that changes in supply chains and the role of
accounting may also be understood as wider
manifestations of modernity as elaborated by
Giddens (1991a, 1991b). Our approach focuses on
the possibilities that relations may be disembedded
and reembedded through the interaction between
local action and wider systems of abstract and
expert knowledge (Giddens, 1991a). Structuration
theory o?ers a way out of a number of unresolved
theoretical and empirical problems in the supply
chain literature. Given that it is often empirically
di?cult to distinguish between behaviour caused
by trust and similar behaviour induced by power
(that is, fear of some sort of sanction), in a struc-
turation perspective, interactions between ?rms
are informed by complex combinations of power
and morally sanctioned modalities. Trust is seen as
being a generalized faith in abstract systems rather
than linked to a particular inter-?rm relationship.
Accounting is merely one of these abstract systems
in a supply chain management, which is also sup-
ported by other abstract systems such as market-
ing, purchasing, quality assurance and logistics.
Rather than the more traditional categories of
‘‘?nancial’’ and ‘‘management’’ accounting, we
argue that accounting should be seen as a set of
institutionalized practices that may be employed
both within and between ?rms. In this context, the
impact of extra information is ambiguous as it
may lead to more ‘‘shopping-around’’ by supply
chain ?rms rather than closer relations. In short,
as an important source of ?nancial and cost
information in supply chains, accounting may
contribute to both dis- and reembedding pro-
cesses. The case provided evidence of tensions
between the trust constructed through abstract
systems and the risk associated with the increased
re?exivity of supply chain actors. We submit that
‘‘modern’’ supply chain relations are inherently
fragile. As Jones and Dugdale argue ‘(T)he meta-
phor of the juggernaut points to immense power
in modernity—economic, political, and social—
mobilized at global level and permeating local
contexts. This power, in large part, is generated by
expert systems, and we hope they will control it;
but this hope is poised in precarious balance
between trust and scepticism (Jones & Dugdate,
2002, p.125).
Our case study described the formation of a
special team, the CMG, that evolved from initia-
ting some ad hoc studies on cost reduction to
become a focus for continuous change in supply
chain practices. Although the team was multi-
functional, it became dominated by accountants
who did their best to promote best practice in
Dextron’s supply chain. The group’s attempts
were partly hindered by the lack of head o?ce
support and partly by the lack of other forms of
expertise such as engineering and marketing. As it
progressively enacted a programme of incessant
change in supply chain practices, the CMG repre-
sented an excellent example of how inter-?rm
accounting can become institutionalized. Our
?ndings on the activities of the CMG supports our
submission that inter-?rm accounting institu-
tionalizes the disembedding and reembedding
processes by routinizing the re?exive monitoring
of supply chain relations.
The structuration approach to inter-?rm rela-
tions elaborates Tomkins (2001) position that ‘the
accounting information needed is itself a re?exive
product of the developing negotiation’ (p. 163).
Thus although we found no applications of sug-
gested techniques for inter-?rm accounting such as
open book costing and sanction budgets, the lim-
ited nature of the inter-?rm accounting was not a
result of the technical inadequacy but rather a
re?ection of the lack of shared destiny type rela-
tions in the electronics industry. Managers can try
to change business relations but their degrees of
freedom are bounded by their own strategic cir-
cumstances especially their relative possession of
market power and proprietorial technology. They
may, in particular, try to reembed their supply
chains by attempts to legitimise collaborative
relations. In our case company these attempts
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 89
were aided by central government initiatives to
modernize the local economy. Ultimately,
although the ?rm was engaged in the dialectic of
the local and the global (Giddens, 1991b), its own
local e?orts could not prevent it becoming a vic-
tim of global competition.
The rhetoric of close relations in supply chains
through target costing and open book accounting
has obscured the longstanding role of accounting
in enabling transactions that are distanced
through space and time. Newer technological
developments such as the internet merely increase
the level of re?exivity and the rate of disembed-
ding. Paradoxically, the electronics industry has
made a vital contribution to the increasing ‘vir-
tuality’ of business relations. Greater trust in the
pro?tability of arms-length relations have
increased the volatility or risk in the supply chain
making local attempts at reembedding increas-
ingly vulnerable to reappraisal via a worldwide
engine of comparison.
Future research may be directed towards some
of the paradoxes and unmeasured costs that have
been described in this study. Institutional theory
focuses attention on identifying lines of continuity.
If a particular ?rm can no longer be seen as the
locus of embedded practices then what continues?
With an optimistic reading, the stocks of know-
ledge on production practices are still carried by
those agents who go on to further their careers in
other supply chains. In addition, the signi?cation
structures embodied in standard operating pro-
cedures, consultancy packages and local industrial
networks are still potentially available to other
?rms and industries. Thus, while a particular ?rm
may have dissolved, the general technology of the
supply chain may be recursively re-constituted
(Orlikowski, 2001).
More pessimistically, however, such reconsti-
tution may only occur in another place at another
time, making the ‘‘savings’’ claimed by the CMG
group look both trivial and illusory in comparison
with the destructive consequences of high social
and regional dislocation costs. Indeed, rather than
saving Dextron, the industrial processes espoused
by the CMG are shown to be ‘as much con-
stituents of a world out of control as a means of
controlling it’ (Bryant & Jary, 2001, p. 29). The
institutionalized re?exivity of the computer industry
has not only squeezed subordinate suppliers, as
was intended by the original actors but, less pre-
dictably, has progressively decentred the once
dominant OEMs. More generally, further work
needs to be done on how to foster a regional
industrial policy that recognizes that the existence
of local ?rms cannot simply be assured on the
basis of the uncritical and piecemeal adoption of
perceived world class practices.
Acknowledgements
We would like to thank Anthony Hopwood and
two anonymous referees for their comments on
earlier drafts of this paper. We would also like to
thank the research board of CIMA for ?nancial
support.
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doc_706797918.pdf
Pro-active supply chain practices in manufacturing have been affected by general features of institutionalized
reflexivity whereby production activities are disembedded by firms whose actions have been enabled by abstract systems
such as accounting and quality management. A new consciousness of the centrality of the supply chain creates
increased tensions between the trust constructed through abstract systems and the risk associated with the increased
reflexivity of supply chain actors. Eschewing traditional distinctions in accounting between the inside and outside of the
organization, a structuration approach shows how inter-firm transactions and accounting may be analysed through the
duality of structure. The theory is explored through a case of a supply chain initiative in UK electronics manufacturing.
The case company set up the cost management group (CMG) which evolved into a semi-autonomous team dominated
by accountants. Drawing on the wider institutionalization of supply chain practices involving outsourcing and partnering
projects, the CMG became a locus of institutionalized reflexivity. As an important source of financial and cost
information in supply chains, the accounting practices espoused by the CMG contributed to both dis- and re-embedding
processes.
Disembedding the supply chain: institutionalized re?exivity
and inter-?rm accounting
Willie Seal
a,
*, Anthony Berry
b
, John Cullen
b
a
Department of Accounting, Finance and Management, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, UK
b
School of Business and Finance, She?eld Hallam University, She?eld S1 1WB, UK
Abstract
Pro-active supply chain practices in manufacturing have been a?ected by general features of institutionalized
re?exivity whereby production activities are disembedded by ?rms whose actions have been enabled by abstract sys-
tems such as accounting and quality management. A new consciousness of the centrality of the supply chain creates
increased tensions between the trust constructed through abstract systems and the risk associated with the increased
re?exivity of supply chain actors. Eschewing traditional distinctions in accounting between the inside and outside of the
organization, a structuration approach shows how inter-?rm transactions and accounting may be analysed through the
duality of structure. The theory is explored through a case of a supply chain initiative in UK electronics manufacturing.
The case company set up the cost management group (CMG) which evolved into a semi-autonomous team dominated
by accountants. Drawing on the wider institutionalization of supply chain practices involving outsourcing and part-
nering projects, the CMG became a locus of institutionalized re?exivity. As an important source of ?nancial and cost
information in supply chains, the accounting practices espoused by the CMG contributed to both dis- and re-embed-
ding processes.
#2003 Elsevier Ltd. All rights reserved.
Introduction
Accounting is implicated in two trends of con-
temporary industrial organization. One trend is
driven by calls on managers to strive for greater
levels of outsourcing and corporate unbundling
(e.g. Hagel & Singer, 1999) while the other urges
managers to develop closer relations with inde-
pendently owned suppliers through strategic alli-
ances or partnership sourcing (e.g. Lamming, 1993).
The conjunction between these two seemingly
contradictory trends is that, while activities are
being moved outside the ?rm, there is often an
expectation that close links will still be maintained
through contractual and other non-hierarchical
mechanisms. Techniques of inter-?rm accounting
such as target costing and open book accounting
are portrayed as enabling ?rms to maintain con-
trol over outsourced activities (e.g. Mouritsen,
Hansen, & Hansen, 2001).
We submit that a fruitful way of understanding
inter-?rm accounting is to see it as involved in the
wider changes in the social relations of production
that are characteristic of modernity (Giddens,
1991a, 1991b). According to Giddens, one of the
features of modernity is disembedding which he
de?nes as ‘the ‘‘lifting out’’ of social relations from
0361-3682/03/$ - see front matter # 2003 Elsevier Ltd. All rights reserved.
doi:10.1016/S0361-3682(02)00055-7
Accounting, Organizations and Society 29 (2004) 73–92
www.elsevier.com/locate/aos
* Corresponding author. Fax: +44-1206-873598.
E-mail address: [email protected] (W. Seal).
local contexts of interaction and their restructur-
ing across inde?nite spans of time-space’ (1991a,
p. 21). Relating these concepts to industrial orga-
nization, we submit that if corporate unbundling
and outsourcing often involve disembedding, then
strategic alliances and partnership sourcing may
be interpreted as attempts to reembed production
relations. By focusing on the possibilities for
reembedding relations by synthesizing the institu-
tionalist and managerialist approaches,
1
we sub-
mit that inter-?rm relations may be analysed as
the outcome of a process of interaction between
?rms’ strategies and the institutional environment
of their industries. In constructing their supply
chains, ?rms may both draw on existing abstract
systems and build their own more localized versions.
In this paper we focus speci?cally on inter-?rm
accounting as an expert system that is produced and
re-produced through the interactions between sup-
ply chain actors and wider institutional in?uences.
Although both the academic and practitioner
literatures on supply chains have grown quickly in
recent years, there are still some major de?-
ciencies. First, there is a disjunction between a
managerialist perspective with its emphasis on
action by one party, predominantly the customer
?rm, and an institutionalist approach, which is
more concerned with the wider institutional ante-
cedents of successful inter-?rm collaboration. As
examples of the latter approach, research on the
nature of the legal framework and on networking
organizations such as industrial associations has
been used to explain international di?erences in
inter-?rm relations (Amin & Thrift, 1994; Lane,
1997; Lane & Bachmann, 1996). In the contrasting
managerialist view, dominant ?rms adopt deliber-
ate strategies of partnership and dependence
among their suppliers (Akacum & Dale, 1995;
Dyer & Ouchi, 1993; Kanter, 1994; Kearney, 1995;
Lamming, 1993; Lere & Saraph, 1995; Mohr &
Spekman, 1994; Rajagopal & Bernard, 1993;
Rognes, 1995; Venkatesan, 1992). Yet the man-
agerialist approaches, which often draw on supply
chain exemplars such as Toyota, have not always
recognized the unique historical and institutional
circumstances of 1950s Japan that forced the
development of the Toyota model (Edwards &
Samimi, 1997). More generally, as Willmott poin-
ted out, there is a ‘hiatus’ between behavioural and
institutional accounts where studies ‘abstract the
activities of individual managers from the institu-
tional arrangements in and through which they act’
(1987, p. 249). Arguably, institutional arrangements
are even more important in supply chains where
managerial action takes place outside or between
conventional hierarchical organizational structures.
The second, and related de?ciency, is portrayed
by confusion over the roles of trust and control in
inter-?rm relations. In the managerialist literature,
the nurture of trust in business relations is seen as
not only desirable but as a feasible strategy irre-
spective of the institutional environment of the
supply chain. In the institutionalist literature, a
growing interest in the ‘institutional production of
trust’ (Gambetta, 1988; Zucker, 1986) has led on
to an explicit consideration of the relationship
between trust and power in inter-?rm relations.
Drawing on the neo-functional analysis of Luh-
mann (1979), trust and power/control are pre-
sented as functional alternatives (see, e.g.
Bachmann, 2001). Neofunctionalist views on trust
and control suggest that it is possible to preserve a
dichotomy ‘between normatively-based trust and
politically-based control’ (Reed, 2001, p. 202).
However, such a dichotomy is unsustainable
because as Reed points out:
. . .(T)rust is often based on manufactured
distrust and the ‘expert’ power-dependency
relationships that it generates. In turn, forms
of collective regulation and discipline based
on unequal control over strategic political,
cultural and economic resources often rely on
the social, as opposed to material, capital
accrued through institutionalized values and
relationships to provide them with a greater
‘naturalness’ and stability than they would
otherwise enjoy (Fukuyama, 1995; Powell,
1996) [2001, p. 202].
Avoiding the psychological and moral baggage
that seems to haunt discussions on trust between
1
Our interpretation of the forces contributing to reembed-
ding is broader than that put forward in Giddens who empha-
sizes the importance of ‘facework’ (1991a, p. 88).
74 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
independently owned ?rms, we propose a per-
spective that focuses on the more generalized sort
of trust that is routinely placed in expert systems.
As Giddens puts it:
Trust in a multiplicity of abstract systems is a
necessary part of everyday life today . . . .
Traditional systems of trust were nearly
always based on ‘‘face-work’’. . . The dis-
embedded characteristics of abstract systems
mean constant interaction with ‘‘absent oth-
ers’’—people one never sees or meets, but
whose actions directly a?ect features of one’s
own life. (1994, 89–90).
Generalized trust in abstract systems has in?u-
enced the whole apparatus of modern production.
Accounting is one such abstract system but other
systems, especially quality assurance, have also
played an important role lending a growing con-
?dence in increased specialization and out-
sourcing. Debates on the origin of the factory
(Braverman, 1974; Williamson, 1985), remind us
of the problems of pre-industrial outsourcing or
‘‘putting-out’’. For example, Braverman argued
that factory production developed because early
systems of putting-out were ‘plagued by problems
of irregularity of production, loss of materials in
transit and through embezzlement, slowness of
manufacture, lack of uniformity and uncertainty
of the quality of the product’ (1974, p. 63).
Developments in expert systems in areas such as
quality management sustain the belief that mod-
ern systems of ‘‘putting out’’ are less likely to suf-
fer from the same problems as their pre-industrial
revolutionary predecessors.
A third de?ciency in the supply chain literature
is more speci?cally a problem in the usual por-
trayal of the special techniques of inter-?rm
accounting. Paradoxically, lengthening the histor-
ical perspective reveals the disembedding role of
accounting. Thus while the advocates of target
costing, open book accounting and sanction bud-
gets have emphasized their use in collaborative
partnerships and closer inter-?rm relations, they
have obscured the more signi?cant and long-
standing role of accounting in enabling trans-
actions that are distanced through space and time.
Certainly, accounting information may be used to
build collaborative networks as new information
and information technologies enable closer ties
between ?rms that are independently owned but
operationally linked (Birnberg, 1998). Yet the
information generated through target costing or
internet searches may also be used re?exively to
squeeze suppliers by threatening them with com-
peting sources of supply. In short, as we shall
show in our case study, there is an inherent ten-
sion in the application of these techniques. Para-
doxically, a capacity to share intimate knowledge
of cost and other commercial information within
the supply chain may enable the ‘‘open archi-
tectures’’ that threaten the survival of the original
equipment manufacturers (OEMs) as much as the
component suppliers.
2
The ‘juggernaut of moder-
nity’ (Giddens, 1991a) does not arbitrarily grind to
a halt for the convenience of particular supply
chain managers—relations are inherently fragile as
new information is re?exively absorbed by supply
chain participants.
With these de?ciencies in mind, the paper pro-
poses to put ‘Giddens into action’ (Whittington,
1992) by developing a new theoretical approach to
supply chain analysis that combines institutional
in?uences with strategic conduct. Rather than the
traditional distinction between the inside and out-
side of the organizations in accounting, a theo-
retical approach is presented that argues that the
key focus should be on how various inter-?rm
accounting techniques are part of ?rms’ institu-
tionalized practices. Drawing on structuration
theory to show how inter-?rm transactions may be
analysed through the duality of structure, an
application of the theory is demonstrated through
a case study on a company called Dextron (an
assumed name) that empirically illustrates the dif-
ferent modes of inter-?rm accounting. The com-
pany had set up a multifunctional team known as
the Cost Management Group in order to actively
manage its supply chain with the initial aim of
reducing costs. As the new approach matured, the
2
Hagel and Singer (1999) argue that it was the Apple II’s
open architecture that ‘created opportunities for many new
companies that specialized in producing speci?c hardware and
software components. . ..’(p. 147). In contrast, the vertically
integrated giants such as IBM began to struggle.
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 75
company attempted to enrich the links in its sup-
ply chain through a policy of micro-corporatism
that drew on wider regional networks that had
been encouraged by central government initia-
tives. These developments were, however, under-
mined by the ‘dialectic of the local and the global’
(Giddens, 1991b, p. 22) which is the ever-present
‘oppositional interplay between local involvements
and globalising tendencies’ (Giddens, 1991b, p.
242).
The paper is organized as follows. The next
section presents a new theoretical approach to
inter-?rm accounting based on structuration and
institutionalized re?exivity. The approach is then
applied to a case study drawn from the UK elec-
tronics industry. The ?nal sections interpret the
empirics in the light of the theory drawing some
conclusions on the role of accounting in supply
chains.
Accounting and the institutionalization of supply
chain practices
Production and accounting as inter-?rm activities
Although the ?rm de?es easy de?nition (Putter-
man, 1986), in the in?uential markets-and-hier-
archies view, it has evolved speci?c contractual
and managerial devices that are explicitly intended
to promote intra?rm co-operation and/or com-
pliance (see e.g. Williamson, 1975, 1985). In con-
trast, in the same theoretical model, inter-?rm
behaviour may be characterized by considerable
opportunism as, under the ideology of competitive
capitalism, independently owned ?rms would be
expected to ‘‘shop around’’ in their business-to-
business relations. Thus while the labour contract
within the ?rm may be intentionally incomplete,
contracts with outside suppliers are expected to be
clearly speci?ed. Yet the neoclassical
3
view of the
?rm, both as the locus of production and posses-
sing a set of fully speci?ed contracts with suppliers,
is a myth.
4
In varying degrees, production is
coordinated beyond the physical and legal
boundaries of the ?rm. Furthermore, contracts
between businesses are often incomplete and/or
implicit rather than explicit (Macaulay, 1963)
with ?rms interacting and negotiating with each
other continuously.
As a corollary of abandoning the notion that
production is strictly an intra?rm activity, we need
to rethink conventional classi?cations in account-
ing that make a sharp distinction between the
‘‘inside’’ and ‘‘outside’’ of the ?rm with manage-
ment accounting concerned with the former and
?nancial accounting with the latter. From a supply
chain perspective, distinctions between the inside
and outside of the ?rm are unhelpful because the
predominant mental construct is a linked series of
processes that convert raw materials and inter-
mediate inputs into the ?nal product (Slack,
Chambers, Harland, Harrison, & Johnston, 1998).
Just as exchange and production activities extend
beyond the legal and physical boundaries of the
organization, so we may argue that accounting
transactions are similarly arrayed along the supply
chain and across organizations.
The suppression of the distinction between the
inside and outside of the ?rm with its parallel dis-
tinction between management and ?nancial
accounting, allows us to locate supply chain
accounting in the wider and more longstanding
social processes of dis- and re-embedding that
characterize late modernity. According to Gid-
dens, these processes are driven by a combination
of trust and risk. Trust enables the distanciation of
time-place relations and increasingly relies on a
faith in ‘the correctness of abstract principles
(technical knowledge)’ (1991a, p. 34). Of parti-
cular relevance to accounting, Giddens draws on
the work of Simmel (1978) arguing that as an
abstract symbol, money (and, by implication, the
recording of ?nancial debts through bookkeeping)
has contributed to the disembedding process.
Relations are also disembedded through trust in
expert systems that are ‘systems of technical
accomplishment or professional expertise that
3
Other contracting models of the ?rm such as agency have
always refused to de?ne the boundaries of the ?rm seeing it as a
‘nexus of contracts’ (Jensen and Meckling, 1976).
4
To be fair to Williamson, he has explicitly modelled what
he would call the hybrid between market and ?rm (Williamson,
1991).
76 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
organise large areas of the material and social
environments in which we live today’ (Giddens,
1991a, p. 27). Furthermore, trust in both
abstract symbols and expert systems is supported
by professionalized bodies of knowledge and
state regulation.
Just as it produces systems of trust, modernity
creates a new form of risk based on the re?exivity
of actors. Giddens states that ‘(T)he re?exivity of
modern social life consists in the fact that social
practices are constantly examined and reformed in
the light of incoming information about those very
practices, thus constitutively altering their char-
acter’ (1991a, p. 38). In the context of the supply
chain management, best practice means that ?rms
are expected to re?exively monitor their suppliers
and customers. In turn, the chronic or institu-
tionalized re?exivity creates unstable relations as
?rms are tempted to constantly change their cus-
tomers/suppliers based on the ever increasing
availability and speed of information generated
and transmitted through new information tech-
nologies such as the internet.
Trust also plays a role in the reembedding of
relations which as Giddens states is the ‘reappro-
priation or recasting of disembedded social rela-
tions so as to pin them down (however partially or
transitorily) to local conditions of time and place’
(1991a, pp. 79–80). In the context of supply
chains, the process of reembedding could be
interpreted as a sort of partnership sourcing. Thus
if accounting plays a role as an abstract symbol
and as an expert system in the disembedding pro-
cess, what role might it play in reembedding? We
submit that both the disembedding and reembed-
ding of transactions in supply chains may be ana-
lysed through the concept of the duality of
structure (Giddens, 1976, 1979, 1984) whereby
institutions are both the background for action
but may, in turn, be recursively modi?ed
through action. When structuration theory is
applied to the supply chain, the important con-
siderations are not whether transactions are inside
or outside the organization but the extent to
which they are institutionalized. In short, whe-
ther they are intra- or inter-organizational, sup-
ply chain activities are based on institutionalized
behaviours.
In structuration, business relations may be ana-
lized through the more general institutional
dimensions of signi?cation, domination and legit-
imation. Giddens uses the concept of modalities to
link action and institutions. According to Wil-
mott, modalities ‘provide ‘‘the coupling elements’’
whereby the analysis of the ‘‘dimensions of inter-
action’’—centred upon the communication of
meaning, the operation of relations of power and
the application of normative sanctions—is linked
to the analysis of the structural components of
social systems—where the analytical focus is upon
signi?cation, domination and legitimation’
(Wilmott, 1987, p. 259–260). In the context of busi-
ness relations between independently owned ?rms,
the more the rules of exchange are objecti?ed
through institutionalization, the lower the level of
overall uncertainty. Since recursive processes may
replicate or revise modalities, inter-?rm accounting
techniques are not static. Furthermore, inter-?rm
accounting may be viewed as a special sort of mod-
ality that varies and evolves between industries and
through time as business relationships also vary.
For example, over time, ?rms that employ target
costing may try to develop more trusting relations
that result in the more elaborate modalities of the
open book. Similarly, open book costing does not
rule out a target costing element in that ?rms may
share information as part of an attempt to achieve
target rates of return within market-driven pricing.
Fig. 1 shows the how the modalities of inter-
pretive schemes, resources and norms link struc-
ture with interaction. Crucially, as agents may
mobilize elements of the ‘vertical relations’ such as
power and sanction, structuration avoids the
dichotomy between trust and control. Fig. 1 also
shows notions of modernity, especially how the
more generalized trust in expert systems may be
related to the principles of structuration. Fig. 1 is
not intended to represent a strati?cation or ver-
tical ranking of institutions since the hierarchical
ordering of institutions and structural principles
depends on ‘the time-space extension of the prac-
tices that they recursively organize’ (Giddens,
1984, p. 17). For example, the fact that a supplier
is part of the global supply chain of an acknow-
ledged world-class manufacturer may carry more
credibility in inter-business relations than the
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 77
possession of o?cially sanctioned quality accred-
itation (Walgenbach, 2001).
Inter-?rm accounting practices as modalities
Although usually analysed in an intra?rm con-
text, modalities in accounting o?er clues as to the
nature of inter-?rm business relations. For exam-
ple, the most important modality in many situa-
tions will be entries in ?nancial accounts as even
the most casual suppliers are o?ered customary
trade credit whether or not they have a formal
contract. Other concrete traces of modalities in the
accounting domain include formal documents
such as business plans, budgets and ?nancial con-
tracts that have encoded more general insti-
tutional principles in speci?c social settings. If
supply contracts include speci?cations on quan-
tity, quality, delivery times and so on, details on
price alone may indicate quite distant relations. In
contrast, closer relations will be indicated if mod-
alities include the language of cost rather than
price; even closer relations may refer to margins or
rates of return. The implications of the latter are
that the customer may be concerned to take out
cost in its supply chain but also recognizes the
need for the supplier to make a pro?t (Seal, Cullen,
Dunlop, Berry, & Mirghani, 1999). Yet inter-?rm
relations cannot simply be analyzed through tan-
gible documents such as contracts. Even if such
formal legal documents exist they may be sym-
bolically ‘‘put away in a drawer’’. Thus, rather
than just inspecting the physical traces provided
by documentation,
5
an analysis of the modality of
interaction must try to identify how day-to-day
business relations are enacted.
Best practice by purchasing managers is now
informed by a ‘‘cost of ownership’’ approach that
explicitly calculates the complete costs of acquir-
ing a component (Baily, Framer, Jessop, & Jones,
1998). The piece price is only the most visible part
of cost with delivery, product support, quality
control, stock-holding, inspection and materials
handling all activities that contribute to total cost.
The recognition of the importance of these activ-
ities enriches the modalities of interaction in the
supply chain beyond price and quantity bargain-
ing with negotiations ranging over quantities,
quality, delivery timings, supply continuity, and
even product development (Seal et al., 1999).
Fig. 1. Modernity, expert systems and structuration.
5
Some researchers have argued that modalities are too
abstract and that the more tangible connotation of ‘scripts’ is
preferable (Barley & Tolbert, 1997).
78 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
While richer modalities imply a broader mobili-
zation of the structural principles of signi?cation,
domination and legitimation, the ability of com-
panies to draw on these resources may vary
between countries and between industries.
Although structural principles may vary between
countries (Lane & Bachman, 1996; Sako, 1992),
increases in the globalization of production have
highlighted di?erences between industries. These
latter di?erences are of more relevance to this
paper as we found that the structure of the perso-
nal computer industry is quite di?erent from that
pertaining in the car industry. In the latter indus-
try, the OEMs have tended to force year-on-year
cost reductions on component suppliers with
the result that the return on investment in the
components industry has become very low that
even long run relationships are under strain.
6
In
structuration terms, motor manufacturers have
mobilized power far more that they have com-
municated meanings and applied normative sanc-
tions. In accounting terms, rather than use the
richer modalities implied by open book account-
ing, car makers have relied far more on the
relentless application of target costing. As we shall
see in our case study, the relative power of the
component suppliers in the PC industry is much
greater than in the motor industry. In further dis-
tinction from the motor industry, there is an
industry norm of rapid technological change
that is controlled by the major component
suppliers rather than by the ?nal assemblers (Cho
& Neiman, 2002).
The distinction between the structural principles
of signi?cation and legitimation explains how
supply chain relations may become closer without
becoming more committed. Thus developments in
linking ?rms’ ERP systems and the use of intra-
and inter-nets may strengthen the modality of
communication but need not a?ect the funda-
mental norms of competitive capitalism. Indeed,
cheaper search and easier information exchange
may encourage greater ?uidity in sourcing rather
than long-term commitment (Holmstrom,
Hoover, Louhiltuoto, & Vasara, 2000).
Inter-?rm accounting: causes and intentions
Although managerial literatures generally focus
on intended action, it is evident that developments in
supply chain management and inter-?rm accounting
exhibit traits of both ‘unacknowledged conditions of
action’ and ‘unintended consequences of action’
(Giddens, 1984, p. 5). Firms may outsource
because they know that there are mechanisms for
retaining control over their supply chain. Alter-
natively they may outsource because of short-term
supply constraints and then ?nd that interaction
with suppliers results in new systems of control
through target costing and open book accounting
(Mouritsen et al., 2001). Even more unintended
consequences may result as the customer’s policy of
outsourcing results in internal changes within the
?rm as activities such as marketing and design
become more important (Mouritsen et al., 2001).
Structural contradictions and dialectics in the
supply chain
Inter-?rm accounting may be seen as a ‘system’
based on re?exive self-monitoring. The reproduc-
tion of the system is based on the ‘reciprocity of
practices’ (Giddens, 1984, p. 28) rather than any
notion of homeostatic control. Indeed, the system
is characterized by structural contradictions and
dialectical power relations. Con?ict arises because
the customer wants the lowest input cost subject
to maintenance of quality—the supplier wants
highest price possible. A collaborative or ‘‘win-
win’’ solution (at least from the ?rm perspective) is
suggested if cost is taken out of components
through better design or co-ordination, but the
temptation is always to go elsewhere. Instability
and implied threats are at the heart of power in
the supply chain. The norms of supply chain are
contradictory. More generally, as Wilmott puts it:
The existence of mutually incompatible or
contravening principles of system organi-
zation helps to explain why stability and
continuity in social systems is impermanent
and problematic and, relatedly, why con?icts
of interest arise and are worked out but rarely
resolved’ (1987, p. 264).
6
See Doig, Ritter, Speckhals, and Wooson (2001).
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 79
As in other social spheres, control in supply
chains is dialectical (Giddens, 1984). Thus even
the weakest of suppliers may be able to exert some
power over its customers. For example, even an
oppressive target costing regime may o?er oppor-
tunities for mutually bene?cial collaboration
between ?rms in order to explore ways of reducing
cost. In contrast, a more na?¨ve demand for price
cuts may merely invite short-run quality shaving
and long-run bankruptcy for suppliers that also
hurts the OEM (Lamming, 1993).
Having introduced a new theoretical approach
to inter-?rm accounting based on structuration
and institutionalized re?exivity, the paper now
goes on to present a case study. The ?eldwork was
gathered at a company in the UK electronics
industry which, in order to disguise its true iden-
tity, we have called Dextron.
Supply chain management in UK manufacturing:
Dextron and the cost management group
Case method
Our discussions with Dextron developed out of
a contact that was initially made at a CIMA
sponsored workshop
7
in February 1998. The case
study was written following three separate full day
visits made to the organization at Coletown dur-
ing 1998 and 1999. The visits included a full site
review and discussion with production managers,
interviews with members of the cost management
group (CMG), other accounting sta?, the produc-
tion manager and the senior site director. Inter-
views and discussions were also held with
managers of a Department of Industry Regional
Initiative on Supply Chains. Documentation
regarding the work of the CMG was made avail-
able and design, procurement, production and
shipping processes were observed. Further data
were obtained via follow up telephone calls and
independent archive searches. The case papers
were reviewed by members of the Cost Manage-
ment Group for factual correctness. Some data
were withheld as being commercially con?dential
and all names and places were disguised, but this,
it was agreed, did not materially a?ect the case
text.
In carrying out research into structuration,
Barley and Tolbert (1997) suggest sites should be
selected as a result of careful consideration of
‘‘factors apt to a?ect an institution’s boundaries
or that may impede or enhance organisational
change (p. 104)’’. In line with Barley and Tolbert’s
(1997) views, our method of ?eldwork was based
upon observation of change across boundaries
and data collection that involved the use of a wide
range of sources including semi-structured inter-
views, conversations during site visits, obser-
vations, documentary evidence, press cuttings and
workshops.
Company background
Dextron designed, assembled and built compu-
ters in a plant employing 300 people. The com-
pany had been in existence for some 30 years; its
head o?ce was based in the city of Midshire. The
research and development group, the product
design group and the marketing group were based
at the head o?ce. Production, procurement and
assembly of the machines took place in the town
of Coletown, some 200 miles from Midshire.
During the 1980s, when the personal computer
industry was fragmented, Dextron gained a high
market reputation for technical quality and relia-
bility. In later years, its competitors caught up
and, by the early 1990s, the company was taken
over by a Japanese conglomerate. The sales
growth of Dextron became so sluggish that by
1998 its production was less than 1% by volume
of the total European output of computers. The
market had become intensely competitive both in
terms of technical sophistication and price. The
major innovations had been in the technology of
the microprocessors and in the development of
software and operating systems. As a result of this
competitive environment, by the middle of 1998
the plant was operating below its break even level
and, indeed, a good percentage of the actual pro-
duction was being bought by the parent company
for its overseas o?ces.
7
The workshop was attended by around 30 accountants
from a variety of di?erent industrial sectors.
80 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
Product technology and the cost structure of the
business
Dextron had two main products: a personal
computer and a computer aimed at the business
market. The delivered machines consisted of four
main parts, the computer, a VDU, a keyboard and
some cabling. For both products, the micro-pro-
cessors and many assembled components such as
computer cases, hard drives, cabling and so on,
were bought in from outside suppliers. With a
high volume of UK and international production,
the VDU, the cabling and the keyboard had
become commodities and were subject to severe
price competition as were the parts for the com-
puter box. With the personal computer using a
bought-in motherboard, Dextron’s main design
contribution was the motherboard for the business
computer.
For both products, the bought-in chips were the
most expensive bought-in items, approximating to
50% of the total production cost of the machines.
Two factors were at work in the cost of chips.
First, changes in chip design and production cost
structure meant that the prices of chips were fall-
ing by about 30% per quarter. At the same time,
chip capability, both in processor speed (from
about 250 MHz in 1998 to an expected 1.5 GHz in
2001) and in capacity was being continually
increased. The capacity of the computers’ disc
drives was also increasing rapidly. Such a rapid
pace of technological change meant that Dextron
designers were faced with twin pressures of cost
reduction and product improvement. The poten-
tial for rapid obsolescence induced a speed-to-
market imperative that made cost management
techniques such as the sort of target costing often
found in car manufacturing of dubious value for
many parts of the product.
8
Another contrast with the car industry was that
Dextron could not hope to replicate that indus-
try’s pyramidal, multi-tier array of suppliers.
Dextron had three types of suppliers but they did
not ?t into a pyramidal model of descending
power and technological sophistication. At one
extreme, when dealing with international compa-
nies with very large markets, Dextron was a small
customer that had to be a price taker. For exam-
ple, although it supplied Dextron with chips, Intel
had much bigger customers such as IBM and
Compaq. Dextron was in a similarly weak posi-
tion in the software part of the supply chain in its
relations with Microsoft, whose industry standard
technology gave it considerable leverage over
issues of hardware compatibility. Dextron did
have some leverage in areas such as CD ROM
supplies and, at the other end of the dominance
spectrum, stood a third group of relatively small
local suppliers to whom Dextron was an impor-
tant customer both in terms of proportion of out-
put and as a technological leader.
Case study modalities
In the analysis of the case material in Section 4,
we will be using the idea of modalities (see Fig. 1).
In order to assist this analysis, the rest of the case
material will be located in three di?erent time
phases. Some of the description referred to here
came from conversations with Peter Thomas, who
only joined the company and the Cost Manage-
ment Group in 1996, but o?ered re?ections on
events before he joined.
Phase 1—up to 1995
Up to 1995, the purchasing organisation within
Dextron was rather ‘‘old style’’, with the purchas-
ing o?cers being expected to follow the demands
of the MRP system to get materials into the plant
to enable production to be continued. This task of
‘‘pulling the product in’’ did not include any for-
mal assessment of supplier performance, though
the o?cers did have considerable practical know-
ledge of the supply market. Peter considered that
‘‘the organisation had a great tacit knowledge
which was not available to it’’. The implication of
Peter’s view seems to be that, in this early phase,
the company had not developed systems and
practices that could e?ectively mobilize the tacit
knowledge of its employees. Paradoxically, the
company practised a curious variety of relationship
8
In another case study in the related telecom industry, we
were told that the speed-to-market imperative ruled out target
costing.
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 81
marketing with strongish bonds developing
between the suppliers and Dextron buyers.
Although the possible downside of relational pur-
chasing is seldom discussed in the management
literature, this relationship worked to the dis-
advantage of Dextron who was seen as an ‘‘easy’’
customer by many of its suppliers.
Phase 2—up to 1998
In 1995 Carl Kenson was appointed as Pro-
curement Director. This appointment followed a
review of the future of the company. It was clear
that the company had to become more ?exible in
market response for product design, development,
production and delivery. It also had to reduce its
costs. While it is true that the rapid growth and
technical speci?cation and cost reduction of pro-
duct was characteristic of this industry, it was so
‘‘because innovation in processor capacity and
speed was almost breathtaking; as was the reduc-
tion in processor prices’’ explained Peter.
Carl Kenson took the view that the company
needed an infusion of management from other
computer manufacturers. Mary Macnally was
hired from Digital as materials manager in order,
as Peter put it, ‘‘ to bring some high quality
expertise and current experience into the procure-
ment role’’.
Under severe market pressure, Dextron sought
to improve the e?ciency of its production through
the introduction of Supply Logistics Integrated
Management (SLIM). This project saw the crea-
tion of cross-functional teams with the aim of
increasing customer focus and breaking down the
former, rather compartmentalized, ‘‘silo’’ model
that had characterized the company’s production
processes. There was also a redesign and re-engi-
neering of the production plant with the resulting
Coletown E?cient Manufacturing (CEM) line
being brought into operation in 1995.
The development of the CEM line focused
attention on the supply of parts to the plant. Peter
explained that:
This new facility required more outsourcing
of components and sub assemblies than
before. The plant capacity was over four
hundred thousand units, in a single ?ow line,
with multiple assembly cells and product
quality control plant.
As well as these changes to the manufacturing
facilities, Dextron needed to drastically shorten its
product cycle. With a target of moving from a 9
months design and development cycle to a 9
months product life cycle, Mary Macnally was
working on the more e?ective integration of the
research and development, product design, manu-
facturing and procurement processes. Her view
was that:
The supply base had been stagnant and in
need of considerable attention in order to
reduce costs and remain competitive in our
demanding market place.
The new supply chain initiative began with an
analysis and then action on the supply of parts to
the motherboard production system. This parti-
cular area was chosen because it was the central
part of the machines that were developed,
designed and manufactured by Dextron itself.
Peter said that the new supply chain approach
‘‘meant that procurement needed new kinds of
buyers, with new skill sets, including bargaining
skills, data logging and supplier evaluation skills
as well as internal communication skills’’. Follow-
ing some sta? changes, not only were the neces-
sary new skills brought in, but the old cosy
relationship nature of procurement changed to a
more adversarial mode with the vigorous assertion
of Dextron’s interests.
The attack on the motherboard costs was seen
to be a considerable success and the question fol-
lowed: How can this new way of working be
applied to the other parts of the manufacturing
system at Coletown? The response was to estab-
lish, early in 1996, a Cost Management Group
(CMG). This group began with a Project Accoun-
tant, Sam Kennet, and a Project Engineer, Bill
Jones, working together on the task of cost man-
agement. The project accountant was encouraged
to manage the cost analysis and to track and
report upon the standard cost of product on a
monthly basis. The project engineer was charged
82 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
with the task of working closely with research and
development (R&D), and production in order to
design or engineer cost out of the product. How-
ever, as Sam Kennet explained:
This CMG orientation did not remain; the
group became the obvious locus and resource
for special project studies of manufacturing,
design and supplier changes. They could
work to the procurement director or to the
plant director as well as to the materials
manager, Mary Macnally.
While the accountant was a source of unique
expertise in the plant, the project engineer found
his role to be more di?cult. He was able to make
an impact upon the machine chassis designs and
cost. However, not only were the R&D and pro-
duct design groups several hundred miles away in
Midshires, but the manufacturing engineering
group at Coletown quickly took hold of any pro-
jects. Slowly, the role of the CMG project engineer
became that of an assistant. When Bill Jones left,
he was not replaced.
Peter Thomas joined Dextron and the CMG in
July 1996 bringing commercial (and purchasing)
expertise from previous roles in international
companies in the industry. It became clear to Sam
and Peter that they were working to ‘‘drag Dex-
tron up to industry standards’’. The purchasing
function was organised into two teams in order
to get focus and complementary learning and
expertise spread among the sta?. This focus led
to CMG being more project driven with many
projects initiated by Carl Kenson and Mary
Macnally.
In 1996, the CMG undertook projects on make-
or-buy decisions on components that resulted in
both more outsourcing and to the redesign of
parts into subassemblies, with consequent assem-
bly cost reduction. Time was also spent on
reviewing the lead-time given to suppliers for part
or component orders. Attention directed towards
the reduction of lead time resulted in the matching
of supply to ?exible production requirements with
a lower likelihood of having surplus parts and
stock write o? or extra stock holding. These
arrangements varied with the kinds of suppliers
and had to be negotiated without any price
increases.
By the end of 1997, the CMG was actively
involved in the reduction of supply chain costs
through the benchmarking of suppliers, value
engineering, identi?cation of total cost of owner-
ship, setting up hubs in appropriate geographical
locations, quality costs and the development of a
sophisticated Supplier Management Programme.
This last initiative represented a shift from an
operational focus on the costs of supply that had
been the previous work of the CMG to include a
managerial level analysis and consideration of the
whole management of supplier relationships.
Building on the SLIM project, the programme
introduced a supplier event log sheet system.
Managed by the buyers, this log sheet was
designed to provide the internal data for annual
supplier evaluation and, according to Peter Tho-
mas, to focus on the‘‘signi?cant and useful’’, to
elicit a response from the supplier in order ‘‘to
close the loop of the problem or issue’’. A second
feature of the programme was a quarterly supplier
newsletter to share information and progress.
Aware that they were now following best industry
practice, the CMG expected the buyers to pro-
mote the programme to the suppliers on the basis
of participation within a modernized supply chain.
As part of a gradual move towards phase 3 in
the early part of 1998, the CMG were beginning to
examine their suppliers’ suppliers to see how the
cost of parts and sub assemblies might be taken
forward. Sometimes this arose from a chance
encounter and suggestion to a supplier that they
might seek alternative quotations. In one episode
such a suggestion took $1 from the part cost, a
unit saving of over twenty percent. A similar
practice was then focussed on other costs such as
packaging and documentation.
In mid 1998, Sam Kennet left Dextron to take
up a post with another company in the region. He
was replaced by another accountant, Muir Smith.
Phase 3—1998 onwards
As Dextron’s supply chain initiative progressed,
some e?orts were made to move away from
adversarial forms of relationship to include some
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 83
collaboration for mutual advantage. The company
was aided in this new approach by the Depart-
ment of Trade and Industry’s (DTI) policy for
regional growth and development. The DTI had
encouraged the creation of regional networks of
?rms, commercial consultancies, Enterprise agen-
cies, Training agencies and University research
groups called, locally; Supply chain partnerships
for empowering Economic Development (SPEED).
These groupings were aimed to equip local ?rms
to cope with the demands of major inward inves-
tors for a network of local suppliers able to meet
the highest international standards.
The CMG had come to operate in a number of
modes; as providers of information and impetus
for change from their connection to SPEED; as
problem ?nders and solvers and as helpers in
implementation. Peter and Muir described them-
selves ‘‘as internal consultants for much of their
work’’. Although they originally had had an
agenda given to them, they had begun to set their
own agenda. As catalysts of change, they worked
both inside and outside the Dextron production
system stimulating new thinking within it. The
CMG, said Muir, ‘‘has begun to see the challenge
of the model of world class manufacturing but
Dextron could only do this in conjunction with the
parent organisation to have any impact on the
European or global levels’’.
The CMG had always produced a monthly Cost
Management Report. This report was very detailed
and included a line-by-line report on product costs,
an item by item report on parts and assembly costs;
a review of plant overheads, a comparison of the
previous month against budget, and a prediction
on costs over the next four months. The report also
contained an analysis of the reasons for variances
and expectations for cost improvements. In April
1998, the CMG cut the document’s length by
50%. Beginning with two pages of news with user
friendly text highlighting signi?cant cost issues, it
was now a focused document, tracking the costs of
particular products in considerable detail and
presenting costs trends (plan against actual) in
graphical forms together with a brief commentary
upon each product. This new presentation found
favour with the managers who liked to have a
short analysis before the detailed data.
At the beginning of phase 3, the CMG identi?ed
opportunities for a greater involvement with mar-
keting; further opportunities for benchmarking
and tear down analysis, a development of ERP
systems and a continued focus on the reduction of
inventories. Almost all of these initiatives implied
a switch from the initial ad hoc work of the CMG
to a greater systemic involvement of supply chain
ideas across all of the operations of the company.
By late 1998, Peter said that they had ‘‘worked
over the issues in operations of the supply system
and that the next steps would be more di?cult’’.
They were seeking to move up a level to consider
the management of the supply system. In this, they
noted that the progress they had made had been
through analysis and improvement in the plant at
Coletown, but also in the‘‘tougher minded and
more professional relationship with their suppliers
and with their internal customers’’, said Muir.
They had ceased being an easy customer, now they
were seeking to gain initiative in the management
process, to keep suppliers on their toes but to also
search for the bene?ts of a more open and colla-
borative relationship.
Some re?ections on the CMG and the evolution of
supply chain accounting at Dextron
Whilst it has been impossible to unravel the
e?ects of all the work undertaken, Peter said,
‘‘that their e?orts had led to total direct savings of
between $8 and $10 million dollars during the
previous two and a half years’’. The CMG did not
claim that this was due to their unaided e?orts:‘‘it
has been achieved by the consistent e?orts of the
whole team at Coletown, their willingness to make
new ideas work, the willingness of the senior
managers to listen, to support good ideas and to
clear paths for implementation of them’’ said
Peter. As well as substantial direct and indirect
cost reductions, there were reductions in working
capital (via inventory control), which produced an
improvement in product margins and asset turn-
over that fed directly into pro?tability. Some of
these virtuous e?ects had been masked (indeed
overwhelmed) by the losses made by Dextron as it
has operated at 50% below its break-even volume.
Realising that the concept of ‘‘relevant costs ‘‘ was
84 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
central to the make-or-buy decisions, the CMG
recognised that the standard cost model may not
meet all of the emerging needs for life cycle costs
in the rapidly changing product environment.
CMG were searching for a new cost model that
would more accurately re?ect the actual oper-
ations of the supply system.
While the Cost Management Group label accu-
rately described well their initial remit, it no longer
re?ected their thinking as they moved towards
phase 3. The role of the accountants in the CMG
was broadened as they took on extra production,
commercial, organisational, and change manage-
ment roles in addition to the substantive account-
ing contribution that they were making. Indeed,
over time, they extracted the cost monitoring and
control function from the ?nance function. The
marketability of these new skills was demonstrated
when the accountant who left Dextron was
appointed to a senior position at a clothing com-
pany on the basis of his work in supply with
CMG. Re?ecting on the expanded role of
accountants within the group, the CMG thought
that the relative dominance of accountants was
largely an accident of geography. The original
engineering role had not developed because of the
split site and the availability of manufacturing
engineering at Coletown. CMG members won-
dered whether there would have been signi?cant
di?erences in CMG approaches, sta?ng and
impact had they been located at Midshires.
Postscript: Just after the observation period,
Dextron closed its Coletown factory and pulled
out of the personal computer industry altogether.
Just as it had tried to relexively monitor its own
supply chain, Dextron’s major customer, a
national retail chain, had decided not to proceed
with a major contract. The chances of ever using
the capacity of the plant had completely vanished
and the best e?orts of the CMG were ultimately
unable to save the local industry from its global
competitors.
Interpreting the case through structuration theory
Structuration theory invites researchers to
explore both the institutional framework and the
in?uence of the strategic action of key players. At
the outset of our ?eldwork, we could identify
mimetic in?uences coming from the institutional
realm. CMG were not enacting totally new prac-
tices. Their initiatives had been encoded from the
supply chain philosophy of Dextron’s new Japa-
nese owners as well as from the procurement
executives that had been brought in to the com-
pany from outside. The receptivity of the company
to change was partly in?uenced by the change in
ownership, partly by the new plant con?guration
and partly by the abiding sense of crisis as the
company struggled to make a pro?t. Past practices
were relatively easy to ‘‘de-institutionalize’’ (Oli-
ver, 1992) with rapid technological changes and
?erce competition constantly challenging all
aspects of performance. It could be argued that
the challenge for Dextron was that although, as a
company, it was as highly re?exive as its more
sophisticated global suppliers, this re?exivity did
not extend to some of its local suppliers. Thus
these suppliers became a target for action by the
company and by the DTI as they both sought to
‘‘modernize’’ the local industrial region.
CMG began its approach through a number of
projects that were not always intended to be
replicated. The most obvious modality that did
become replicated was CMG’s monthly supply
chain report which itself went through a series of
revisions. Our case also suggests that we should
expect to ?nd a variety of modalities depending on
the relations with speci?c suppliers. Although we
have emphasized the role of strategic conduct by
CMG, we have shown that its ‘‘degrees of free-
dom’’ (Archer, 1982) depended on modalities of
domination that were in?uenced by market and
technological factors. Local ‘‘metal-bashers’’ and
cable makers could be cost-managed through
direct inspection with suggested changes to com-
ponents integrated into Dextron’s product cycle.
In contrast, CMG was forced to be passive in the
face of the resources and market power of the chip
and software giants. Neither physical inspection
nor open book costing could be on the agenda for
a customer of Dextron’s small size and technologi-
cal subordination. In any case, the chip producers
were regarded as being world-class manufacturers
who were quite capable of optimizing their own
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 85
product processes without taking advice from
their customers (Cho & Neiman, 2002).
Since the scope for strategic action was largely
limited to its smaller suppliers, Table 1 sum-
marises these supply chain practices using the
notion of modalities as shown in Fig. 1. Each box
represents a phase in the evolution of the supply
chain and should be viewed as a set of modalities
rather than a single modality. There seemed to
have been three main phases in supply chain
management at Dextron. Taking the pre-1995
period as phase 1, the transaction atmosphere was
characterised by cosy but arms-length procure-
ment in manufacturing. The institutional realm for
Dextron’s supply chain was notable for its laissez-
faire attitudes. Contract law was nominally the
main formal institution but as we have noted,
supply chains in UK manufacturing were custo-
marily governed on a non-contractual basis. In
this phase production was embedded within the
factory and through a network of local suppliers.
Although it was clearly modern in its product and
technology, Dextron was relatively unre?exive with
respect to its supply base. The main form of inter-
?rm accounting was a conventional set of ?nancial
accounting and ?nancial management practices.
The initial impetus for changes in supply chain
management was triggered by the installation of
new plant that involved an increase in out-sour-
cing. Under pressure from competitors and
encoding supply chain management developments
in other parts of manufacturing, Dextron enacted
new practices in the supply chain, particularly
value engineering and teardown analysis. The
changes involved a ‘tougher minded and more
professional relationship’ with their suppliers and
with their internal customers. Dextron ceased
being an ‘easy customer’ gaining the initiative in
the management process with the aim of keeping
‘suppliers on their toes’. The bene?ts of changes in
practice were appropriated by Dextron rather
than shared out with its supply chain ‘‘partners’’.
This phase was characterized by the disembedding
of both internal production and previous business
relations. Dextron became more re?exive in its
approach to its suppliers. Of course, it could also
become a victim of the re?exivity of its more
powerful suppliers and customers.
9
Referring back
to Fig. 1, the changes thus established in phase 2
involved the domination/power, signi?cation/
interpretive scheme and legitimation/norm dimen-
sions. The new plant lay-out and the new supply
relations were legitimated through reference to
changing industry norms of increased outsourcing
and process re-engineering. The recruitment of
executives from competitors served to reinforce
the mimetic nature of the changes.
Table 1
Case study modalities
modalities institutional realm key actors at ?rm-level
phase 1
arms length contracting price negotiation
?nancial accounting
common law buyers responding to
production demands
phase 2
closer relationship with suppliers/cost management
based on physical inspection of suppliers/monthly
CMG report/series of ‘‘one-o?’’ projects
Japanese owners/imitation
of competitors and practices
in other industries
CMG new sta? including
new Procurement Director
phase 3
more communication/consultation with suppliers
newsletters, etc. Supplier management programme/
SLIM
regional networks sponsored
by the DTI SPEED
CMG
9
For example, some of the over-capacity had resulted from
a failed contract with a major national retailer.
86 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
The third set of supply chain modalities at Dex-
tron in phase 3 involved a search for the bene?ts
of more open and collaborative relationships as
the CMG drew on the new institutionalized prac-
tices stemming from the DTI initiative. This phase
could be seen as an attempt by some entities in the
supply chain to reembed their business relations.
The intervention of the DTI opened up two new
possibilities in comparison with phase 2. First,
Dextron’s supply chain initiatives could be seen to
have a wider legitimacy with inter-?rm relations
sanctioned by third party, governmental media-
tion. No longer uniquely associated with the
assertion of power relations, the new practices
were legitimated to suppliers as the enactment of
new industry norms. Second, practices stood a
better chance of being replicated and routinized.
As well as monthly CMG reports, the supply man-
agement initiatives by CMG could be seen as being
driven by an on-going programme of continuous
change rather than just a series of one-o? projects.
The CMG as an expert accounting system
Drawing on Giddens (1991a), we have already
identi?ed some general properties of accounting as
an expert system in both dis- and reembedding
supply chain relations. We can now develop our
argument in the speci?c context of Dextron and
the CMG. As it evolved from its early remit, the
CMG eventually developed a special sort of
autonomy. Working as a small multi-functional
team that operated alongside the standard operat-
ing routines of the company, it became a source of
institutionalized change. The CMG’s autonomy as
‘‘internal consultants’’ enabled it to lead inno-
vation in the organization of its supply and pro-
curement. Freed from the time cycles of the
accounting and reporting structures in Dextron, it
was able to operate across boundaries both within
the organisation and outside it. The ability to
break out of a reporting time-frame appears to
have been crucial to the CMG for it was able to
take both a short-term project focus and a longer-
term development perspective. The CMG came to
be seen as a repository of expert knowledge and as
the centre of a network of supply chain practices
both within Dextron and with its suppliers.
In some respects, the CMG constituted an
accounting regime (Jones & Dugdale, 2001). Jones
and Dugdale interpret accounting as being ‘in?u-
ential in de?ning positions, reporting exchanges,
allocating resources, and thus shaping actors’
identi?cation of their interests’ (2001, p. 38). This
broad de?nition of accounting suggests possible
con?icts. More speci?cally in the context of a
supply chain, accounting is faced with a tension
between its role of identifying the competing
interests of individual capitals and its calculative
practices, such as life cycle costing, which may
demonstrate the gains of collaboration along the
supply chain.
The supply chain in manufacturing, in parti-
cular, with its technological interdependencies
between processes is generally reembedded
through engineering and operational management
including systems of quality assurance. It is thus
perhaps not surprising to ?nd that in other
empirical studies (see e.g. Seal et al., 1999), supply
chain partnerships in manufacturing tend to
?ourish better when the traditional accountant is
sidelined by the engineer. Di?erences between
?rms’ ?nancial and costing systems can generate
misunderstandings that are so serious that they
threaten those aspects of the partnership that are
genuinely collaborative. Open-book negotiations
between two private systems of accounting reg-
ulation may be hampered by primitive forms of
internal costing and cost control of procurement
(Kearney, 1995; Seal et al., 1999). While the
accountant is a somewhat ambivalent latecomer to
the bene?ts of a value chain perspective, the engi-
neer can access a knowledge base that is more
naturally focused on issues of product function-
ality, manufacturing processes and supply chain
logistics.
Although it tried to create and embrace a multi-
functional perspective, the CMG was hampered
by the lack of experts that could combine technical
and commercial concerns. In contrast to industries
such as the Japanese car industry (Lamming,
1993), the dominant professional in?uence on
supply chain management at Dextron was
accounting rather than engineering. It was perhaps
characteristic of an accounting orientation that in
phase 3, Dextron chose to tighten ?nancial controls
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 87
rather than introduce greater variety in perfor-
mance measurement. Thus although there was
increased legitimation of many new supply chain
practices, there was no parallel expansion in the
communicative role of accounting. With the
absence of other forms of expert knowledge for
largely geographical reasons, the accountants in
CMG were almost heroic in their e?orts to expand
their traditional accounting repertoires. Ulti-
mately, however, they were hampered by the nar-
rowness of their expertise and the lack of head
o?ce support.
Whatever the limitations of its knowledge base,
the CMG could still be seen as a prime source of
institutionalized re?exivity at Dextron. It devel-
oped an independent capacity to monitor cost and
product information both within and outside the
company. Through its attempted enactment of
best practices in the industry, the CMG e?ectively
routinized product and process changes through-
out Dextron’s supply chain.
Strategic conduct in PC supply chains
Our ?ndings on the increased disembedding of
PC production processes were consistent with
other research on UK manufacturing which has
found a signi?cant gap between the rhetoric of
partnership and the reality (Frances & Garnsey,
1996). The absence of industry standards and/or
any form of public regulation leads to a lack of
common standards about cost issues that then
have to be negotiated on a di?cult ad hoc basis
(Seal et al., 1999). Structuration theory can be
used to understand how ?rms may strategically
construct their own systems of regulation for their
supply chains sometimes acting through alliances
with other ?rms and public agencies (Hines, 1994)
and sometimes in a more autonomous and domi-
nant fashion (Frances & Garnsey, 1996). With the
globalization of industries such as PC manu-
facturing, the key structural principles are indus-
try- rather than country-speci?c. The industry
exemplar for PC manufacture is Dell Direct
(Kuglin & Rosenbaum, 2001). Dell has established
a make-to-order system that accepts that the main
direct innovation now comes from suppliers, that
the PC has a life cycle of 3 months to 2 years and
that 50% of pro?ts must be achieved within the
?rst 3–6 months of the life cycle. Deep discounting
when new processors, operating systems or mem-
ories are introduced, means that components
become obsolete very quickly. Supply chains are
no longer linear but networked
10
while ‘informa-
tion moves independently of product at internet
speeds’ (Kuglin & Rosenbaum, 2001, p. 59). The
key to success for the PC manufacturer is the
integration of sales and marketing with opera-
tional decision-making while synchronizing multi-
ple supply chain partners. From this perspective,
we can see that Dextron was playing ‘‘catch-up’’,
struggling to achieve the sophisticated co-ordina-
tion and strong marketing presence that was
rapidly becoming industry standard.
Conclusion
Adding to the literature on accounting and sup-
ply chains (Hopwood, 1996; Gietzmann, 1996;
Frances & Garnsey, 1996; Seal et al., 1999; Van
der Meer-Kooistra & Vosselman, 2000; Seal &
Vincent-Jones, 1997; Tomkins, 2001, Mouritsen et
al., 2001), the paper has developed an application
of structuration theory to inter-?rm accounting.
By adopting a structuration analysis, we have
shown the interplay between the realms of action
and institution over a period of time. Aided by
some governmental supply chain initiatives, our
case study company Dextron did try to broaden
its repertoire of supply chain relationships through
a form of microcorporatism. However, we found
that its ability to enrich the modalities in its supply
chain was heavily in?uenced by the power/dom-
ination nexus (Giddens, 1984). To some of its
suppliers, Dextron represented a very small player
that had to accept forms of accounting communi-
cation (price, quantity and a given quality) deter-
mined by the supplier. These suppliers were not only
large in market terms but they typically possessed
10
Signi?cantly, Kuglin and Rosenbaum (2001) argue that
industry networks include di?erent companies but also involve
governmental and ?nancial institutions. They do not elaborate
on their inclusion of such institutions but their view of net-
works is clearly consistent with the construction and main-
tenance of abstract systems and regulatory regimes.
88 W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92
sophisticated proprietorial knowledge that they
would not share with any of their customers. In
other relationships where it was the dominant
player, Dextron could require a much higher level
of disclosure involving issues on design, quality
and cost. Here again the domination was based as
much on technological sophistication as on mar-
ket power.
Although we have focused on structuration the-
ory, we have supplemented the model by arguing
that changes in supply chains and the role of
accounting may also be understood as wider
manifestations of modernity as elaborated by
Giddens (1991a, 1991b). Our approach focuses on
the possibilities that relations may be disembedded
and reembedded through the interaction between
local action and wider systems of abstract and
expert knowledge (Giddens, 1991a). Structuration
theory o?ers a way out of a number of unresolved
theoretical and empirical problems in the supply
chain literature. Given that it is often empirically
di?cult to distinguish between behaviour caused
by trust and similar behaviour induced by power
(that is, fear of some sort of sanction), in a struc-
turation perspective, interactions between ?rms
are informed by complex combinations of power
and morally sanctioned modalities. Trust is seen as
being a generalized faith in abstract systems rather
than linked to a particular inter-?rm relationship.
Accounting is merely one of these abstract systems
in a supply chain management, which is also sup-
ported by other abstract systems such as market-
ing, purchasing, quality assurance and logistics.
Rather than the more traditional categories of
‘‘?nancial’’ and ‘‘management’’ accounting, we
argue that accounting should be seen as a set of
institutionalized practices that may be employed
both within and between ?rms. In this context, the
impact of extra information is ambiguous as it
may lead to more ‘‘shopping-around’’ by supply
chain ?rms rather than closer relations. In short,
as an important source of ?nancial and cost
information in supply chains, accounting may
contribute to both dis- and reembedding pro-
cesses. The case provided evidence of tensions
between the trust constructed through abstract
systems and the risk associated with the increased
re?exivity of supply chain actors. We submit that
‘‘modern’’ supply chain relations are inherently
fragile. As Jones and Dugdale argue ‘(T)he meta-
phor of the juggernaut points to immense power
in modernity—economic, political, and social—
mobilized at global level and permeating local
contexts. This power, in large part, is generated by
expert systems, and we hope they will control it;
but this hope is poised in precarious balance
between trust and scepticism (Jones & Dugdate,
2002, p.125).
Our case study described the formation of a
special team, the CMG, that evolved from initia-
ting some ad hoc studies on cost reduction to
become a focus for continuous change in supply
chain practices. Although the team was multi-
functional, it became dominated by accountants
who did their best to promote best practice in
Dextron’s supply chain. The group’s attempts
were partly hindered by the lack of head o?ce
support and partly by the lack of other forms of
expertise such as engineering and marketing. As it
progressively enacted a programme of incessant
change in supply chain practices, the CMG repre-
sented an excellent example of how inter-?rm
accounting can become institutionalized. Our
?ndings on the activities of the CMG supports our
submission that inter-?rm accounting institu-
tionalizes the disembedding and reembedding
processes by routinizing the re?exive monitoring
of supply chain relations.
The structuration approach to inter-?rm rela-
tions elaborates Tomkins (2001) position that ‘the
accounting information needed is itself a re?exive
product of the developing negotiation’ (p. 163).
Thus although we found no applications of sug-
gested techniques for inter-?rm accounting such as
open book costing and sanction budgets, the lim-
ited nature of the inter-?rm accounting was not a
result of the technical inadequacy but rather a
re?ection of the lack of shared destiny type rela-
tions in the electronics industry. Managers can try
to change business relations but their degrees of
freedom are bounded by their own strategic cir-
cumstances especially their relative possession of
market power and proprietorial technology. They
may, in particular, try to reembed their supply
chains by attempts to legitimise collaborative
relations. In our case company these attempts
W. Seal et al. / Accounting, Organizations and Society 29 (2004) 73–92 89
were aided by central government initiatives to
modernize the local economy. Ultimately,
although the ?rm was engaged in the dialectic of
the local and the global (Giddens, 1991b), its own
local e?orts could not prevent it becoming a vic-
tim of global competition.
The rhetoric of close relations in supply chains
through target costing and open book accounting
has obscured the longstanding role of accounting
in enabling transactions that are distanced
through space and time. Newer technological
developments such as the internet merely increase
the level of re?exivity and the rate of disembed-
ding. Paradoxically, the electronics industry has
made a vital contribution to the increasing ‘vir-
tuality’ of business relations. Greater trust in the
pro?tability of arms-length relations have
increased the volatility or risk in the supply chain
making local attempts at reembedding increas-
ingly vulnerable to reappraisal via a worldwide
engine of comparison.
Future research may be directed towards some
of the paradoxes and unmeasured costs that have
been described in this study. Institutional theory
focuses attention on identifying lines of continuity.
If a particular ?rm can no longer be seen as the
locus of embedded practices then what continues?
With an optimistic reading, the stocks of know-
ledge on production practices are still carried by
those agents who go on to further their careers in
other supply chains. In addition, the signi?cation
structures embodied in standard operating pro-
cedures, consultancy packages and local industrial
networks are still potentially available to other
?rms and industries. Thus, while a particular ?rm
may have dissolved, the general technology of the
supply chain may be recursively re-constituted
(Orlikowski, 2001).
More pessimistically, however, such reconsti-
tution may only occur in another place at another
time, making the ‘‘savings’’ claimed by the CMG
group look both trivial and illusory in comparison
with the destructive consequences of high social
and regional dislocation costs. Indeed, rather than
saving Dextron, the industrial processes espoused
by the CMG are shown to be ‘as much con-
stituents of a world out of control as a means of
controlling it’ (Bryant & Jary, 2001, p. 29). The
institutionalized re?exivity of the computer industry
has not only squeezed subordinate suppliers, as
was intended by the original actors but, less pre-
dictably, has progressively decentred the once
dominant OEMs. More generally, further work
needs to be done on how to foster a regional
industrial policy that recognizes that the existence
of local ?rms cannot simply be assured on the
basis of the uncritical and piecemeal adoption of
perceived world class practices.
Acknowledgements
We would like to thank Anthony Hopwood and
two anonymous referees for their comments on
earlier drafts of this paper. We would also like to
thank the research board of CIMA for ?nancial
support.
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