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The Cost Effects of Component Commonality: A Literature Review Through a Management-Accounting Lens

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  • Eva Labro

    () (Department of Accounting and Finance, London School of Economics, Houghton Street, London WC2A 2AE, United Kingdom)

Abstract

In this paper I review the component commonality literature through a management-accounting lens, focusing on the cost effects of an increase in the use of the same version of a component across multiple products. The bulk of this literature is of a theoretical nature, for example, analytical models, programming models, or conjectures based on casual observations of practice. Some of this literature purports, especially in introductions to the topic, that cost generally decreases with increasing commonality. However, based on a review of the theoretical literature using an activity-based costing framework and distinguishing between cost-driver and cost-rate effects, I conclude that the cost picture is more subtle. In other words, it is too early to make any general statement about the effect of increasing commonality on total costs. Moving to the limited empirical literature on the topic, consisting of case studies (sometimes combined with simulation) and empirical research on larger data sets, the conclusion that there is even more room for future research becomes evident.

Suggested Citation

  • Eva Labro, 2004. "The Cost Effects of Component Commonality: A Literature Review Through a Management-Accounting Lens," Manufacturing & Service Operations Management, INFORMS, vol. 6(4), pages 358-367, June.
  • Handle: RePEc:inm:ormsom:v:6:y:2004:i:4:p:358-367
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    File URL: http://dx.doi.org/10.1287/msom.1040.0047
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nils Boysen & Armin Scholl, 2008. "A general solution framework for component commonality problems," Jena Research Papers in Business and Economics - Working and Discussion Papers (Expired!) 12/2008, Friedrich-Schiller-University Jena, School of Economics and Business Administration.
    2. Thyssen, Jesper & Israelsen, Poul & Jorgensen, Brian, 2006. "Activity-based costing as a method for assessing the economics of modularization--A case study and beyond," International Journal of Production Economics, Elsevier, vol. 103(1), pages 252-270, September.
    3. Israelsen, Poul & Jørgensen, Brian, 2011. "Decentralizing decision making in modularization strategies: Overcoming barriers from dysfunctional accounting systems," International Journal of Production Economics, Elsevier, vol. 131(2), pages 453-462, June.
    4. Brun, Alessandro & Capra, Eugenio & Miragliotta, Giovanni, 2009. "VRP revisited: The impact of behavioural costs in balancing standardisation and variety," International Journal of Production Economics, Elsevier, vol. 117(1), pages 16-29, January.
    5. Jans, Raf & Degraeve, Zeger & Schepens, Luc, 2008. "Analysis of an industrial component commonality problem," European Journal of Operational Research, Elsevier, vol. 186(2), pages 801-811, April.

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