Management control of supplier relationships in manufacturing: A case study in the automotive industry

This paper studies management control system design of supplier relationships in manufacturing, a supply chain phase currently under-explored. Compared to supplier relations during procurement and R&D, which research found to be governed by a combination of formal and informal controls, supplier relations in manufacturing are more formal, so that they could be governed by more formal and less informal controls. In order to refine management control theory, we propose a theoretical framework specifically adapted for the manufacturing phase. This framework is investigated by means of an in-depth case study of the supplier management control system of a Volvo Cars production facility. We identify three types of suppliers that visualize the associations in the framework and illustrate the framework’s explicative power in automotive manufacturing. Furthermore, the case contradicts that supplier relations in the manufacturing phase are governed by little informal control, because the automaker highly values the role of trust building and social pressure. Most notably, a structured supplier team functions as a clan and establishes informal control among participating suppliers, which strengthens the automaker’s control on dyadic supplier relations