Japanese firms are opting to blur their organizational boundaries in many ways. Approaches adopted include sharing research and development projects, placing their employees in other firms, and the development of inter-organizational cost management systems. Blurring organizational boundaries improves the efficiency of the entire value chain from raw material to customer. Organizational blurring typically occurs when information that is critical to one firm is possessed by another firm either further up or down the value chain. The two or more firms then create relationships that share organizational resources including information. The sharing of resources improves both inter and intra organizational coordination. A field study analyzing the cost management practices of three Japanese firms in the same supplier chain identified the development of inter-organizational cost management systems. These systems are designed to create downward cost pressures on the entire supplier chain. This pressure is achieved through several different mechanisms including target costing systems, minimum cost investigations, and quality-price-functionality tradeoffs. These mechanisms relieve sales of the responsibility for pressuring manufacturing on cost and allows them to focus on other areas of coordination between the functions. The objective of these inter-organizational systems is to identify innovative ways to reduce the cost of the products supplied by the chain. In theory, these mechanisms should result in lower cost products by allowing all of the firms in the chain to share information. This sharing leads to better solutions to the cost reduction problem. By designing products jointly, the firms can try to reach a global minimum cost instead of a series of local minimum costs.
