The dynamic relation between management control and governance structure in a supply chain context

Abstract

Purpose The purpose of this paper is to show that local management control systems within supply chain organisations and the governance of supply chains are intertwined and that local control systems and governance structure have an important effect on the functioning of the supply chain. Design/methodology/approach The paper reports on a case study of a supply chain and examines how local management control systems within the participating organisations affect cooperation between the organisations in the supply chain. In the case study, a supply chain, including eight food manufacturers, two logistic service providers, and two retailers, is investigated. Findings The behaviour of several entities in the chain is explained by examining the present local management control systems. The main conclusion is that these systems call for behaviour that is not congruent with the broad supply chain objective. Research limitations/implications The research is based on a case study in one supply chain that has mainly a cost‐minimisation objective. Further in‐depth studies could be undertaken in supply chains with other objectives to further validate the findings. Practical implications The paper demonstrates that the local management control systems may hinder the achievement of the supply chain objective. Possible design implications for both local management control systems and governance structures in the supply chain are outlined. Originality/value The paper focuses on local information sharing concerns and on local performance measurement and incentive issues at the intra‐organisational level but within a supply chain context.

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