Research On Supply Chain Cost Management Based On Principal-Agent Theory

Under the background of economy globalization and market competition increasingly fierce, the enterprises have been unable to meet the changes in the market only by self-adjustment relied on their resources. The vertical management model has gradually substituted by the horizontal management model. Marketing competition has changed from single enterprise to the whole supply chain. Cost management extended to the whole supply chain has become the breakthrough point of corporation obtaining the competition and cost advantages.However, existing inconsistency of interest and information asymmetry in principal-agent relationships leads to principal-agent problem in supply chain, which causes supply chain cost increased. Based on this, this article applies principal-agent theory to supply chain management, uses normal research and case analysis as main research methods. On the basis of introduction about basic theoretical foundation and basic methods of supply chain cost management, the article researches on supply chain cost management under principal-agent relationships. Through analyzing conflict of interest between enterprises in supply chain, the article provides the basic methods and model to solve the problem. It also discusses the necessity of using cost management and relevant safeguard mechanism together in solving problem, and further discusses the solutions of supply chain cost management under principal-agent relationships. Finally, the article further discusses with a case analysis about supply chain cost management in Baoshan Iron and Steel Group.The main contributions of this article include the following: First, on the basis of production cost, activity-based cost and transaction cost, the paper defines the specific cost composition caused by logistics, cash flow and capital flow in supply chain. It shows that supply chain cost management should integrate strategic cost management, lean cost management, principal-agent theory, inter-organizational cost management as its theoretical foundation, and uses value chain analysis, target costing and activity-based costing in cost management. Second, through analyzing the conflict of interest and the resulting cost lost in supply chain, the paper applies the principal-agent theory to supply chain management, which realizing cost control during resolving the principal-agent problems at the same time. Based on mutual trust and information sharing between enterprises in supply chain, through integrating target costing and activity-based costing from the perspective of product life-cycle cost, the paper provides the framework of supply chain management under principal-agent relationships.