Managing Suppliers: Incentive Systems in Japanese and U.S. Industry

U.S. industry is changing. More work is being subcontracted; longer-tern relationships are being developed with fewer suppliers; suppliers are being given more design responsibilities; and there is more monitoring of suppliers' quality. These changes, moving U.S. business practices closer to Japanese business practices, recognize the indubitable success of Japanese methods of organizing production. This article examines the structure of incentives offered to supplier firms in Japan and compares them with U.S. practices.