A transfer pricing apparatus for measuring value added along the supply chain: Reflections for internet based inter-organisational relationships

Inter-firm communication through advanced technology such as the internet, adds value to supply chain organisations through speed of information transference at a lower cost than traditional communication modes. However, the sharing of sensitive market information relies upon a strong inter-organisational relationship presence, displaying intangible qualities such as trust and commitment. These value added relational based characteristics are not as yet easily measured. This paper introduces and explains the concept of measuring value added along the supply chain from a transfer pricing perspective. This non-conventional supply chain (value-chain) perspective invites the reader to consider measuring added value as it moves between organisations using a model which encourages congruent behaviour between supply chain partners. A proposed model adapted from the Balanced Score Card model (Kaplan and Norton, 1996) provides a tool to measure tangible and intangible value between firms using transfer pricing. It is argued that embracing and appropriately engaging with this model will enable organisations to better measure intangible inter-organisational relationship qualities, thus providing organisations with the confidence to exchange sensitive information through mechanisms like the internet as a means of enhancing supply chain performance.