In relation to the research on the supply chain system, in the absence of the premise of unfairness, the theory of long-term continuous transaction is becoming widely used for explaining the system's efficiency. Also, this theory is shifting the emphasis from the 'hostage' to the 'process' as the main factor for its efficiency. Until now, the conventional analysis on the supply chain system has been limited to the relationship between the automobile manufacturer and the first-tier supplier. This paper considers if the theory of process holds true for the lower structure of the supply chain system and this consideration is crucial for understanding the entire picture of the supply chain system. According to the elaborate research by Shiomi (1985), despite the fact that there are only a few firms that have a capital relationship with clients, his paper illustrates that the functional integration achieved by 'Kanban' is being implemented up to some proportion of the third level transaction. However, that paper has the following problems. Firstly, regarding the object of this analysis, the paper put forward the same premise as Kaneko (1978) that the supplier association represents the entire suppliers at the second level transaction. Secondly, like the conventional studies that fail to approach the issue from managerial standpoint, there is a lack of consideration for the transaction amount, an important assessment criteria from a managerial standpoint. For the analytical purpose, this paper includes the entire part suppliers for Aisin Seiki, and considers correlation between different criteria such as transaction amount and capital relationship. The results are as follows: Firstly, at the second level transaction, the supplier association does not encompass the entire suppliers either in the number of suppliers or in terms of the amount of purchases. Secondly, given that the capital relationship is a kind of hostage, it follows that the hostage is important for the second level transaction. Thirdly, the hostage tends to work to the second-tier suppliers' disadvantage.
