Munson et al 1999 - 11 The Use and Abuse of Power in Supply...

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Click to edit Master subtitle style The Use and Abuse of Power in  Supply Chains Sept 13, 2010 11
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Background This article examines the  power tactics  between supply chain members  and further explores the retaliatory actions taken in response by the  abused chain members. The relationship between supply chain members is not always  symmetrical. In a supply chain, companies try to  exercise power  in five main areas: Pricing control I nventory control and JIT, O perations control, C hannel structure control,  I nformation control Facing the pressure, the smaller supply chain members can either comply  or retaliate. 22
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Pricing Control Large companies, using power derived from market centrality and  dominance,  demand lower prices or quantity discounts  from their  suppliers. Ex. Wal-Mart, a notorious “hardball” negotiator.  Suppliers cannot afford  to not sell to the massive customer base. Manufacturers may print prices directly onto the label of the  products to control the perceived quality. Ex. Books, snacks, and greeting cards 33
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Inventory Control and JIT Depending on the relative power of companies, the manufacturer  could demand Just in Time (JIT) delivery, or it may have to pay a  surcharge to receive it. Ex. Rainbird Inc. pays Connor Formed Metal an additional $.02 cents per  unit for JIT delivery of springs. However, this can also have the effect of heightening the companies  dependence on specific suppliers.  By switching to JIT, the suppliers  become irreplaceable, as a disruption in deliveries would be disastrous to  the manufacturer.  This creates an obvious power shift to the suppliers.
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