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Buyer Power In Supply Chain Essay

3197 words - 13 pages

Supply Chain StrategyAbstractThe report discusses the buyer power and its impact in the supply chain. At the national level, retailer power is seen to be of concern and the subject of inquiries by competition authorities. The retail concentration can be socially beneficial where it results in buyer power that can be used to counter market power of manufactures. Contrarily, some observers argued that buyer power may ultimately damage the supply chain because they think there may be longer-term detrimental effects, such as forcing manufactures reduce investment on new products and, in the process cause wholesaler prices to small retailer to rise. The report aimed to outline the ongoing debate and to prove that buyer power is beneficial to the supply chain through the fresh food supply chain study.1.IntroductionHandfield and Jr defined Supply chain as encompassing all activities associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information flows. Materials and information flow both up and down the supply chain.Supply chain are essentially a series of linked suppliers and customers, every customer is in turn a supplier to the next downstream organization until a finished product reaches the ultimate end user (Handfiels and Jr, 1999). In a word, it aims to deliver right product in the right place at right time at the right cost. Power influences that get what, when and how (Hograrth-scott, 1999). A firm is defined to have buyer power if, in relation to at least one supplier, it can credibly threaten to impose a long term opportunity cost which, were the threat carried out, will significantly disproportionate to any resulting long term opportunity cost to itself (Dubson et al, 2000). Inderst (1981) defines Buyer power as "A situation which exists when a firm or a group of firms, either because it has a dominant position as a purchaser of a product or service or because it has strategic or leverage advantages as a result of its size or other characteristics, is able to obtain from a supplier more favourable terms than those available to other buyers". Oecd give a example in the Dubson's article which, retailer A has buyer power over supplier B if a decision to delist B's product could cause A's profit to decline by 0.1 per cent and B's to decline by 10 per cent(Dubson et al, 2000). In the first section of the report, the variable supply chain is outlined, the second section discuss the buyer power of retailers and its impact in UK food supply chain via the analysis of vegetable supply chain and, the final section conclude the report that buyer power is beneficial to the operation of supply chain. Meanwhile, retailers can't abuse the buyer power.There is consensus throughout the literature, defining power as the ability to institute change in another agent's behaviour in a direction, which it would not freely tend, and in a direction favoring the influencer's utility...

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