Building efficient supply chains for the retail industry: role of power in the supply chain negotiation process

Abstract

An important part of building efficiency in the supply chain is building effective long-term relationships with the supplier or the manufacturer The relationship should be such that both parties can gain from it For that, there is a need for both parties to bring together their sets of complimentary skills and efficiencies. The process of building such relationships passes through stages of extensive negotiations. In this paper, we analyze the process of such negotiations. We study a past attempt at using an analytical model of collective action - the Coleman Model -for modeling the negotiation process. We make a critical analysis of a laboratory simulation of the negotiation process using this model We identify issues related to the measurement of the parameters used in the model, channel member power and cost benefit. We address the issue of channel member power in detail and propose modifications to the Coleman Model We then describe a laboratory simulation process carried out to test the validity of the proposed modification. Finally, we summarize some issues that arise from the simulation and from a literature review of past research. The proposed modification to the Coleman Model is in the general channel member power that is unrelated to specific product situation(s) for which the negotiation process is being carried out It should also be included or taken into consideration in this model, as this power is likely to affect the actual negotiation process. The reasoning is that channel members have fairly accurate perceptions of the power of their negotiating partners. It is hoped that taking this power into account will increase the predictive accuracy of the Coleman Model The simulation exercise carried out with the modification is found to support this thinking.