Analysis of relations of power among actors in the fresh vegetable supply chain in supply chain management
A supply chain refers to a system of organizations, activities, technology, information, resources and people involved in moving a service or product from the producer or supplier to the end-customer. On the other hand, supply chain management (SCM) is the planning and management of every activity involved in product/service sourcing, procurement, conversion plus all the logistics management activities.[1] The subject of power relationships among actors in a supply chain has of late been getting increasingly more attention. It is imperative to differentiate between, and deal with positive and negative effects of power with the aim of avoiding problems and use power as an effectual tool for supply chain management (SCM). Therefore, a vital challenge is to determine the role that power plays within supply chain networks, and how power affects SCM with special attention to cooperation and coordination, and if power can be used as a tool in promoting the overall effectiveness of supply chain. Thus, in the context of Russia and Vietnam, the purpose of this paper is to analyze the relations of power among actors in the supply chain of fresh vegetables. The two countries have chosen deliberately because many international firms have invested in the last two years in these two competitive markets.
In the context of Russia
Presently, a group of international players with immense power has emerged among retailers and manufacturers throughout the world. When processors and retailers enter a new country, they often encounter the difficulty of building up their procurement and distribution systems. Global food manufacturers and retailers have been able to obtain a competitive edge with regard to supply chains. Such global food processing firms as Campina, Mars and Danone operate their production in the suburbs of Moscow and other big Russian cities. A vast majority of branded food processors and retailers upon entering Russia often introduce their own models of business in their work with local suppliers; models of business which used to be effective in their countries of origin which in most cases is Western Europe.[2] Big branded fresh vegetable processing firms and retailers are considered supply chain captains. They usually coordinate and organize their suppliers and set the process standards all through the entire supply chain, and they are often the main gate-way to the end-customers and are also gate-keepers between consumer and producer. Nonetheless, power does not belong only to the manufacturers and retailers since suppliers might also find themselves in the position to select from retailers whom they wish to deliver to.
Fresh vegetable suppliers in Russia have traditionally occupied a powerful position with regard to relationships with domestic and local retailers. They are in a more dominant and stronger position and have an edge in contract negotiations with buyers. The powerful position occupied by Russian suppliers on the market is largely because of the supreme importance of the market of raw materials. One of the challenges experienced by international manufacturers and retailers upon entry into Russia is the uncooperative behavior of the suppliers. Local Russian retailers encountering the new reality struggle with global foreign competitors who come into the local market and bring modern supply chain management concepts.[3] The fresh vegetable suppliers in Russia occupy a powerful position because of the following reasons: weak enforcement of contracts, inadequate quality of delivered goods, low transparency of legal system, and difficulties in obtaining raw materials and supplies. Other reasons include persisting corruption in the country, high barriers of entry for instance complicated registration procedures, limited production capacity, challenges related with real-estate in cities, lack of production know-how, insufficient infrastructure in some regions leading to high costs of logistics, a supply chain characterized by distrust and lack of professionalism, and finally lack of financing for farmers. Thus, the question comes up of how power can be utilized as a tool for managing fresh vegetables supply chains in Russia. The question faced by retailers will be ‘how can they get suppliers or the farmers to do whatever the retailer desires them to do?’[4] Therefore, power is at the centre of every business-to-business (B2B) relationships. Power is also one of the influential and strongest tools for supply chain management.
Power in Supply Chains
In supply chains, power is commonly viewed as the capability of a company to own and control essential assets in markets and supply chains, which enable it to maintain its ability to accumulate and appropriate value for itself by continually leveraging its suppliers, customers and competitors. In general, power in supply chain is the capacity, potential or ability of getting others to do something; to influence, control, determine or command the behaviors, decisions, actions or intentions of others in the pursuit of one’s interests against their will.[5] The six main types of power include coercive power, which allows one to punish others, and in the context of the supply chain network, it is reflective of the fear of a supply chain network member to be punished in the event that it fails to conform to the requirements of the focal firm/company. Informative power comes from the ability to elucidate current information and to show the logic of suggested actions. In case a firm has new information regarding customer demands, it can utilize it in persuading suppliers to deliver their products and become a part of the network.
Referent power relies on the ability of being attractive to others and depends on the interpersonal skills and charisma of the power holder. In the context of the supply chain, this power is seen when network actors desire to join the network. Legitimate power comes from a legitimate right to influence others, and a duty of accepting this influence, and in this case, a focal party/actor is identified by the members of the network as having a right to make particular decisions. Expert power is obtained from the special knowledge or skills of a specific subject. In a supply chain network, a focal company’s expert power can be attained if the network actors have the belief that it has a special knowledge which is important to them. Lastly, there is reward power, and this relies on the capacity of the power holder to give rewards to others. In the event that a focal firm has access to resources that are essential for other actors in the network, it may make these network actors to perform in a preferred manner.[6] In the fresh vegetable supply chain, using coercive power has an undesirable effect largely because the weaker actors might lose interest in the relationship.
Cooperation and coordination in supply chain management
Cooperation and coordination are very important areas of interest in supply chain management. Problems relating to cooperation often come about as a result of conflicts of interest. As such, every party involved – from suppliers of raw materials to consumers and everyone in between – should work more collaboratively, and if possible invest in information technology (IT) that allows them to share product information more easily. This is vitally imperative for the supply chain to work more effectively and efficiently. The basis of cooperation in the supply chain network is on the individual drive/motivation of its actors, and is determined by aligning interests through formal mechanisms, for instance contracting.[7]
Collaboration is essential in supply chain networks because of the following reasons: it reduces costs, increases quality, improves delivery, augments flexibility, stimulates innovativeness and cuts lead time and procurement costs. Because cooperation among the actors is sometimes not voluntary, retailers who are powerless have a big impact on the way collaboration is practiced along the supply chain. Some actors in the supply chain might be forced to take part; others are not totally accommodating of the idea to cooperate, and may want more support or influence in the process of collaboration. There is a spectrum of collaborative relationships between equal matching and forced participation, and idyllically, the relationship needs to be based on equal matching.[8] That is the reason why the focal actor managing the entire network of supply chain must utilize its power in aligning the interests of individual entities and stimulate cooperation amongst the actors.
Effects of power on coordination and cooperation
In the context of fresh vegetable supply chains, the role of power is indispensable in the sense that through its interactions with the other components of the relationship atmosphere, it could critically hinder cooperation. Conversely, power can be viewed as a means for organizing social interactions efficiently, and for enabling moderately stable relationships to develop between the cooperating social actors. Using coercive power has a potential of having a negative effect/result simply because weaker parties could lose their interest in the relationship. On the other hand, coercive power could have a desirable effect with regard to promoting coordination and development of stable relationships.[9]
Within the supply chain network of fresh vegetables, the perceived use of coercive power would negatively affect cooperation and positively affect coordination. Presuming that reward power is seen to have an element of coercion to it, then reward power would have a positive effect/result on coordination, because both punishment and reward rouse rapid changes in behavior. However, reward power will also provide extrinsic motivation that motivates one to conform to the requirements, so as to attain favorable effects and to create enduring and harmonious inter-organization exchange relationships. Within the supply chain network of fresh vegetables, the perceived use of information power would positively affect cooperation and negatively affect coordination. Successful coordination of exchange relationships generally has a positive effect/result on legitimate power. As power distribution becomes legitimate ultimately, a more standardized format of business is applied, for instance contracts. Nonetheless, the capability of taking legal redress, particularly to impose legal sanctions, may be seen as a punishment. Reward power has a positive result on both cooperation and coordination, although its outcome with regard to coordination is somehow stronger than on cooperation. As such, increased use of reward power will lead to improvement of coordination on the fresh vegetable supply chain. Reward will have a desirable/positive result and is attributed to the nature of relationships between buyers and processors. Managers should use reward power mechanisms for cooperation and coordination in relationships with buyers.[10]
Informational and expert powers have positive result on both cooperation and coordination, although the effect of expert power is somehow stronger compared to that of informational power. The positive result of these two sorts of power on cooperation is roughly equal. Thus, the results of informational and expert power are highly advisable because they bring positive effects on both cooperation and coordination. The result of legitimate power in the supply chain relationships of fresh vegetables is negative on both cooperation and coordination with roughly equivalent strength. Thus, similar as the result of coercive power, this type of power typically has negative result with regard to the management of supply chains. As such, using this power as priority management mechanisms is not recommended, just as in the case of coercive power. Referential power has positive result on both cooperation and coordination. Increasing use of this type of power is imperative in helping to improve considerably the coordination within the supply chain. Referential power is potent enough to inspire the actions of members of the supply chain in the Russian fresh vegetable business. Regarding the effect/result on cooperation, there is a trivial negative effect.
In the context of Viet Nam
In Viet Nam, the supply chain of fresh vegetable is typically characterized by numerous local and national small and medium-sized firms at the stage of production. The middle stage comprises trade-oriented medium sized companies, wholesalers, exporters, cooperative production and marketing societies. The upper end of the supply chain consists of large scale retail groups.[11] The analysis of the relations of power among actors in the fresh vegetable supply chain in Viet Nam emphasizes the significance of the institutional, historical, food trading, cultural and geographical environments in shaping the structure of the supply chains as well as the marketing relationships between the different stakeholders.
This Vietnamese supply chain represents the traditional fresh vegetable distribution channel from the rural province of Lam Dong to the capital city Ho Chi Minh City (HCMC). In this supply chain, the fresh vegetables – tomatoes and lettuce – get to the market in different ways. First they can be sold by the supplier/producer to a collector who would grade them. This collector would then depend on another collector/broker to; find wholesale customers in HCMC markets, collect sufficient produce for transportation to the city, and to coordinate the transportation logistics. A wholesaler in the city will then sell the produce to retailers and secondary wholesalers. Secondly, the supply of the fresh vegetables from the producer to the wholesalers can also be facilitated by only one collector in a traditional marketing channel. Thirdly, a modern distribution system can be used which consists of metro cash & carry together with its network of tomato and lettuce suppliers in the remote region of the province of Lam Dong, and these suppliers are typically producer groups. Usually, the cash & carry business has the determination of improving its customer portfolio of the city’s 5-star hotels. Long-term relationships among the actors entails a lasting commitment from both individuals in the transaction which might nevertheless coexist with some adversarial behavior, for instance comparing prices with competing customers or suppliers within the market.
Generally, there is a positive impact of lasting commitment on establishing a successful inter-company relationship, and there is an indirect link between lasting commitment of business partners, and performance via the fostering of successful B2B relationships. Moreover, lasting commitment and the good inter-company relationships that result from it allow supply chain stakeholders to manage risks more effectively given the unsure context of Viet Nam’s produce marketing.[12]
Conclusion
Power is very essential among the actors in a supply chain, and there are several and types sources of power. The main types of power include coercive, informative, referent, legitimate, expert and reward power. For managerial implications, this implies that parties who gain power from other actors should recognize that these parties still possess some power which can be utilized opportunistically. Therefore, recognizing these sources can be helpful in working out strategies on how to handle this behavior. Moreover, utilizing power does not necessarily mean that coercive actions need to be taken. It also implies knowing and recognizing that power also esteems from the capacity to offer rewards which may lead to a change in behavior, and in turn, enhances corporation. Supply managers should be cautious in selecting the suitable mechanism of power and alter it to the problem setting as well as strategic goals.[13]
For successful management of supply chain networks, it is indispensable to have knowledge of the different sources of power. The example of such differentiation of power can as well be found in the Russian food retail landscape. In the event that the retailer gets the supplier to do whatever the supplier would not otherwise have done, then the retailer has the means that probably threatens the supplier in acting in a manner favorable to the retailer. In case the two parties do not have the same opportunity in attaining their goals and pursuing their interests, the retailer has a greater ability to attain her goals than the supplier has. Managers in particular need to be aware of the fact that depending on its source, power could have dissimilar effects/consequences on both cooperation and coordination. Power is not always negative, and depending on its origin, it might have dissimilar effects on coordination as well as cooperation. It has the potential of destroying a cooperative relationship or help to find solutions to problems of aligning and coordinating actions. The knowledge regarding these effects must be used adeptly for successful management of supply chain networks.[14]
The coercive or reward power ‘stick or carrot’ method may have outstanding outcomes on coordination because it offers extrinsic motivation to conform to the requirements so as to attain outcomes that are favorable, but overusing it could hinder cooperation. Conversely, other non-coercive powers such as referent power, informational power, legitimate power and expert power might be more suitable in facilitating cooperation albeit less effectual for coordination. This is largely because they are less expected to be utilized in targeting a particular performance or behavior, although they can provide intrinsic motivation as well as alignment of interests. In solving cooperation and coordination problems, it is vital for managers to evaluate the costliness of the selected power basing on the available source.
Works Cited
Belaya, Vera and Jon Hanf. Power and Supply Management: Insights from Russia. Oxford: Oxford University Press, 2009. Print
Flynn, Barbara and Jose Machuca. Managing Global Supply Chain Relationships: Operations, Strategies and Practices. Liverpool: Hart Publishing, 2010. Print.
Hugos, Michael. Essentials of Supply Chain Management (3rd Ed.). London: Wiley. 2011, Print.
Perera, Manoshi and Jeevika Weerahewa. Analysis of Vegetable Supply Chains, 2008. Web.
Wincel, Jeffrey. Lean Supply Chain Management: A Handbook for Strategic Procurement. Belfast: Productivity Press. Print.
[1] Michael Hugos. Essentials of Supply Chain Management (3rd Ed.). London: Wiley. 2011, Print.
[2] Manoshi Perera and Jeevika Weerahewa. Analysis of Vegetable Supply Chains, 2008. Web.
[3] Vera Belaya and Jon Hanf. Power and Supply Management: Insights from Russia. Oxford: Oxford University Press, 2009. Print
[4] Jeffrey Wincel. Lean Supply Chain Management: A Handbook for Strategic Procurement. Belfast: Productivity Press. Print.
[5] Barbara Flynn and Jose Machuca. Managing Global Supply Chain Relationships: Operations, Strategies and Practices. Liverpool: Hart Publishing, 2010. Print.
[6] Vera Belaya and Jon Hanf. Power and Supply Management: Insights from Russia. Oxford: Oxford University Press, 2009. Print
[7] Manoshi Perera and Jeevika Weerahewa. Analysis of Vegetable Supply Chains, 2008. Web.
[8] Vera Belaya and Jon Hanf. Power and Supply Management: Insights from Russia. Oxford: Oxford University Press, 2009. Print
[9] Jeffrey Wincel. Lean Supply Chain Management: A Handbook for Strategic Procurement. Belfast: Productivity Press. Print.
[10] Vera Belaya and Jon Hanf. Power and Supply Management: Insights from Russia. Oxford: Oxford University Press, 2009. Print
[11] Michael Hugos. Essentials of Supply Chain Management (3rd Ed.). London: Wiley. 2011, Print.
[12] Manoshi Perera and Jeevika Weerahewa. Analysis of Vegetable Supply Chains, 2008. Web.
[13] Jeffrey Wincel. Lean Supply Chain Management: A Handbook for Strategic Procurement. Belfast: Productivity Press. Print.
[14] Manoshi Perera and Jeevika Weerahewa. Analysis of Vegetable Supply Chains, 2008. Web.
Last Completed Projects
| topic title | academic level | Writer | delivered |
|---|
Are you looking for a similar paper or any other quality academic essay? Then look no further. Our research paper writing service is what you require. Our team of experienced writers is on standby to deliver to you an original paper as per your specified instructions with zero plagiarism guaranteed. This is the perfect way you can prepare your own unique academic paper and score the grades you deserve.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]