Power Relations in Global Supply Chains
Power has a significant impact on fundamental elements such as cooperation, compliance, commitment, and dispute resolution, all of which influence the connection between buyers and sellers in the global supply chain network. The majority of research contend that the type of relationship and, in particular, the type of supply framework used influence power relations and power balance between the players. Some of the most widely used supply chain frameworks, such as mainstream and critical Supply Chain Management, Global Community Chains, and Global Production Networks, emphasize the relevance of power relations in global supply chains for optimal channel member satisfaction. By placing power relations at the center of the supply chain management, development of a more effective and collaborative dynamic is made possible. This essay will therefore examine how these four frameworks stipulate the relevance of power relations in the global supply.
How and Why the Different Analytical Frameworks Evaluate the Relevance of Power Relations in Global Supply Chains
According to Belaya (2011) supply chain power relations define the capability of channel members and actors to control the decision variables of other channels members with the desire to sustain the critical assets and accumulate value that is sufficient enough to leverage industrial rivals, suppliers, and customers. In global supply chains, power is particularly viewed as a means to attainment of certain strategies by applying influence mechanisms after getting influence over another enterprise.
Mainstream Supply Chain Management
Mainstream SCM framework tries to establish a standardized supply chain network with the aim of enhancing competitive advantage through defined managerial processes. A mainstream framework stipulates how the supply chain process should be carried out by all the players across the globe (Genefi, 2016). While still offering a foundation for effective tailored solutions, a streamlined framework established standardization which ensures that there is no superior player thus it becomes less costly for firms in relation to ownership and functionality mechanisms.
Through the lens of Porter's five forces firms and suppliers dominate the supply chain network and as such, customization of the supply chain ensures that power is equally distributed and there is no room for favoritism or exploitation. This is because power is maintained through vertical integration while competitive advantage is attained horizontally, meaning that firms have equal chances but individual bargaining power determine their competitive advantage. Only firms that work well with the suppliers are in a position to get compliance in terms of new regulations and policies, and at the same time, transparency is assured due to the credible flow of information (Genefi, 2013).
In this model, power relations are established through standardization which guarantees equal opportunities for the players. The reason for such power relations is to encourage cooperation, reduce costs, and promote effectiveness for competitive advantage.
Critical Supply Chain Management
Contrary to the mainstream model, the relevance of power relations in global supply chains is to attain monopoly powers (Soni and Kodali, 2013). This framework mainly focuses on the structure of the distribution channel with the aim of getting strategies that can lead to competitive advantage over other firms in the industry. For instance, customers such as the state and established international firms take advantage of their financial strength. According to Maloni and Benton (2005) the effects of buyer-supplier relationships and the corresponding influence of this particular relationship to the performance of supply chain make it possible for power to improve integration of the chain and lead to higher outcomes. As a result of the high performance, the power holders are triggered to take a second look at their positioning within the supply chain which generates a more conscious and considerate application of power.
Just like the mainstream framework, critical SCM encourages the transparency and the use of credible information. Customers and suppliers need to understand their partners in the supply chain in all aspects starting from the sources of information and materials to imbalances within the chain and the outcome of power. As such, the proper use or misuse of power can be utilized in attainment of satisfaction of the members and high performance.
Power in critical SCM is relevant in attainment of monopoly with regard to competitive advantage and influence over the supply chain process.
Global Commodity Chains
According to Bair (2009), global community chains assesses how the international division and standardization of labor characteristics has drastically evolved. Moreover, the framework assists in understanding the unequal distribution of incentives among the different divisions of labor in the world economy. Links within the chain are distributed unevenly given that there are developed and less-developed nations which do not constitute the same power and resources.
Power relevance within global commodity chains can be evaluated by looking at four dimensions as indicated by Bair (2009) (i)the input-output process that stipulates how raw materials are transformed to end products (ii) geographical alignment (iii) governance configuration that shows how some players within the system exercise control over other participants and how value is created within the chain, and (iv) theoretical perspective of the process that details the evolution of the distribution network over time.
The global commodity chains model shows relevance of power through the governance structure determines the strength and impact of the player in the supply chain. These power relations assist in coordinating, improving, and facilitating the supply chain process so that all the minor and major players are equally rewarded. This power is also aimed at improving and sustaining global development and it's therefore not self-centered.
Global Production Networks
According to Yeung and Coe, (2011) GPN are frameworks through which international and local actors from various economies compete and cooperate for attainment of better share value, revolution, and dispersion of economic activities. GPN is defined as a model that consists connected economic and noneconomic variables that are centrally coordinated for distribution of goods and services across the global supply chains. The actors are diverse and comprise of the state, social institutions, consumers, and the suppliers. The main objective is to facilitate equality and development for improvement in value and integration.
In this case, the relevance of power relations is established by bringing together diverse players and ensuring that all aspects and views of the processes and stakeholders are looked into for better performance to all the players. The framework ensures that there cooperation, and improved mechanisms in solving conflicts. Power leads to collaborative relationships that are essential for innovation needed to improving growth and resilience. The model also encourages supplier-relationship management which evidently leads to improvement in technological-triggered supply chains and ensures that the actors get relevant tools necessary to involve procurement early for better results.
Examples of Power Relations in the Frameworks
Power relations exist between the company and the supply chain, employers and the employees, and between the company and the statutory authority (Lintukangas, 2011). Within the supply chain, power is distributed depending on the objective of the framework utilized within the framework.
Mainstream model has the suppliers and the firms as the main players. The decision to standardize the process is highly influenced by the competitive edge of the firms. However, since the firms and suppliers seek for a custom supply chain that reduces costs and maximizes profitability, power is used accordingly. The outcome of the relations are then realized by the employees, employers, and the society at large.
The employer for instance comes up with the supplier code of conduct which stipulates the expectations of both the employees, the suppliers, and other stakeholders such that rules and policies required for the effective coordination of the supply chain process are adhered to (Blair, 2009). The state sets rules and regulations and when the power relations between the firms and the suppliers are credible, it becomes easier to implement. Streamlining of the supply chain also eases the burden of decision making to the firm since the exact processes, costs, and expected outcomes are well-structured.
Critical SCM model mainly focuses on customers and suppliers. The customers aim to utilize their influence in attaining control over the suppliers. For instance, multinationals have the ability to control their chain due to their consistency in purchasing in large volumes thus they are in a position no monopolize the supply chain and determine the prices and incentives used.
Global commodity chain framework is mostly dominated by the state and multinationals. It's critical for the governance institutions to utilize their power in ensuring that all players are well-represented and that the rewards are evenly distributed.
Global production network engages with the state, employers, employees, suppliers, and industry advocates to ensure that the supply chain maximizes value for all participants. Power is centralized and representatives from each category ensure that the needs of each player are addressed for sustainable development in all sectors of the economy.
Recommendations and Conclusion
Though all the frameworks advance the use of power relations to control the supply chain for competitive advantage of each player, the global production network stands out. GPN framework centralizes power relations and as such, it ensures that the demands of all the actors are addressed leading to equal distribution of rewards.
The needs of the employers, the firm, employees, the state, suppliers, and the industry at large are taken into consideration when GPN model is applied. The model advocates for equality and even distribution of resources. The selected centralized authority that oversees the needs of each player in the supply chain network ensures that power relations facilitate collaboration and mitigation of risks that may deter the distribution process. Unlike the critical SCM model which promotes monopoly, GPN encourages standardization and equal opportunity for the firms and economies involved in the supply chain such that competitive advantage is obtained without favoritism. The result is enhanced cooperation, transparency, accountability, and overall global development.
It is however paramount for the players in the global supply chain to utilize all the different frameworks since they offer diverse solutions with regard to power relations. Each of the framework is open to improvement and it's possible to integrate the various aspects of each model to come up with a strengthened and practical model that addresses the needs of all the actors and recipients of the global supply chain.
References
Benton, W.C. and Maloni, M. (2005). The influence of power driven buyer/seller relationships on supply chain satisfaction. Journal of Operations Management, 23(1), pp.1-22.
Belaya, V. and Hanf, J.H. (2011). Power and supply chain management–Insights from Russia. In 51st Annual Conference of German Association of Agricultural Economists (GEWISOLA), Halle. Retrieved December (Vol. 21, No. 2012, pp. 90-91).
Blair, J. (2009). Global commodity chains: Genealogy and review. Blair (2009), pp.1-35.
Gereffi, G. and Fernandez-Stark, K. (2016). Global value chain analysis: a primer.
Gereffi, G. and Lee, J. (2012). Why the world suddenly cares about global supply chains. Journal of supply chain management, 48(3), pp.24-32.
Gerefi, G. and Fernandez, K. (2011). Globalization of Supply Chains. Center of Globalization Governance and Competitiveness.
Kähkönen, A.K. and Lintukangas, K. (2011). Does power matter? The role of power in supplier relationship management. In 27th IMP conference. Glasgow, Scotland.
Soni, G. and Kodali, R. (2013). A critical review of supply chain management frameworks: proposed framework. Benchmarking: an international journal, 20(2), pp.263-298.
Yeung, H.W.C. and Coe, N.M. (2015). Toward a dynamic theory of global production networks. Economic Geography, 91(1), pp.29-58.
