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Changing buyer–seller relationships

 The origins of the relationship approach to understanding buyer–seller

interaction at different parts of the supply chain goes back several
decades when the conventional marketing mix paradigm began to be
 The growth of the service sector, move from mass marketing to micro
marketing to mass customization,
 With the associated database infrastructure, allowed companies to
target customers more effectively.
Power and dependence
 ‘Power in the supply chain can be defined operationally as the ability of one
entity in the chain to control the decision of another entity’
 It is generally agreed that the power base has shifted over time from supplier
to retailer
 The five power bases which they identified
 Reward power
is simply the power of a manager to give some type of reward to an employee as a
means to influence the employee to act. Rewards can be tangible or intangible.
 Coercive power
 is the ability to influence someone's decision making by taking something
away as punishment or threatening punishment if the person does not follow
 Referent power
Refers to the ability of a leader to influence a follower because of the follower's loyalty,
respect, friendship, admiration, affection, or a desire to gain approval
 legitimate power
Is power you derive from your formal position or office held in the organization's hierarchy
of authority.
 Expert power
is power based upon employees' perception that a manager or some other member of an
organization has a high level of knowledge or a specialized set of skills that other
employees or members of the organization do not possess

 These power would lead to dependency of the retailer on the supplier, especially
with regard to expert power in that the supplier had the marketing/logistics
expertise in the channel.
Trust and commitment
 According to Kumar (1996) trust is the antithesis of power and it is trust
that leads to cooperation
 Trust can easily be signaled as ‘the glue that holds a relationship
measure because this involves social networks that are inherently fluid
in a retail buying context. At an organizational level trust, and therefore
commitment, can be related to the relationship lifecycle.
Cooperation and coopetition
 Collaborative advantage rather than competitive advantage
 The thrust of this argument is that in sectors such as the FMCG
industry where demand is stable, it is more appropriate for companies
to ‘grow the cake’ in specific categories by boosting demand and
compete on conventional marketing criteria
 Companies have reviewed their logistics operations and are now
willing to collaborate with competitors on ‘invisible’, shared resources
but not on promotion or ‘visible’ marketing efforts.
 This mirrors the well-established approach by Japanese manufacturing
companies which cooperate on R&D but compete on the branded
consumer goods in the marketplace.
Quick Response (QR)
 Kurt Salmon Associates (KSA) recognized that 11 weeks out of the 66-
week lead-time in the pipeline are spent on the actual processes (value-
adding time/horizontal time), and the rest (non-value-adding
time/vertical time) are wasted in the form of WIP (work in process) and
finished inventories at various stages of the complex system
 The resultant losses arising from this was estimated at 25 billion dollars,
due to stocking too large an inventory of unwanted items and too small
of the fast-movers.
 The term QR was coined in the United States
 QR, in principle, requires the traditional buyer–supplier relationship that
is too often motivated by opportunism, to transform into a more
collaborative partnership
 Thus, partnership among the supply chain members is a prerequisite of
QR programmers.
 therefore the US-born QR concept places much focus on the relationship
between retailers and the apparel manufacturers. The eventual benefits
on both parties
Efficient Consumer Response (ECR)
 ECR emerged in the United States partly through the joint initiatives
between Wal-Mart and Procter & Gamble and the increased
competition in the traditional grocery industry in the early 1990s due to
recession and competition from new retail formats.
 The European ECR initiative defines ECR as a ‘global movement in the
grocery industry focusing on the total supply chain – suppliers,
manufacturers, wholesalers and retailers, working closer together to
fulfil the changing demands of the grocery consumer better, faster and
at least cost’ (Fiddis, 1997, p 40).
 Despite the apparent emphasis on the consumer, much of the early
studies focused mainly on the supply side of ECR. Initially reports
sought efficiencies in replenishment and the standardization of material
handling equipment to eliminate unnecessary handling through the
supply chain.