Competitive forces, increasing trade pressures and endless price reductions are combining to make relative power a key issue in unprecedented times…
Because running a business, supply or retail, means achieving and managing a delicate balance of the conflicting interests of shareholders, lenders, customers, workers, management, government and perhaps even the consumer-shopper, knowing the inevitability of compromise diluting profitability, and being measured via 20/20 hindsight, it is understandable that those ‘in charge’ are often tempted to respond more readily to the most powerful demands.
In a trading relationship, it is relatively easy to shift from assertion to aggression in dealing with an up-the-line partner when attempting to meet the demands of the more powerful of the internal stakeholders. Acknowledging that consumer power is the key driver, then logically this means the system only works if power diminishes as one moves back up the supply chain…
Starting with consumer-shoppers’ ability to vote with their feet, or their ability to command the help of government if their needs/rights are being ignored, the real power resides on the shop floor (or rather the floor of the shop), and cannot be ignored…
Given retailers’ ability to aggregate and apply buying muscle, they can appear to have more focused and usable power, which they then apply further up the supply chain. The finished goods supplier by definition has more power than the ingredients supplier and proceeds/needs to apply that power in driving down costs…
Governments come on board when they perceive that a shift in the power balance could result in votes being lost as they struggle with their compromises… Hence their interference when the farmers are under pressure, retailers are ‘over consolidating’, or a detrimental change in the health of the consumer-shopper is in danger of driving up healthcare costs…
Suppliers and retailers need to anticipate these inevitabilities, plan for appropriate change and prepare plausible explanations for the lead-times required.
Transparency can help.
With so many of the company’s systems/models designed for internal consumption and to meet internal needs, then accidental or forced exposure to outside eyes reveals their ‘bias’ and renders them indefensible…
The question of whether one should have to explain is not the issue (i.e. whilst refusal to explain can be interpreted an attempt at concealment, willingness to explain does not necessarily imply weakness).
It is perhaps better to accept the inevitability of total transparency, and design policies, systems and process that are fully defensible, internally and externally. Only then can we have the courage to be transparent.
In the process of attempting to fully understand partners’ views as we strive towards greater transparency from their perspective, our position can become more defensible, and result in our ability to build and use expert power, to the disadvantage of less transparent competitors…
As more transparent key influencers accumulate more power in the market, then this wish for a less opaque trading environment may even become self-fulfilling…..
Because running a business, supply or retail, means achieving and managing a delicate balance of the conflicting interests of shareholders, lenders, customers, workers, management, government and perhaps even the consumer-shopper, knowing the inevitability of compromise diluting profitability, and being measured via 20/20 hindsight, it is understandable that those ‘in charge’ are often tempted to respond more readily to the most powerful demands.
In a trading relationship, it is relatively easy to shift from assertion to aggression in dealing with an up-the-line partner when attempting to meet the demands of the more powerful of the internal stakeholders. Acknowledging that consumer power is the key driver, then logically this means the system only works if power diminishes as one moves back up the supply chain…
Starting with consumer-shoppers’ ability to vote with their feet, or their ability to command the help of government if their needs/rights are being ignored, the real power resides on the shop floor (or rather the floor of the shop), and cannot be ignored…
Given retailers’ ability to aggregate and apply buying muscle, they can appear to have more focused and usable power, which they then apply further up the supply chain. The finished goods supplier by definition has more power than the ingredients supplier and proceeds/needs to apply that power in driving down costs…
Governments come on board when they perceive that a shift in the power balance could result in votes being lost as they struggle with their compromises… Hence their interference when the farmers are under pressure, retailers are ‘over consolidating’, or a detrimental change in the health of the consumer-shopper is in danger of driving up healthcare costs…
Suppliers and retailers need to anticipate these inevitabilities, plan for appropriate change and prepare plausible explanations for the lead-times required.
Transparency can help.
With so many of the company’s systems/models designed for internal consumption and to meet internal needs, then accidental or forced exposure to outside eyes reveals their ‘bias’ and renders them indefensible…
The question of whether one should have to explain is not the issue (i.e. whilst refusal to explain can be interpreted an attempt at concealment, willingness to explain does not necessarily imply weakness).
It is perhaps better to accept the inevitability of total transparency, and design policies, systems and process that are fully defensible, internally and externally. Only then can we have the courage to be transparent.
In the process of attempting to fully understand partners’ views as we strive towards greater transparency from their perspective, our position can become more defensible, and result in our ability to build and use expert power, to the disadvantage of less transparent competitors…
As more transparent key influencers accumulate more power in the market, then this wish for a less opaque trading environment may even become self-fulfilling…..
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