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Continuing
with our last piece, we will discuss the different
elements of trust and how they play out in supply
chain relationships.
Power
One of the greatest deterrents to trust is power.
Many industry stories detail the havoc wreaked
on supply chains by powerful retailers, automotive
OEMs, and other power brokers who drive bullwhip
effects, vendor managed inventories, and other
forms of power exertion. How should supply chain
researchers treat power? What do we know about
power?
French and Raven (1959) identified three types
of power associated with referent, legitimate,
and coercive power with the three types of trust
discussed in the prior section. If we compare
these three types of power (French & Raven
1959) with calculus-based, knowledge-based and
identification-based trust (Lewicki & Bunker
1995) there appears to be some similarities as
shown below.
|
Coercive
Power
Expectation that the other party will punish
in situation of nonconformance
|
|
Calculus-Based
Trust
Trust sustained through deterrence punishment |
| |
|
|
Expert
Power
Power due to Knowledge of perception of knowledge
in a given area |
|
Knowledge-based
Trust
Knowing the other party so that their behavior
is anticipatable |
| |
|
|
Referent
Power
Basis of referent power is in identification
of one party with the other, a feeling of
oneness |
|
Identification-based
Trust
Indentification with the other party's desires
and intentions |
The
definitions above reveal a link between the areas
of power and trust. Perhaps the judicious use
of power or even restraint from power can lead
to the various types of trust discussed. Coercive
power is the expectation of punishment from another
party unless there is compliance. Non-coercive
power involves referent, expert, legitimate, and
reward power. The various forms of power are shown
below.
|
French Jr. & Raven (1959) |
|
There
are different types of power including referent,
legitimate and coercive. |
| |
|
|
| Gaski
(1984) |
|
There
is not a strong relationship between power
and dependence. Coercive versus non-coercive
power usage has not been effectively tested
yet |
| |
|
|
| Gaski
& Nevin (1985) |
|
Exercise
of power has an effect on satisfaction and
conflict beyond the mere presence of power |
| |
|
|
| Venkatesh
et al. (1995) |
|
Found
significance between use of a particular influence
strategy and type of power in a relationship. |
| |
|
|
| Heide
(1994) |
|
The
more unilateral power is in a buyer-supplier
relationship the higher the use of explicit
contracts. |
| |
|
|
| Lusch
& Brown (1996) |
|
The
higher the level of dependence of the supplier
or buyer on the other the higher the higher
the use of explicit contracting. |
Dependence
Dependence has been observed two ways. First,
dependence may be defined in terms of a relationship
between one party (usually supplier) on another
party (usually buyer). Second, the power one party
has over another may be due to dependence, usually
due to a high percentage of a supplier’s
output going to one buyer. Again, the specter
of the Walmarts, Carrefours, Home Depots, and
other retailers come to mind. Several authors
including Lascelles and Dale (1989), Dwyer Schurr
and Oh (1987) and Krause (1995) have addressed
the issue of dependence from a volume perspective.
They hypothesize that the more a buyer buys from
a supplier the more likely the buyer will be able
to influence the supplier.
| Treleven
(1987) |
|
In
situations with fewer suppliers buyers have
fewer opportunities to exploit suppliers |
| |
|
|
| Mohr
& Spekman (1994) |
|
Interdependence
is correlated with relationship performance |
| |
|
|
| Emerson
(1962) |
|
Power
and dependence have a reciprocal relationship |
| |
|
|
| Cadotte
& Stern (1979) |
|
The
power dependence relationship determines the
amount of interdependence between parties |
| |
|
|
| Lascelles
and Dale (1989) |
|
The
volume of business with a supplier impacts
the ability of a buyer to impact a supplier |
| |
|
|
| Frazier,
Spekman and O’Neal (1988) |
|
Coercive
use of power can damage a relationship |
| |
|
|
| Dwyer,
Schurr and Oh (1987) |
|
Power
is a function of dependence of parties on
one another |
| |
|
|
| Noorweir,
John and Nevin (1990) |
|
Voluntary
restraint from the use of power improves the
relational exchange norms of a relationship |
| |
|
|
| Williamson
(1975) |
|
Power
assymetries will always be exploited |
| |
|
|
| Heide
(1994) |
|
The
more dependent a supplier is the higher the
use of explicit contracts is. |
| |
|
|
| Etgar
& Valency (1983) |
|
The
more dependence that is present the more vulnerable
the weaker member is to the other. |
| |
|
|
| Heide
(1994) |
|
The
higher the degree of interdependence the more
commitment exhibited by both parties. |
| |
|
|
| Lusch
& Brown (1996) |
|
The
more dependence a buyer has on a supplier
the more likely the buyer is to have a long-term
orientation. |
Dependence
of a party on another means that one party will
have power over another. Treleven (1987) notes
that in markets with limited numbers of suppliers
there is less leverage for buyers in negotiating
with suppliers. Resource dependence theory also
notes that when power between parties is in relative
balance (high uncertainty) organizations will
attempt to create negotiated environments.
Clearly, the interplay of trust, dependence, and
power is an issue that companies in all walks
of life will have to manage for some time into
the future. If companies are serious about deploying
supply chain management, skills in managing relationships
and forming bonds that go beyond the traditional
boundaries, managing this interplay will be key
to success. One example of how this power is being
wielded, is Walmart’s latest request that
all suppliers have RFID tags on pallets by January
2005…..want to learn more? Stay tuned for
out next piece in two weeks….
Sincerely,
Rob Handfield
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