The Effect of Coercive Power on Supply Chain Inventory Replenishment Decisions

Abstract

Supply chains often consist of stakeholders with different power levels collaborating with each other in order to meet customer demand. This imbalance of power along the supply chain is a critical factor that affects its short and long-term behavior, as well as its overall stability and efficiency. The role and the impacts of power in distribution channels have been explored quite extensively in Marketing, but far less so with regard to power in the context of supply chains. This paper explores the effect of power on supply chain functioning by focusing on a specific power type i.e. coercive power. More specifically, the impact of power and power awareness on inventory replenishment human decision-making is investigated. An experimental approach with unknown market demand and local information availability is implemented so as to provide a controlled environment for decision-making. Three different treatments are implemented in order to create situations of balanced power, imbalanced power without awareness and imbalanced power with awareness. Results show that power awareness does play a significant role in the way coercive power is exercised. In particular, a significant increase of the size and variability of order quantity and order time interval is observed in the case of imbalanced power with awareness. © IFIP International Federation for Information Processing 2014.