Buyer power in supply chain

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Supply Chain Strategy


The report discusses the buyer power and its impact in the supply chain. At the national level, retailer power is seen to be of concern and the subject of inquiries by competition authorities. The retail concentration can be socially beneficial where it results in buyer power that can be used to counter market power of manufactures. Contrarily, some observers argued that buyer power may ultimately damage the supply chain because they think there may be longer-term detrimental effects, such as forcing manufactures reduce investment on new products and, in the process cause wholesaler prices to small retailer to rise. The report aimed to outline the ongoing debate and to prove that buyer power is beneficial to the supply chain through the fresh food supply chain study.


Handfield and Jr defined Supply chain as encompassing all activities associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information flows.

Materials and information flow both up and down the supply chain.

Supply chain are essentially a series of linked suppliers and customers, every customer is in turn a supplier to the next downstream organization until a finished product reaches the ultimate end user (Handfiels and Jr, 1999). In a word, it aims to deliver right product in the right place at right time at the right cost. Power influences that get what, when and how (Hograrth-scott, 1999). A firm is defined to have buyer power if, in relation to at least one supplier, it can credibly threaten to impose a long term opportunity cost which, were the threat carried out, will significantly disproportionate to any resulting long term opportunity cost to itself (Dubson et al, 2000). Inderst (1981) defines Buyer power as "A...