Definition of supply chain power

This represents the extent to which a company has influence on other members of the supply chain.  A supply chain is the network of various companies that are involved in the sourcing, manufacture and delivery of products and services, from extracting raw materials to final consumption.

Let us consider shirts, there are many companies involved in the production of this item, such as the manufacturer of the fabric, the cotton supplier and the farmers managing the cotton plant.  Effective coordination and collaboration among channel partners provides a quality product at a competitive price delivered on time.

Example

The most powerful companies in the supply chain can push changes onto its suppliers which can have a profound impact on the company and the industry as a whole.

According to an FT article, 'Wal-Mart sees jump in CFL sales', in 2006 the US retail giant Wal-Mart set itself the goal of selling 100m low-energy light bulbs by 2007.  Within a year, the percentage of its customers buying the bulbs had more than doubled, from five to 13 per cent.  Now other retailers stock various energy efficient bulbs at competitive prices. [1]

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Wal-Mart sees jump in CFL sales

FT Articles & Analysis

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