Lead companies exercise control over supply chains in various different ways. In dyadic relationships between two players there are various examples of partnerships, contracts and supplier manuals or charters.  

We have recently seen an example of a partnership arrangement in a producer-driven chain in which the producer is providing knowledge transfer through investment in outside consultancy to work with a logistics service provider to develop the capabilities of the provider to better support the changing business needs of the producer.  

In other instances where main players are attempting to drive out cost, improve speed of response and improve standards at all levels of the supply chain there are examples of pressure being applied to suppliers through coercion or persuasion or a mixture of both. 

For example in the auto industry there have been attempts by some key players such as Toyota to structure supplier networks into hierarchies or tiers and to devolve responsibility and accountability for managing costs and standards to the main suppliers. 

In this case different forms of control are being exercised by different parties in the same chain with the producer setting the standard with the tier 1 suppliers exercising the tracking and monitoring of performance of the lower tier suppliers. Capability may then be considered to be dispersed throughout the network or chain.  

That it has been the auto industry that has led the field in structured supplier networks is perhaps linked to the legacy of strong vertical integration in this industry as exemplified by the early days of Ford Motor Company in which production as well as many elements of supply and even transport infrastructure were under the ownership and control of the company. 

A spectacular example of supply chain control following the changing sources of profitability in the chain is in the buyer-driven retail supply chains where main players such as Tesco and Wal-Mart have come to occupy very powerful positions in the chain controlling the access of suppliers to mass consumer markets.  

Given the low tech nature of most of the supplier base in these buyer-driven chains and the commodity-type products that are being moved there has been a greater level of coercive practices reported as highlighted by the conclusions of the various UK Competition Commission’s investigations into the large grocery retailers’ activities in that jurisdiction.