Effect of Customer Power on Supply Chain Integration and Performance

Abstract

Supply chain integration (SCI) has received increasing attention from academic researchers and practitioners in recent years, however, our knowledge of what influences SCI, and how SCI influences the performance of supply chains and manufacturers within the supply chain is still very limited. Although researchers in marketing and management have investigated power and relationship commitment issues within and between organizations, few have examined their impact on SCI. This chapter studies the relationship between power, relationship commitment and integration between manufacturers and their customers within a supply chain. The impact of customers’ SCI on the customer service and financial performance of manufacturers is also investigated. The authors propose and empirically test a model using data collected from 617 manufacturing companies in China. The results show that customers’ use of different types of power has different impacts on manufacturers’ relationship commitment. Expert power, referent power and reward power are very important in improving manufacturers’ normative relationship commitment, while reward power and coercive power enhance instrumental relationship commitment. The authors also find that normative relationship commitment have a greater impact on customer integration and customer service by manufacturers than instrumental relationship commitment. Customer integration significantly enhanced manufacturers’ customer service and financial performance. The improvement in customer service of manufacturers positively influenced their financial performance.