Networks of collaboration or conflict? Electronic data interchange and power in the supply chain

Journal of Strategic Information Systems 1995 4 (1) 31-42

Networks of collaboration or conflict? Electronic data interchange and power in the supply chain

Juliet Webster Department of Innovation Studies, University of East London, Maryland House,

Manbey Park Road, London El5 1 EY, UK

This paper is concerned with the way in which the design and use of interorganizational information systems reflect the strategic interests of powerful corporate players and the struggles of those players for domination in the marketplace. The paper draws upon the insights developed within the sociology of technology, in which innovation is not simply a technical-rational process of ‘solving problems’; it also involves economic and political processes in articulating interests, building alliances and struggling over outcomes. To illustrate the way in which powerful users seek to have their interests articulated in information systems, the paper discusses the design and implementation of electronic data interchange in a major UK motor manufacturer, highlighting the economic, political and cultural factors which have conditioned the design and use of this system. It then sets these findings in the context of the automotive industry more broadly, and compares them with experiences in another sector, retailing. The paper concludes that the design and use of electronic trading networks are more strongly shaped by the competitive environment than by contemporary ‘popular’ management ideas.

Keywords: supply chain management, interorganizational systems, electronic data interchange, automotive industry

The development and implementation of interorganizational networks over the past decade has been accompanied by an expectation that fundamentally different organizational structures and forms of competitive behaviour would begin to emerge. As the potential for linking the information systems of separate organizations has gradually been realized, parallel changes in the relationships between hitherto competing organizations have been suggested. In particular, these ideas emphasize the integrative potential of computer networks which promote information sharing, and the increasing collaboration which this implies. In other words, it is suggested that technological integration will prompt organizational integration.

One particular type of interorganizational network technology with which these

Paper submitted January 1994; revised paper accepted for publication by Professor R D Galliers, August 1994

0963-8687/95/$09.50 0 1995 Elsevier Science B.V. All rights reserved 31

Networks of collaboration or conflict?: J Webster

ideas have been strongly associated is electronic data interchange (EDI). ED1 is the ‘exchange of structured data between the computer systems of business partners’ (Parfett, 1993, p 13).l It has been described as a technology of ‘seminal importance’, one which ‘will probably have a greater impact on the way we do business than any other factor’ (Patrick, 1988, p 229).

This paper examines arguments that interorganizational networks generally, and ED1 networks specifically, are associated with radically new supply chain structures and relationships. Are user organizations increasingly sharing information, integrating their information systems and collaborating in order to bring higher quality, improved products and services to the end customer? Are they, as a result, dismantling the boundaries between them? This paper considers some empirical evidence which might lead us to question this scenario, and examines the implications of this evidence for our understanding of the dynamics of trading relationships more generally.

The vision of changed interorganizational relationships

ED1 potentially facilitates profound changes in organizational behaviour, use of technology and interorganizational relationships. It permits a sharing of information and thus much closer relationships between trading partners, allowing them to alter radically their procedures for dealing with one another in procuring supplies, delivering goods and services, and carrying out financial transactions. Its advocates promote it as a means of effecting changes in the competitive environment through reduced supplier bases, just-in-time inventory management, and ‘quick response’ to customer demand, because it offers organizations the ability to order and receive materials and services much more rapidly than with paper-based trading systems. It allows organizations to optimize the flow of goods along the supply chain, using ED1 to share information about markets, materials requirements forecasts, inventory levels, production and delivery schedules. Indeed organizations may even open up their internal computerized information systems containing sales figures, stock records or production schedules for interrogation by their suppliers so that the latter can anticipate their requirements and replenish their stocks on a proactive basis. This arrangement may permeate the entire supply chain, from the first upstream supplier to the endmost customer, and it is heralded as providing a speedier and improved product or service to the final customer, who is seen as a customer of all the parties in the supply chain, and not simply of the downstream vendor. This vision draws upon the characteristics of the Japanese ‘keiretsu’ system - an organizational collective based on co-operation and mutual stakeholding among a group of manufacturers, suppliers, trading and finance companies. Companies within particular industry supply chains will recognize that, in order to maintain competitive advantage over other corporations in their industry, they will have to renounce their old adversarial practices (McFarlan, 1984). They will adopt a common objective - that of providing a better and faster service or product to the final customer. The implementation of interorganizational networks like ED1

’ Such a definition of EDI has conventionally deliberately been intended to exclude methods of electronic communication, such as fax or electronic mail, which have hitherto not made use of structured data. It is ED1 in this strict sense with which this paper is concerned. However, it is worth noting that ‘electronic trading’ now increasingly encompasses the use of structured fax messages and even messages which are transmitted by computer and received via the Royal Mail’s EDIPost service. This broader approach to electronic trading clearly has profound implications for the ways in which trading partners collaborate in setting up trading links; some of these issues are introduced later in this paper.

32 Journal of Strategic Information Systems 1995 Volume 4 Number 1

Networks of collaboration or conj?ict?: J Webster

has thus been strongly linked with the idea of a move away from competitive supply chain relationships and towards closer, more collaborative structures and practices:

. . . the various components of the network recognize their interdependence and are willing to share information, cooperate with each other, and customize their product or service . . many recently designed networks expect a more proactive role among participants - voluntary behaviour that improves the final product or service rather than simply fulfils a contractual obligation. (Miles and Snow, 1922)

The emphasis is on ‘partnership’, necessary in order to meet more effectively current market demand, and give an an infrastructural impetus by interorganizational systems (see, for example, Gummesson, 1987; Kanter, 1989; Skagen, 1989; Bowersox, 1990; Konsynski and McFarlan, 1990; Reich and Huff, 1991). Cunningham and Tynan (1992) outline the scenario in the retail industry:

Many major manufacturers and retailers are now very much more concerned with the development of ‘partnerships’ with their suppliers. For example, it is now becoming much more common for UK grocery retailers to insist upon closer and - they claim - more co-operative relationships. As part of this trend there are developments which may lead to more ‘information sharing’ between retailers and their suppliers; this is reflected in the fact that one of the most important objectives for most retailers is to get as many of their key suppliers as possible on to ED1 . . This trend will be further encouraged by the need for retailers to supply forecast data in order to allow their suppliers to provide a quick response (or QR) capability. (p 13)

Consequent upon this information sharing, ED1 is seen as promoting profound changes in supply chain structures and relationships. Organizations will interact not only at the points of buying and selling, but in the marketing, logistics planning, and even information systems development areas. Once information is shared with trading partners, certain non-core activities can even be outsourced to them. It is argued that ED1 facilitates this ‘vertical disintegration’, because it enables independent companies to maintain close links, effectively substituting electronic transaction-based communications for hierarchical co-ordination (Clarke, 1992). Alternatively, with the supply chain redefined as a total network, individual organizations will renegotiate their own roles and scope in relation to one another, and redistribute functions to their trading partners. This phenomenon has been dubbed ‘business network redesign’ (Short and Venkatraman, 1992).*

ED1 is also seen as a key tool in the management of international supply chains and in the conduct of international trading relationships. With the arrival of the Single European Market and the removal of trade barriers, ED1 is promoted as a means of simplifying and harmonizing the international trade and payment cycle. Open electronic trading communities symbolize the vision of unfettered trade across national boundaries, of ‘level playing fields’, and of a technologically and economically integrated European region. As a result, the Commission of the European Communities, as part of its programme for the Single European Market, has thrown considerable weight and resources behind the development and diffusion of EDI.

This scenario of the decline of conflict and of moves towards harmony, collaboration and ‘partnership’ between trading organizations, and indeed between

’ ‘Business network redesign’ is seen as an extension of the concept of ‘business process redesign’ which is currently much vaunted in business management circles. Where the latter emphasizes improvements in the firm’s internal operations, the former involves a reconceptualization of the entire business network and the individual firm’s place within it. EDI is seen as a key strategic tool in this process.

Journal of Strategic information Systems 1995 Volume 4 Number 1 33


trading nations, is the vision of trading relationships in the 1990s. Are organizations in fact enjoying such harmonious relationships? What is the reality behind the implementation of ED1 systems? In order to consider the practice, as opposed to the theory, of EDI, some ED1 networks are discussed below.

ED1 in the motor industry: the case of Ford

The Ford Motor Company was one of the earliest innovators in interorganizational network technology. In the mid 1980s it established a corporate network, Fordnet. This network covers all Ford sites in Europe, and has mailbox facilities for Ford’s business partners (eg suppliers, dealers and shipping companies). The network is proprietory, as are the software and file layouts.

ED1 is only one of the applications served by the network, which handles all kinds of corporate data transfer within Ford and with its trading partners. ED1 in Ford was developed and implemented expressly in order to streamline business processes and eliminate inventory. Ford of Europe therefore uses ED1 principally for applications which transmit forecast information to suppliers on materials requirements and which provide detailed instructions to suppliers on the daily shipments of materials required.

When the network was introduced, Ford made it clear to its established suppliers that they should use EDI. New suppliers were informed that trading by ED1 was a requirement of trading with Ford, and that no paper transactions would be done. Ford provided its suppliers with Fordnet software to run on IBM machines and with Fordnet training courses. Suppliers with incompatible systems, or with no systems at all, were required to find appropriate solutions as quickly as possible. If establishing connections with Fordnet involved suppliers in the expense of having to buy new equipment, or the inconvenience of having to use Ford’s system in addition to other systems for trading with other customers, then, Ford maintained, this was their problem.

In developing a proprietory interorganizational network, Ford had a basic objective - to gain competitive advantage by locking its suppliers and customers into its systems, and locking its competitors out of them. Indeed, the company wants this lock-in to restrict its suppliers’ and dealers’ ability to do business with other manufacturers or, at the very least, to inhibit their trading relationships with other companies.

Indeed, it is quite clear from both the design and the implementation of Fordnet that Ford does not regard its trading relationships as if they were partnerships, made on an equal basis, but relationships involving its domination and their subordination. This is not really surprising, given Ford’s market position and purchasing power, but it does run counter to the popular view of ‘collaboration’ and ‘partnership’ in trading relationships - a view which is often promoted by corporations themselves when publicizing their ED1 networks. Ford’s attitude to its trading partners was revealingly expressed by one of Ford’s systems staff, describing the reaction of suppliers across Europe to the imposition of the requirement that all future transactions were to be conducted using ED1 rather than paper:

The Spanish were extremely obedient. Ford is their bread and butter. When we say “Jump”, they jump. The Germans gave us the most trouble. Among other things, they didn’t like the dedicated network.

Ford also shows little inclination to reengineer its business processes, at least not



outside its own corporate boundaries. The company’s only objective is for its business partners to use its proprietary network; it is unconcerned with the established trading and information handling practices of its suppliers, with the way in which Fordnet cuts across these, and with developing solutions to such incompatibilities. Neither is it concerned with how the data transmitted over the network is used by its trading partners. Ford’s suppliers have enormously contrasting levels of technological sophistication. While over 50 per cent of its trading partners in Germany, for example, are able to integrate ED1 messages from Fordnet with their own in-house computing applications, most of its Spanish suppliers have low levels of office automation, and simply ‘view and print’ Ford’s ED1 messages. ED1 has therefore had no impact at all on their business processes; it has simply meant an additional expense. Serious attention to business process redesign would involve addressing these kinds of inefficiencies throughout the supply chain and, if necessary, providing training in how to streamline information handling procedures. But Ford’s use of ED1 confirms Short and Venkatraman’s (1992) observations that, rather than signalling significant changes in supply chain structures and relationships, ‘many, if not most, business process redesign initiatives invariably turn inward’ (p 7), leaving existing relationships with suppliers and customers intact.

Companies who supply to Ford find the trading relationship coercive and the strictures of using Fordnet ED1 unnecessarily expensive and inconvenient. One supplier complains that doing ED1 with Ford has increased the costs of the trading relationship, but has not reduced expense in any way. Moreover, there are technical incompatibilities between Fordnet and the supplier’s computer systems. First, the two systems’ traffic speeds are different and this causes communications problems. In addition, Ford uses an IBM communications protocol which is very unusual and which needs Ford proprietary software on the front end. This creates extra expense and inconvenience to the suppliers. Second, Ford converted some paper documents with ancient information categories into ED1 messages, but without always retaining a clear memory of the definition of some of the data being transmitted. The result was that it had problems in clarifying this with its supplier, and thus that integrating messages directly into the supplier’s internal applications was riddled with difficulties. Third, Ford uses the German automotive industry ED1 message standard, VDA, but converts it into a proprietary version, and the use of this unique standard message is very costly for the supplier.

The supplier in question is not a small company without market muscle or in-house computing expertise. On the contrary, it is a large multi-national company with customers throughout the motor industry, with a long-established history of supplying to the motor industry and, indeed, with a trading relationship with Ford which dates back to Ford’s arrival in the UK in the 1920s. Nevertheless, the company feels constrained to trade on the terms dictated by Ford, and to conceal the costs and inconvenience of doing so. As for many other suppliers to the automotive industry, Ford is its biggest customer, and this inhibits suppliers from challenging Ford’s approach to EDI. However, also like other companies in the same position, it privately questions whether supplying Ford is worthwhile.

EDI: coercion and power in the automotive industry

It might be supposed that Ford is an exceptional case and, what is more, one that is notorious even within the motor industry for its use of a network to force its trading partners to do business on the terms it dictates. However, it would seem that Ford’s

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Networks of collaboration or conflict?: .l Webster

ED1 practices are not unique, but typically derive from its position as a large manufacturer with considerable market power. A similar dynamic is noted in a survey of corporate uses of telecommunications carried out for the OECD and DGXIII of the CEC, focusing here on motor manufacturers in the USA:

The problem for US suppliers, and especially the smaller ones, is that they have little choice but to accept the will and network solutions of their large clients . . . Indeed, the small suppliers have had little, and overwhelmingly negative, experience with this type of application. They have had no opportunities to experiment with the technology, being hard pressed by their clients to deploy it in pre-set and rigid ways, and have not learned about its potential. This one-sided deployment of ED1 applications has effectively shut the weaker market players out of the telecommunications learning cycle. (Bar et al, 1989, p 35)

We may therefore note similarities in the automotive companies’ strategic use of ED1 across countries, and consequently in the experiences of their trading partners. For, as we have seen, it is not only the smaller players which find themselves hampered by the ED1 strategies of the automotive giants. Even the larger suppliers - some themselves multinational corporations with considerable telecommunications expertise and technological sophistication - find themselves forced to conform to the objectives and programmes of their customers. They too have to accept networks deliberately designed and configured to meet these objectives and to preserve the power and dominance of the large customers. Unlike the small and medium enterprises which are the focus of considerable policy concern, such players are not excluded from the ‘telecommunications learning cycle’, but have their own strategic programmes for networking, their own established network technologies, and established electronic linkages with other trading partners.

There are other examples of companies outside the automotive industry using ED1 to underline coercive trading practices. In retailing, the British do-it-yourself chain, B&Q, pursued a similar ED1 strategy to that of Ford, installing its own computer terminals in its suppliers’ premises and refusing to do business with any trading partner that is unable or unwilling to exchange information electronically. W H Smith’s Do-It-All do-it-yourself chain developed ED1 in 1987. Its message to its suppliers, referring to ED1 and business respectively, was ‘get in or get out’ (Garcia-Sierra, 1993, p 60). The supermarket chain, Tesco, while not so tough in its domination of its trading partners, has pursued an ED1 strategy in which its objective is to draw its food manufacturing suppliers away from their established paper-based systems and into its own recommended electronic trading system. Although this has involved a more consensual process of negotiation over transactions and training suppliers in its preferred business processes, Tesco has still ultimately imposed its business methods and systems of information handling upon its trading partners. It now trades electronically with more than 1000 of its key suppliers and is ‘reviewing’ its relationship with the remaining 1500 smaller suppliers. The suppliers are all too aware that this ‘review’ process means weighting being given to their ED1 awareness and expertise, and some have adopted ED1 in order to forestall the possibility of being dropped from Tesco’s vendor list. In all, there is considerable evidence of coercion by large manufacturers of smaller suppliers to move to ED1 in order to suit the information technology (IT) and business strategies of the manufacturers (Cunningham and Tynan, 1992). In the ED1 user community, this practice has been associated with the catch-phrase ‘ED1 or die’ - meaning that trading partners are required to use the system or the


Networks of collaboration or conflict?: .I Webster

customer will not trade with them at all. It is a practice which has been particularly prevalent amongst large retail outlets in the UK:

Given the retailers’ investment in their basic IT infrastructures . , it will not be long before the ability to trade electronically is a basic requirement. This is because the scale of retail operations - at least in the more concentrated northern European markets - will mean that it becomes almost impossible to trade without computer systems support. (Cunningham, 1992, pp 3-4)

These innovations reflect a set of supply-chain relationships and an agenda for managing them which is based on the domination of large and powerful companies over their less powerful trading partners. Because of their purchasing power, the ‘hubs’ in the trading network can dictate the terms on which they do business with the ‘spokes’. They use ED1 to heighten their control over their trading relationships and, as the case of Ford demonstrates, they may even enshrine this control in the ED1 system itself, through particular configuration of the network, hardware and software. In pursuing their agendas for reducing market uncertainty, or simply for locking trading partners into trading relationships with them, these powerful players have unilaterally imposed their own in-house computer systems or information handling practices upon their trading partners, extending their own hardware systems into their suppliers’ premises, dictating product and inventory coding according to their own established in-house information systems, and dictating the type and frequency of data to be exchanged.

The spokes are left with little choice but to conform to the trading terms, conditions and systems dictated by the hubs and to contribute to their perpetuation, and these can now become crystallized into ED1 networks. Moreover, they have little or no influence over the development of these ED1 networks. They are forced to adopt the systems and information handling procedures developed by their major customers, which are geared to the requirements of the latter, and not to their own procedures or business strategies. Furthermore, the absence of any collaboration or prior consensus about the structure, function and design of these networks affords the spokes little opportunity to develop their knowledge and expertise in ED1 use. This is not a problem in cases where the spokes themselves have their own established ED1 systems (which is true of many of Ford’s larger suppliers). However, small and medium enterprises (SMEs) embarking on ED1 use for the first time are confronted with foreign systems whose functioning they do not understand, where they are merely required to interpret and act upon the messages transmitted to them.

Conclusion: understanding the reasons for conflict and its persistence

How can we understand this imbalance of power in electronic trading relationships? There are fundamental structural issues which provide part of the explanation for this. Firstly, there are factors relating to the structure and workings of the supply chain in the industries considered. The typical ‘hub-and-spoke’ arrangement of the automotive and retail industries, in which large, multinational assemblers or large retail multiples trade with a constellation of smaller partners (albeit that some of these smaller partners are large multinationals in their own right), confers on the assemblers and multiples a great deal of purchasing power. Moreover, the nature of the automotive industry worldwide -with, in the USA, a couple of very large assembly companies and, in Europe, very large numbers of suppliers per assembler - gives the assemblers a monopoly position in the

Journal of Strategic Information Systems 1995 Volume 4 Number 1 37


marketplace which again makes their suppliers highly dependent upon them for business (Womack et aE, 1990).

The second factor, related to the first one, is the established expertise and resources in information systems held by the hubs, which increase their ability to use these systems in a strategic manner to pursue particular corporate objectives. For example, General Motors’ long-term innovations in information systems, and in particular its attempts to build company-wide information networks, are well documented. High technology utilization in automobile assembly, in which the assemblers have built up substantial levels of know-how in systems development, has placed them in a strong position to construct proactively systems which are designed to serve their longer-term business objectives. Systems like Fordnet have to be seen in the context of previous generations of automation in Ford, and the company’s accumulated expertise in this sphere.

Although this kind of technological capability is not the exclusive preserve of the customers and is equally held by some of the large first-tier suppliers (including Ford’s supplier discussed above), it is clear that the bigger and more highly resourced the company, the more likely it is to have built up such a capability. Small suppliers have neither the resources nor the expertise to develop strategically systems, and have therefore never had the opportunity to build up a technological capability. This lack militates against them when it comes to dealing with large hubs who have no interest in disseminating their expertise, but are purely interested in using systems to control their supplier base more strictly. This is evident from Ford’s attitude to its Spanish suppliers, in particular. Given this context, it is easy to understand why small suppliers find themselves disadvantaged in the application of electronic trading networks, and feel forced to comply with the imperatives of their customers. The compliance of the larger first-tier suppliers, which have established ED1 systems and considerable expertise of their own, is harder to explain. It can only be understood in terms of the much greater market power of the customers, even over large multinational components manufacturers.

Thirdly, electronic trading networks themselves crystallize this power imbalance. Proprietary networks by their very nature confer advantage upon their proprietors and disadvantage upon the non-owners. The company which owns and controls the network may dictate its functioning: network architecture, communications protocols, message standards, product coding and information handling procedures. Indeed, the private control of telecommunications networks is critical to the configurability of the network, a configurability which may be central to the firm’s competitive strategy. Other players have to comply with these arrangements, which may not be designed to suit them. Network control may even be more important than network ownership, and critical to the securing of competitive advantage (Bar et al, 1989).

Fourthly, at the level of the national and international company more generally, it is indeed not surprising to find that competition, which entails conflict, continues to be a motive force for business organizations, and that it continues to express itself in many supply chain relationships. Even where companies move towards more co-operative trading relationships, by suspending competition in specific areas and by carefully negotiating with other companies and associations in their industry, their strategies are still underpinned by competitive motives:

Competition generally does not disappear altogether but becomes covert, in such forms as: manoeuvring to ensure that the benefits fall disproportionately in the company’s direction and the costs disproportionately on other participants; and

38 Journal of Strategic Information Systems 1995 Volume 4 Number I


preparing to leverage on the scheme as soon as it is implemented. (Clarke, 1992,

P 149)

ED1 users may introduce this technology in order to pursue particular business strategies. These may include the introduction of business network redesign and ‘desourcing’ - in which the upstream supplier base is rationalized while downstream relationships are made more ‘collaborative’. Alternatively, ED1 may be used as a weapon against new entrants into the industry - to raise the barriers to entry and establish closed groups of players, essentially cartels. Or proprietary ED1 systems may be part of a strategy used by corporations to establish or reinforce domination over their trading partners, who are required to use the proprietary system and trade on the terms dictated by the hub company. This strategy can be likened to the classic strategy of vertical integration. It replicates the control of the vertically integrated organization, without actually requiring the ownership of subordinate companies. Instead, control over these subordinate trading partners can be achieved through electronic linkages. These linkages constitute what Yates and Benjamin (1991) have referred to as ‘virtual vertical integration’.

Of course, the experience of ED1 has not been entirely coercive and conflictual, even within the motor industry. We can note the growing number of instances of collaborative behaviour between trading organizations, which is facilitated by the introduction of EDI. We can also acknowledge that, despite being nurtured, cajoled or forced into electronic trading relationships with proactive ED1 users, many organizations are now themselves recognizing that ED1 also offers them the benefits of increased data accuracy, decreased administration costs and speedier handling of information and, as a result, they are in turn initiating new EDI linkages with their trading partners. In the UK retail industry, for example, some of the large multiples engaged in ‘rolling out’ ED1 to their entire supplier network provide their suppliers with training in ED1 use. The purpose of such training is to encourage uses of ED1 which confer benefits upon the suppliers themselves, on the grounds that suppliers will be much more amenable to electronic trading if the benefits percolate through the supply chain. This, indeed, has been the effect of such practices and there is now important evidence of ED1 being accepted, utilized, and passed on to other trading partners by small retail suppliers (Kirwan, 1994). Furthermore, the establishment of electronic linkages, while often operating to the greater advantage of the large and powerful players, does not operate entirely to the detriment of the smaller and less powerful ones. It has been suggested that small companies have to date only been unable to derive the strategic benefits of ED1 and other network technologies because they have been excluded from the telecommunications learning cycle, or because they have only attained the first phase of the learning cycle, automating existing processes but leaving the substance of those processes intact (Bar et al, 1989). The implication of this is that experiences of ED1 are contingent upon the maturity of ED1 use among particular players and in particular industry sectors. On this basis, it could be speculated that cases like that of Ford are exceptional, representing an early implementation of ED1 which will become increasingly outdated as users ‘roll out’ the benefits of ED1 to their trading partners. In this scenario, the disadvantaging of small suppliers in electronic tradings relationships is merely a temporary phenomenon. Indeed, in the UK retailing industry, as we have seen, large customers now see the importance of educating their suppliers in the efficient use of EDI, thereby attempting to pass on some of its benefits. This is in sharp contrast to Ford, which does not conceal its lack of interest in the fortunes of its suppliers.


Networks of collaboration or conflict?: .I Webster

However, a wholesale shift towards collaborative trading practices would involve a significant change in the motivations of ED1 users and the mechanisms that they use for trading with one another. For example, new shared information handling procedures cannot be assumed simply because organizations put in place a technology which facilitates such change. Questions still arise as to how much information is shared, how access to it is controlled, who is excluded from certain information exchanges, and to whose relative advantage (Cunningham, 1992). These issues are subject to management choice rather than technological imperative. And they are determined by the structure and quality of supply chain relationships which are already established. These relationships of interorganizational power and interdependence are highly complex; they operate at a variety of levels between organizations (Dodgson, 1993), and are in turn shaped by a range of strategic imperatives (Pfeffer and Novak, 1976; Pfeffer and Salancik, 1978). This variety of causes and expressions of interorganizational relationships alone suggests that a simple outcome of establishing electronic linkages is unlikely. However, even where organizations do make moves towards more sharing of information in order to integrate the supply chain, this does not necessarily mean that it will be used on a more equitable basis than hitherto. Corporations may share information, but use this shared information as a powerful lever with which to continue to dictate the terms on which they do business with their trading partners. Given this qualification, the extent to which truly, as opposed to superficially, collaborative relationships and hence full partnership will be established remains to be seen.

Trading relationships and supply chain power politics may therefore change with time and experience. They certainly vary across industries. ‘Hub-and-spoke’ arrangements typify the retailing and automotive industries, but in others, such as electronics, there is much less inequality of size and influence between players, and large and powerful corporations buy from and sell to other large and powerful corporations. Any assessment of the organizational dynamics which are associated with the use of EDI must crucially take into account this political dimension of particular supply chain relations which shapes and constrains the interactions between organizations. In other words, the study of existing power-dependency relationships across different sectors and trading networks is critical to an understanding of the changes taking place in organizational boundaries - of whether they are broken down, simply maintained, or invaded.

In addition to being contingent upon the characteristics of particular supply chains or trading networks, trading relationships are also highly susceptible to changes in the overall economic climate. During recessionary periods, suppliers are particularly anxious to conform to the requirements of their customers in order to keep their business and prevent them from taking their custom elsewhere; in boom periods, on the other hand, the balance of power may shift in favour of suppliers, as a greater proliferation of customers affords them more choice as to who they do business with. This suggests that during different economic periods, different strategies will be appropriate to the maintenance of market power by different players. During some periods, it may be possible to maintain this power through overtly adversarial methods, while in others it may best be maintained by introducing more collaborative interorganizational relationships, in other words, through the veiled use of coercion.

Optimism about the future of trading relationships may be well founded. It may be that, with the diffusion of ED1 expertise and recognition of the short-term competitive gains to be had from coercive implementations, the benefits of using

40 Journal of Strategic Information Systems 1995 Volume 4 Number I


ED1 will be more widely dispersed. It may be that changes in world markets and in the competitive arenas within which particular industries operate will force changes in company strategies for gaining competitive advantage, such that they cease to benefit economically and strategically from relations of domination and dependency with their trading ‘partners’. However, the evidence for these changes is still, at best, patchy and, in the final analysis, may have little to do with the implementation of electronic trading and more to do with the defucto strategic and organizational imperatives of particular industries. The lesson of the motor and retailing industries in Britain suggests that assumptions about wholesale changes in interorganizational relationships should be made with great caution. The vision of collaboration is a somewhat over-generalized and romanticized vision, perhaps more of a managerial ideology of the way in which organizations ought to interact with one another, rather than a description of how they necessarily do interact.

Acknowledgements

I am very grateful for the kind help of the individuals and companies who co-operated with this research, and for the financial support of the Economic and Social Research Council.

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Documents

Networks of collaboration or conflict? Electronic data interchange and power in the supply chain