Many large organization are moving from single sourcing to multi-sourcing just because of many factors such as increasing power of buyers, increasing of the range of purchases and the supply chain risk. For multi-sourcing to be effective the sourcing company needs to have a certain degree of influence or power and in this power, positive results or negative results can be obtained. Power is the ability to influence people or situation and they are many types power which can be used to influence in negotiation and in multi-sourcing such as legitimate, expert, reward, coercive and referent power.
Power is usually a degree that is reached by a company mainly due to its existence in the industry. As large organizations usually purchase their goods in large quantities, they can choose the suppliers that they want to do with multi-sourcing as they have the power to do so. The suppliers will now operate being controlled by the buyer. For example INSCO can have many suppliers of chicken such as Crestar chickens and Irvine’s chickens and have got the power to choose which suppliers to do with multi-sourcing since they buy in large quantities.
If the buyer has all knowledge and skill in prices or suppliers he or she has the expert power to do multi-sourcing. Buyers will have the ability to influence suppliers based on their past experience and expertise. This will attract many suppliers because they will rely on his knowledge and skill of the buyer. For example in the cotton industry Cottco may pass knowledge or training to farmers on how to farm crops this expert power will increase supplier base hence multi-sourcing strategy will be effective.
Legitimate power is the power that derived from the position a person hold in an organization. The buyer will be in a position to control suppliers so that they will adhere to the organization requirements if the buyer has legitimate power. Legitimate power is not without a disadvantage. While legitimate power can help...