Limits to Interfirm Coordination through Information Technology: Results of a Field Study in Consumer Packaged Goods Distribution

Abstract

:Researchers have suggested that information technology (In can reduce coordination costs, leading to increased coordination and cooperation among buyers and suppliers in an industry. However, improved coordination through IT, and the economic benefits from that coordination, may not be fully realized in practice; this conclusion is suggested by a field study in the consumer packaged goods industry investigating the impact of IT on interactions between manufacturers and retailers. New coordination mechanisms are emerging, driven by checkout scanner systems and IT, that permit more tightly coupled logistics operations in the distribution channel. The potential benefits of this increased coordination, through reduction in inventory and more stable manufacturing, are dramatic. However, we have observed considerable resistance by retailers to these innovations. Analysis of out field study results suggests that this resistance is due to the impact of the new coordination mechanisms on bargaining power; retailers perceive that their bargaining power will be eroded under the new coordination structure, and fear that this will preclude their sharing in the economic benefits.