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European Management Journal Vol. 23, No. 6, pp.

648662, 2005
2005 Elsevier Ltd. All rights reserved.
Printed in Great Britain
0263-2373 $30.00

The Limits of Lean

Management Thinking:
Multiple Retailers and
Food and Farming
Supply Chains
ANDREW COX, CBSP, Birmingham Business School
DAN CHICKSAND, CBSP, Birmingham Business School
This article discusses the strengths and weaknesses
of lean management thinking in the food and farming industry in the UK. Based on a case study of red
meat supply it is argued that the adoption of lean
practices internally may be appropriate for all participants in the industry, but the inter-organisational aspects of lean may not be easy to apply in
practice, nor appropriate, for many participants.
For some participants especially the multiple
retailers the adoption of lean principles may lead
to a positive outcome with stable and/or increasing
profitability. For the majority of participants in
these industry supply chains, however, the adoption of lean principles may result in a high level
of dependency on buyers and to low or declining
levels of profitability.
2005 Elsevier Ltd. All rights reserved.

and leverage perspective on transactional exchange,

into the UK fresh/frozen, beef supply chain. The
study shows that, while aspects of lean thinking
may be appropriate internally for all participants in
beef supply chains, the ability to extend this way of
thinking beyond the boundaries of the firm into the
extended supply chain for fresh/frozen beef is much
more problematic. This is primarily because the
power and leverage resources do not exist to allow
a lean supply chain management approach to be
adopted throughout the chain. This means that lean
supply is of limited utility for many participants in
the beef supply chain.

Keywords: Lean thinking, Power analysis, Supply

chain management

The UK red meat industry is experiencing unparalleled challenges and has been thinking radically
about its future. The major threats to the industry
range from health related problemslike the Foot
and Mouth Disease and BSEto the de-coupling of
farmers CAP subsidies after 2005. Relatedly there
have been changes in consumer preferences, with
per capita meat consumption falling from 20.9 kg
in 1980 to 16.6 kg in 2002 (Meat and Livestock Commission, 2005) and increasing concentration of market power, with 75% of fresh/frozen beef sold
through multiple retailers. Recent health and safety
concerns, coupled with changes in consumer lifestyles and demand, have resulted in the share of

The article analyses the current crisis of profitability
and competitiveness in the UK food industry and
red meat supply chains, followed by a description
of the recent UK government and farming industry
responsebased primarily on the adoption of lean
principles to these problems. The article then presents the findings from a study, based on the power

The Crisis in UK Red Meat Supply Chains

and the Government and Industry Response

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005


red meat consumption within the total meat market

being under continuous pressure. This has had a major impact on the market price for red meat products
(Simmons et al., 2003).
This uncertainty about the future is most evident
within the beef industry, due to changes to CAP subsidies (decoupling) and the reintroduction of over
thirty-month-old beasts (OTMS) into the supply
chain. The potential effects of the loss of subsidies
and an influx of approximately 150,000 tonnes of
lower quality beef onto the market are not fully
known. This has led to calls for increased collaboration to reduce risk and uncertainty, stimulate innovation and increase value creation for everyone in the
industry (Van der Vorst et al., 1998).
The UK Governments response to this crisis was the
formation of a Policy Commission, which produced a
Report into the creation of a sustainable future for
farming (Curry Commission, 2002). This led to the
creation of three industry-wide agencies to facilitate
new thinking in red meat supply chains. The three
agencies are the Food Chain Centre (FCC), with a brief
to support lean thinking and efficiency improvement
across all British agriculture sectors (dairy, cereals
and fresh produce), the Red Meat Industry Forum
(RMIF), which was created to oversee ten projects
to assist in the improvement of efficiency and competitiveness in British red meat supply chains and
the English Farming and Food Partnership (EFFP) to focus on the potential for collaboration within farming.
The RMIF embarked initially upon a Value Chain
Analysis (VCA) project to study and map ten value
chains within UK agriculture: sugar cane and potatoes (1996/97); cereals (1997/98); beef, milk, oilseeds,
pig, poultry, salads and vegetables and sugar beet
(1998). These projects were based upon lean thinking
and integrated supply chain management principles
(Womack and Jones, 1996). The rationale was that, by
understanding the causes of waste and inefficiency
from poor co-ordination and uncertainty, it would
be possible to generate win-win outcomes for the
majority of participants in the industry. Unfortunately, while there has been considerable success in
identifying the sources of waste in the ten value
chains analysed, the building of collaborative intracompany teams to generate win-win integrated
supply chain improvements has not been very successful. The major reason for this it is argued because
it has been very difficult to achieve the desired levels
of trust between participants in the chain (Simmons
et al., 2003). This is an explanation for failure that is
often used by analysts of non-integrated and poorly
co-ordinated buyer and supplier relationships (Carlisle and Parker, 1989; Sako, 1992).
This apparent failure of inter-organisational collaboration requires explanation and, in the next section,
recent critiques of the lean approach that explain
why such failures may be predictable are discussed.

These explanations are based, first, upon operational

criticisms of the lean paradigm and, second, on the
commercial critique from the power and leverage
perspective. This discussion is then followed by an
analysis of the appropriateness of lean supply chain
management for the fresh/frozen beef supply chains
managed by multiple retailers and integrated food
processors. This study was primarily funded by the
EPSRC, and undertaken in conjunction with the
North West Food Alliance (NWFA), the RMIF and
its consulting arm, the MLC.

Lean Thinking and the Power and Leverage

Perspective on Appropriateness in Strategy
and Relationship Management
There is considerable debate about the most effective
way for companies to manage their buying and selling relationships to achieve sustainable business success. Historically, Michael Porter (1980) argued that
companies should always think about buyer and
supplier power and their ability to augment this to
achieve competitive advantage. More recently there
has been a radical re-appraisal in favour of winwin principles of commercial exchange (Brandenburger and Nalebuff, 1996); relationship marketing
(Gummesson, 1999); and, partnership sourcing or
alliancing (Macbeth and Ferguson, 1994).
It is clear that much of this thinking has informed recent government and food supply chain initiatives.
The ten VCA studies outlined above were predicated
on emulating the lean and highly collaborative approaches adopted, initially, by Toyota in the Japanese
automotive sector. This approach seeks to find ways
to deliver exceptional value to end customers by
finding ways of eradicating waste and inefficiency
throughout the supply chain (Womack and Jones,
1996; Hines et al., 2000). There are, however, writers
who have argued that lean approaches may not have
universal applicability for all organisations. The critique of the lean way of thinking can be divided
broadly into those that focus primarily on operational issues (agile and batch critiques) and those that
focus on the limits imposed by the need to create a
commercial and operational synergy before this approach can be used by buyers and suppliers throughout a supply chain (the power and leverage critique).
(a) Agile and Batch Production: The Operational
Critique of Lean
There are two major operational critiques levelled at
the lean approach. The first is associated with the agile
school (Fisher, 1997; Christopher and Towill, 2002;
Lee, 2002). This contends that the lean approach is
not always the most appropriate way to manage
internal processes or external relationships. The lean
approach operates best when there is high volume,
predictable demand with supply certainty, so that
functional products can be created. In low volume,
highly volatile supply chains, where customer

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005



requirements are often unpredictable and supplier

capabilities and innovations are difficult to control,
a more responsive or agile approach, based on innovative products, is appropriate operationally. Table
1 shows the demand and supply characteristics that
operate in primarily lean and agile supply chains.
It is clear, therefore, that supply chains cannot be
managed using only lean techniques because they
have very unique demand and supply characteristics
that require very different operational ways of working both internally and externally. Indeed, sometimes agilean approaches may be necessary
because there are decoupling points in supply chains
that require a lean approach at one point and a more
agile approach at another (Naylor et al., 1999).
A second operational critique of lean is the operational
appropriateness school that denies the universal applicability of the approach as a system of production
(James-Moore and Gibbons, 1997; Lowe et al., 1997).
It is argued that there is considerable evidence in
the automotive sector of the continuation of batch
and craft based systems of production amongst speciality and specialist component manufacturers. Furthermore, there is little evidence that all production
systems are moving towards the lean model in all
industries. This is because just-in-time flow for production cannot be sustained unless production levelling is possible within the organisation internally and
with the suppliers in the supply chain externally
(Cooney, 2002).
(b) The Power and Leverage Perspective: The Strategic and
Commercial Critique of Lean
There is also a school of thinking that questions the
universal applicability of the lean paradigm from a
strategic and commercial perspective. Some writers
in this school (the anti-power school of writing) have
commented on the difficulty of achieving win-win
outcomes when there is a dominant buyer in the supply chain. Writers in this school tend to emphasise the
onesided commercial benefits that flow from suppliers to buyers when lean partnering approaches are
adopted, and call for a more equitable approach to
the sharing of value in the chain from waste reduction
Table 1

and inefficiency improvement programmes (Ramsey,

1996; Maloni and Benton, 2000; Emiliani, 2003).
The power and leverage perspective provides a less normative critique. This approach contends that there can
never be any one single best way (lean or agile) of
managing business strategy and operational delivery.
On the contrary any approach that claims universal
applicability must be false because the business environment is in constant flux and this requires companies to be flexible about which operational means are
the most conducive for sustaining business strategy.
Managers, therefore, should have an open mind about
whether or not they should adopt any particular operational means and, as a result, the lean collaborative
approach to external relationships cannot be a universally applicable operational delivery mechanism for
all companies in all circumstances (Cox, 2004a).
The first requirement for companies, therefore, is to
decide on what their commercial rather than their
operational strategy should be. When devising a
commercial strategy it is essential that companies decide whether they are trying to achieve above normal
returns (double digit profitability), or whether they
are attempting to achieve low or normal returns.
Whatever the operational means that are devised to
deliver a particular commercial goalbased on differentiation or cost leadershipthe consequence will
be that it either leads to above normal returns or low
or normal returns commercially.
This approach also holds that whether or not a company can pursue any operational means to achieve
its commercial ends successfully depends, ultimately, on the power circumstances it finds itself in
currently, and whether or not it has opportunities
to leverage the desired outcome in the future. All
companies act as both buyers and suppliers and
Figure 1 provides a way of thinking about the power
and leverage position that can exist between buyers
and suppliers as they strive to achieve their preferred
operational means and commercial ends.
The Figure shows that buyers normally will be in a
position to achieve all that they desire operationally

Lean and Agile Product Profiles

Distinguishing Attributes

Lean Supply

Agile Supply

Typical products
Marketplace demand
Product variety
Product life cycle
Customer drivers
Profit margin
Dominant costs
Stockout penalties
Purchasing policy
Informatioin enrichment
Forecasting mechanism

Functional products
Physical costs
Long-term contractual
Buy materials
Highly desirable

Innovative products
Marketability costs
Immediate and volatile
Assign capacity


European Management Journal Vol. 23, No. 6, pp. 648662, December 2005


and commercially at the expense of suppliers if they

are in a position of buyer dominance (>) and, sometimes, when they experience independence (0). When
situations of interdependence (=) occurs it is normal
for the buyer and supplier to share the value from
the exchange relationship; when supplier dominance
(<) occurs it is normally the supplier who is able to
achieve all of their operational and commercial goals
at the expense of the buyer. From the perspective of
any individual company in a supply chain this
means that the most desirable leverage position is
to be able to dominate relationships with both its customers and its suppliers (i.e. to impose price and
quality standards both downstream and upstream).
This is known as Janus-faced Dominance (Cox et al.,
2000): it occurs when a company appropriates the
maximum share of value for itself in the form of
above normal returns (rents) by achieving both buyer
dominance upstream and supplier dominance downstream (Figure 2). It is under these circumstances that
one might expect companies to be able to consistently earn above normal returns commercially. The

problem for companies is, however, that, if they are

not able to operate as sellers in supplier dominance
(<) or interdependence (=) downstream, then it is unlikely that above normal returns will be made. If this
is compounded by an inability to achieve buyer dominance (>) upstream, then it is likely that the company
will be on a treadmill to oblivion commerciallyit will
make only low or normal returns.
From this perspective the lean approach may suffer
from serious flaws strategically. Toyota developed
the lean approach, but it makes only low returns. It
follows from this that, even before one considers
whether or not the lean approach is desirable operationally, one must question whether this commercial
model (based on passing value to customers in order
to win volume, but with relatively low returns) is one
that companies should be seeking to emulate
There is a further commercial issue with the delivery
mechanism favoured by advocates of both lean
and agile operational approaches. Writers in these



to Buyer
Relative to

Few buyers/many suppliers

Buyer has high % share of total market for
Supplier is highly dependent on buyer for
revenue with few alternatives
Supplier's switching costs are high
Buyer's switching costs are low
Buyer's account is attractive to supplier
Supplier's offering is a standardized
Buyer's search costs are low
Supplier has no information asymmetry
advantages over buyer



Many buyers/many suppliers

Buyer has relatively low % share of total
market for supplier
Supplier has little dependence on buyer for
revenue and has many alternatives
Supplier's switching costs are low
Buyer's switching costs are low
Buyer's account is not particularly attractive
to supplier
Supplier's offering is a standardized
Buyer's search costs are relatively low
Supplier has very limited information
asymmetry advantages over buyer

Few buyers/few suppliers
Buyer has relatively high % share of total
market for supplier
Supplier is highly dependent on buyer for
revenue with few alternatives
Suppliers switching costs are high
Buyers switching costs are high
Buyers account is attractive to supplier
Supplier s offering is relatively unique
Buyers search costs are relatively high
Supplier has moderate information
asymmetry advantages over buyer


Many buyers/few suppliers
Buyer has low % share of total market for
Supplier has no dependence on buyer for
revenue and has many alternatives
Supplier's switching costs are low
Buyer's switching costs are high
Buyer's account is not particularly attractive
to supplier
Supplier's offering is relatively unique
Buyer's search costs are very high
Supplier has substantial information
asymmetry advantages over buyer


Attributes to
Supplier Power
Relative to Buyer

Robertson Cox Ltd. 2000 All Rights Reserved Source: Adapted from Cox, A (2001), p. 14

Figure 1 The Power Matrix: Attributes of Buyer and Supplier Power

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005













this point in the

Source: Robertson Cox Ltd, 2000. All Rights Reserved.

Figure 2 Janus-Faced Dominance in Business and the Supply Chain

schools normally recommend that operational collaboration should be based on win-win (equity based)
approaches to commercial exchange. It has been
argued that, while equitable sharing of commercial
value is one approach to exchange, it may not be the
best way to maximise commercial returns for either
party. If there is an alternative for either party that
provides a higher share of value than equity, and
which is also just as sustainable overtime, then this
approach may be seen to be commercially superior
for whichever party is able to achieve it (Cox, 2004b).
It has also been argued that power circumstances
underpin the successful operational and commercial
implementation of exchange relationships. This is because, unless there is a power situation of buyer dominance or interdependence, long-term collaboration
cannot be sustained by a buyer. Conversely, collaboration cannot be sustained overtime for a supplier
unless there is a power circumstance of supplier dominance or interdependence (Cox et al., 2004). This perspective also holds, therefore, that lean approaches
cannot be implemented successfully within supply
chains as a whole unless they are characterised by extended dyadic exchange transactions of buyer dominance and/or interdependence. This means that
without an understanding of the power and leverage
circumstances that prevail it is not possible to predict
which operational means are capable of successful
commercial implementation in relationships.
From this perspective lean is normally a strategy for
low commercial returns (a treadmill to oblivion), especially when it is based on passing value to customers
using equity-based collaboration. In these circumstances value will have to be shared but, since most
of it is to be passed to customers, there is unlikely
to be much value left for participants in the chain.
Lean can potentially be a recipe for above normal returns, however, if one player in the chain is able to

appropriate the lions share of the value for themselves through Janus-faced Dominance. The problem
is, of course, that such an approach cannot be sustained for long unless aligned exchange partners
can be foundi.e. willing supplicants making low
returns. If such supplicants cannot be found, and if
customers can insist on receiving continuous
improvement in value, then it is unlikely that lean
can provide the basis for above normal returns.
It is also argued that, while lean approaches may be
relatively easy to implement internally, they may be
very difficult to implement externallyparticularly
if the power and leverage circumstances are nonconducive, and also if suppliers lack the competencies internally to undertake what is required (Cox
et al., 2004). Given this, the full scale operationalisation of lean, agile and agilean supply chain management thinking is fraught with significant commercial
and operational difficulties for companies implementing these approaches beyond their own organisational boundaries.
The power and leverage perspective, while accepting
that lean approaches may be viable strategies for
some companies, provides therefore a way of predicting the likelihood of success or failure for such
approaches in specific dyadic exchange relationships
and within particular supply chains and markets.
The research findings reported here test out the utility of this perspective based on an analysis of the
supply chain for fresh/frozen beef in the UK.

Testing Lean Thinking in the Beef Industry

Using Power and Leverage Analysis
Since 2002 lean has been the approach favoured by
government agencies for the creation of sustainable
farming in the UK. In recent years, however, there

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005


has been a growing scepticism amongst some industry participants about the utility of lean thinking for
everyone in the industry (interviews with NWFA
and RMIF personnel and industry participants).
The industry had assumed that the lean approach
would provide an opportunity for all participants
in the chain to improve their commercial returns
from working together. When this did not materialise there has been disappointment and growing scepticism. In particular there has been a concern that the
ten VCA studies have not provided any new understanding of, or solutions for, carcass imbalance.
This problem arises because there is rarely a balance
of specific types of meat cuts from the beasts that are
slaughtered upstream to allow for a sustainable and
predictable supply, enabling productive efficiency,
downstream (Simmons et al., 2003). As a result of a
mismatch between demand requirements and supply availability there is nearly always inefficiency
and undesirable commercial costs to be borne at
the primary production (processor) stage of the supply chain that is almost impossible to eradicate.
Unfortunately the VCA studies did not find any radical ways of overcoming this problem, nor of eradicating the relatively high levels of opportunism
endemic within red meat supply chains, as a result
of short-term demand and supply misalignments.
Given this the RMIF and the NWFA have looked for
an alternative way of thinking about how to develop
strategies for UK red meat supply chains. The research findings reported here are part of a research
project into the applicability of power and leverage
thinking, as a way of understanding, to what extent
lean or alternative strategies can be implemented
successfully within UK food supply chains. This article specifically addresses the problems of managing
within fresh/frozen beef supply chains in the UK
and shows why it is that lean approaches are very
difficult to implement throughout the chain and
why, even when it is feasible for some participants,
it may not be the basis for above normal returns commercially for all of them. It also explains why opportunism and a lack of trustwhich are often regarded
as the curse of red meat supply chainsis a perfectly
rational response by industry participants experiencing unavoidable demand and supply misalignments
and high levels of uncertainty.
The research project was undertaken using a structured questionnaire and interviews with key industry players within the fresh/frozen beef supply
chain. The questions were derived to allow the
researchers to map the power relationships between
buyers and suppliers at each dyad in the chain.
Questions specifically addressed demand and supply characteristics; the nature of competitive forces;
and, the issues of utility, scarcity and information
asymmetry between buyers and suppliers at each
dyad in the chain (Figure 1). The interview responses
were supplemented with extensive market informa-

tion provided by the Red Meat Industry Forum and

the Meat and Livestock Commission. From this it
was possible to describe the power regimes within
the UK fresh/frozen beef industry.
On the Nature of Power and Leverage
in UK Beef Supply Chains
(a) The Complexity of UK Beef Supply Chains
The UK beef supply chain cannot be described as one
because it is characterised by many different supply
chains. Figure 3 provides an indication of the overall
level of complexity that arises from the very different
routes to market for beef, with a generic representation of both the value and physical flows from farmer
through to the end customer.
Figure 4 provides an overview of seven (although not
all) of the sub-supply chains that characterise the
generic UK beef supply chain. This indicates that
the supply chain as a whole is quite varied in the
structure and number of routes to market. These distinct supply chains have both fairly regular and standardised demand and supply for certain products,
but they also experience tremendous irregularity
and uncertainty of demand and supply for other
products and services, all of which are derived from
the same raw materiala cow or a bull.
One of the most important factors, directly impacting
on the power of buyers and sellers at all points in
beef supply chains, is the fact that different types of
beef products are created from an exploding beast.
This means that, unlike many supply chains that are
primarily constructed to bring together complex supply inputs into one finished product, the beef supply
chain is partially characterized by the opposite. The
primary processing stage (abattoirs) is a disassembly
process, although elsewhere in the chainat the secondary processing stagea traditional assembly process exists (Bourlakis and Weightman, 2004).
The beef supply chain is, therefore, characterised by
complexity. There are variable qualities of beasts
entering the chain, with different eating and variable
marketing potentials. Beef beasts also have different
origination characteristicspurebred, continental
cross or bull-beast as a by-product from the dairy
herd. Whatever its origination, the beast does not become one, but explodes into many different products (both fresh & frozen e.g. rump, sirloin, mince
and processes e.g. pies and ready meals etc.). Each
of these products has its own unique demand and
supply problems for participants in the chain.
On the demand side, while at the national level the
demand for beef is known and fairly predictable
given seasonal and weather fluctuations, for an individual producer demand has often been uncertain.
Farmers typically receive poor forecasts and have
no certainty of demand or price, because there are
no formal contracts in place with customers for the

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005



suckler beef producers, with most sales taking place

through agents or direct with processors. Meat processors also do not have formal contracts in place
with their customers (including the multiple retailers). Processors normally have non-legally binding
Supply Agreements with multiple retail customers,
which typically run for one year.
This is true even though consolidation of supply has
occurred. Recently, Sainsburys consolidated its demand into one supplier for beef (ABP), and from
three suppliers to one for lamb (Rose County-Part
of Dungannon Meats). This consolidation may, in
future, provide a greater certainty for preferred suppliers from the major multiples, and further consolidation to single sourcing by species continues to be
the most likely trend in the future. Despite this, within a Supply Agreement, even for preferred suppliers, there is still a high level of uncertainty both
about the relationship being continued and about
the level of demand that will occur.
The Supply Agreement normally has detailed
specification parameters (e.g. farm assured beef,
conformity & leanness requirements, packaging
specifications and future requirements although
demand is uncertain and one week processors may
have to supply X amount of mince, the following
week 2X of mince). Multiple retailers also normally
specify that beef to be sold as fresh or frozen cannot
be procured via the auction markets for animal welfare reasons. This structure provides an effective

mechanism through which dominant customers can

retain control operationally and commercially of
their preferred processors.
On the supply side farmers are supported by subsidies (although no longer subsidised to produce),
but there are relatively low levels of capital required
to set up given the small scale of most farms. Most
production is extensive and seasonal; there are long
lead times (it usually takes between 2430 months
to produce and finish an extensively reared suckler
beast); and, the primary meat cut products are of relatively high variety and heterogeneous. Primary processing (the abattoirs) is dispersed throughout the
country and complex, with considerable secondary
processing required, serviced by a widely dispersed
farming supply base.
Given all of this there is often a problem of aligning
demand and supply for particular cuts of meat to provide the optimal volumes to ensure that just-in-time
(continuous pull and flow rather than push and
batch) production can occur. This creates the problem
of carcass imbalance that directly affects power and
leverage positions within the chain, and which is crucial for an understanding of which relationship strategies are commercially and operationally appropriate
for particular participants in the chain. The analysis
that follows, of the supply chain through which the
multiple retailers obtain fresh/frozen beef products
from integrated (primary/abattoir and secondary)
food processors, explains how and why.










Beef from pure bred beasts from suckler herd


Beef from continental cross beasts from dairy

Beef from bull beasts as by-product of the

E = Exports, E/I = Exports/Imports, EC= End Customer, FS= Food Services, IB= Independent
Butchers, IR= Independent Retailers, MR= Multiple Retailers, MW = Meat Wholesalers, B= Buying
Agents, A= Auctions, F= Farmers, I= Inputs

Figure 3 The Beef Herd in the UK: Understanding the Flow of Value and Physical Flow


European Management Journal Vol. 23, No. 6, pp. 648662, December 2005


(b) The Power Regime for Fresh/Frozen Beef Products

As Figure 5 indicates the power relationship between
the end consumer and the multiple retailers in this
chain are characterised by independence (0) or supplier
dominance (<). This means that end consumers have
limited power to extract value from multiple retailers. If value improvement occurs (either in the form
of lower prices or better quality for particular products) it is normally determined by the supplier in response to competitive pressures in local markets.
This is due to the following major factors:
v the relatively low number of alternative multiple retail
suppliers to choose from in specific local markets;
v there are many potential alternative customers;
v the volumes being purchased by consumers are relatively low;
v the switching costs for both the supplier and buyer are
v search costs are low for the buyer but bundled supply
offerings within particular retail outlets creates lockin within particular localities; and,
v the products-many are relatively standardised but
information asymmetry favours the supplier.
Given this, the power structure oscillates between
independence (when there are many alternative
sources of supply for fresh/frozen beef close-by, with
constant price wars taking place and the product is a
low value commodity) or supplier dominance (when
there are no real alternative sources of supply closeby, with no price wars and the product is a high value
premium product). Value (either as better quality or
lower prices or both) will only pass to the end consumer, therefore, when independence occurs. But this
is driven primarily by market contestation and the
end consumer is always a price and quality receiver.
In such an environment there are few incentives for
buyers or sellers to enter into long-term collaborative
relationships. This is because it is logical for end consumers to either buy what is convenient locally or, if
they have available alternatives, to search the market
for better deals. If end consumers opt for the former
approach they would adopt the non-adversarial
arms-length relationship management style outlined
in Figure 6. If they chose instead to search for better
local deals they would be operating in the adversarial
arms-length relationship style. Both of these armslength relationship management approaches are
perfectly rational and logical responses for end consumers given the power circumstances prevailing.
The same logic is true for multiple retailers. This is
because there are few benefits to be obtained as sellers from extensive forms of collaboration with end
customers. The multiple retailers will use all types
of loyalty programmes or loss leaders (and other promotional campaigns) to stop end customers switching to alternative sources of supply but, while they

may seek lock-in to their overall offerings, this cannot be regarded as a form of collaboration with the
end consumer.
The multiple retailers oscillate, therefore, between
more or less adversarial forms of arms-length relationship management with their customers. When
there are loss leaders they are operating non-adversarially, when they are premium pricing particular
products they are operating adversarially to maximise returns. In both cases, however, the relationship
is arms-length operationally because neither party is
making the dedicated investments in one another, or
developing the relationship specific adaptations or
the cultural norms, classically associated with high
levels of operational collaboration (Cannon and Perreault, 1999). This is because the switching costs for
consumers in food supply chains are relatively low
and this reduces the scope for operational and commercial collaboration.
This is not necessarily the case at the next dyad in the
chain. As Figure 5 indicates the power structure between the multiple retailers and the integrated food
processors (secondary and primary production/
abattoirs combined) is normally characterised by
buyer dominance (>). Multiple retailers normally have
buyer dominance when they source commoditised
products that are to be sold on a price basis relative
to a given quality standard. This is because they have
the following key power levers over suppliers:
v Few buyers, with many potential suppliers;
v High volume relative to supplier business turnover;
v Supplier switching costs high, those of the buyer relatively low;
v Buyer account is very attractive to suppliers for
v Supplier offerings are standard and commoditised;
v Buyer search costs low; and,
v Information asymmetry favours the buyer.
These power attributes ensure that when multiple
retailers negotiate with integrated processors the
relationship is normally commercially unequal. This
is because the processors are normally highly dependent on the multiple retailers (due to the need to attain high utilisation of fixed assets and to aid in
overcoming the issue of carcass balance), and must
supply standard products at a price that minimises
the returns earned by the processors. This power circumstance can change in the short-term if there are
seasonal variations in supply for particular cuts of
meat, however, as the multiple retailers are in a position to switch to alternative suppliers with relative
ease, it is unlikely that the processor will be able to
pass on extra costs due to supply shortages to the
multiple retailers.
With the existence of longer-term collaborative
relationships between the multiple retailers and the

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005



processors, and further consolidation (driven by the

strategy of multiple retailers to single source) at the
processors stage, coupled with circumstances of potential supply shortages (due to decoupling), it could
be argued that the integrated processors could create
situations of interdependence (=) in the future. However, at present there is still overcapacity at the processing stage, resulting in high levels of contestation
and weak returns for processors. This suggests that,
at the present moment, operational collaboration
with preferred processing suppliers is occurring in
a power situation of buyer dominance favouring the
multiple retailers.
The power position of the processors could theoretically be improved if they were to sell their own premium branded products. In this circumstance it
would be the suppliers brand that had customer recognition and allegiance and, if the brand was very
popular, it is unlikely that multiple retailers would
refuse to stock it. In this circumstance the power position would tend towards interdependence (=). This is
because the power attributes of the buyer and supplier would be as follows:
v Few buyers, with one or few suppliers;
v Buyer may have a large, but not total, share of market
sales for the supplier;
v Supplier has some alternative channels to market;
v Supplier and buyer switching costs relatively high;
v Supplier finds buyers account attractive but buyer
highly values the suppliers brand;
v Search and transactions costs to find alternatives are
high for the buyer; and,
v Supplier may have some product information asymmetries against the buyer.
In these circumstances the supplier is in a stronger
bargaining position with the retailers, and they ought
to be able to extract a higher share of the commercial
value from the exchange (and therefore higher returns). The retailers, because they need the branded
products in their stores, would have to forgo some of
their commercial leverage in order to ensure supply.
It must be recognised, however, that this situation is
not unforeseen by the multiple retailers. One of the
most contested areas in the relationship between
multiple retailers and food manufacturers (such as
Bernard Matthews, Cadburys, Coke, Nestle, Unilever, to name just a few) today is over branded items.
The multiple retailers have recognised that, in order
for them to appropriate the maximum share of value,
it is essential that they minimise the power of supplier brands by creating their own premium brands.
Thus, in the beef supply chain, Sainsburys has created its Jamie Oliver premium cuts range and Taste
the Difference; Tesco has Tesco Finest.
In this way the multiple retailers are attempting to
undermine the leverage of processors in the chain.
Furthermore, currently, there is no processor (or

farmer) owned fresh/frozen branded beef product

that is sold through the multiple retailers (although
there are brands such as Lakeland Beef and Cumbrian Fellbred which target service sector and direct
sales customers). Mark & Spencer and Waitrose sell
and market Aberdeen Angus but this is a breed that
has been developed into a brand that is not owned by
any specific farmer group/and or processor. Furthermore, since there are currently many potential processors who are willing to produce the multiple
retailers own premium brands, and because, there
is no direct competition from processor/producers
driven branded premium meat products, when the
multiple retailers develop their own premium brand,
their power and leverage position is, therefore, also
normally one of buyer dominance (>) over processors.
Even though the power structures for premium and
standard products are characterised by buyer dominance, with most of the commercial returns being retained by the multiple retailers, there is still
considerable scope for buyers and processors to
undertake operational collaboration based on lean
principles at this point in the chain. First, there is normally a high level of volume from the multiple retailers for both branded and non-branded goods. In this
circumstance it is logical for preferred suppliers to
work closely with multiple retailers to align their
operational processes and systems in such a way as
to minimise waste and inefficiency in the chain,
and also to optimise service and quality delivery at
the lowest possible transaction costs possible.
To say that lean collaboration is operationally desirable at this stage is one thing, whether or not it is
commercially a sensible idea is another. In situations
of buyer dominance the commercial benefits from
operational collaboration tend to flow to the multiple
retailers, who maximise value appropriation by
using adversarial collaboration and by forcing suppliers to collaborate non-adversarially (Figure 6).
The fact that the multiple retailers have targeted supplier own brands demonstrates that they fully understand that they must do everything in their power to
make it difficult for processors to create their own
premium brands. Their collaboration is aimed at
ensuring that they retain the maximum share of commercial value, even when they provide preferred
supplier relationships for standard products and/or
premium brands to some integrated processors.
This means that the commercial benefits of lean operational collaboration are passed to the multiple retailer and not retained by the processor, who remains
highly dependent operationally and commercially
on the multiple retailer, and acts as willing supplicant to their every requirement. The processors
may receive higher volumes but only at the price
of operational and commercial dependency. This
means that the win-win is not based on equal shares:
rather than a positive-sum outcome in which both parties make above normal returns this is a nonzero-sum

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005


Example 1- Supply Chain for Fresh/Frozen Beef with Multiple Retailer





Example 2- Supply Chain for Processed Beef with Multiple Retailer and






Example 3- Supply Chain for Fresh/Frozen Beef with Ind. Retailer and




Example 4- Supply Chain for processed Beef with Ind. Retailer and






Example 5- Supply Chain with Independent butchers




Example 6- Supply Chain with Food Services







Example 7- Supply Chain with Direct Sales





EC = End Customer
A = Agent/dealer
M = Marketing Group
IB = Independent Butcher
MW = Meat Wholesalers

MR = Multiple Retailers
Au = Auction
I = Input suppliers
FS = Food Services
IR = Independent Retailers

SP & PP = Secondary & Primary Processors

F = Farmer
FM = Farmers Market
R/S = Restaurants

Figure 4 Seven Beef Supply Chains

outcome that favours the multiple retailersthey

make above normal returns; their first-tier suppliers
only receive low or normal returns (Cox, 2004b).
The multiple retailers, therefore, understand that
they can create above normal returns for themselves
from collaborationespecially if they can use opera-

tional and commercial leverage adversarially. This is

because they are the only players in this chain who
have the capability currently to create the Janus-faced
Dominance, through which they can leverage their
customers and their first-tier suppliers at the same
time (Cox et al., 2000). Lean collaborative strategies
tend, therefore, to favour some players in this supply

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005




0/ <


>/ = / 0 / <



EC = End Customers MR = Multiple Retailers SP = Secondary Processors

PP = Primary Processors

B =Buying Agents

A= Auctions (Not Officially Used)

F = Farmers

I = Input Suppliers

Figure 5 The Frozen/Fresh Beef Power Regime with Multiple Retailers and Integrated Processors





Commercial Exchange Favours One

Party Rather than Another

Commercial Exchange Favours One

Party Rather than Another

Operational Exchange Based on

Limited Transactional Linkages

Operational Exchange Based on

Extensive Transactional Linkages

Commercial Exchange Based on

Equitable Returns

Commercial Exchange Based on

Equitable Returns

Operational Exchange Based on

Limited Transactional Linkages

Operational Exchange Based on

Extensive Transactional Linkages








Figure 6 Commercial and Operational Relationship Management Styles

Robertson Cox, 1998 All Rights Reserved. Source: Adapted from Cox, A (1999), p. 23

chain more than others. This is not an abuse of power

by the multiple retailers but merely the logical outcome of dominant players using market and supply
chain leverage to appropriate value for themselves.

their negotiating power by reducing the number of

suppliers in the market relative to the number of
buyers (i.e. in an attempt to create a power position
of interdependence).

The problem is, however, that in doing so it is possible that they may be creating treadmills to oblivion
for those integrated processors who specialise in
commoditised non-branded products, and those
own branded suppliers who are not able to sustain
differentiation in the face of direct competition from
the multiple retailers own brands. Those that cannot
defend their brands will see their current collaboration shift from interdependence to buyer dominance,
with the supplier increasingly locked into the multiple retailers control of this supply chain. They can
only expect lower commercial returns from collaboration when this occurs. This explains why in recent
years there has been increasing consolidation
amongst integrated processors (in 2002/3 there were
314 abattoirs, a quarter of the 1980 level). Consolidation on the supply-side is a classic response to buyer
dominance as particular suppliers seek to increase

In the beef supply chain, therefore, lean collaboration

is being used at the first-tier between the multiple
retailers and the integrated processors, but this relationship is one that is undertaken under a power situation of buyer dominance that favours the multiple
retailers. Despite this the scope for fully integrated
supply chain management based on lean principles
is much more tenuous further upstream in the UK
beef supply chain. Figure 5 shows that, apart from
the relationship between the processors and some
preferred buying agents, the power structures in
the UK beef supply chain are not conducive to extended forms of operational or commercial collaboration. As a result, relationships, historically, have been
short-term arms-length and opportunistic. This is
primarily because demand and supply misalignments occur frequently further upstream in the
chain, and this means that there are few operational


European Management Journal Vol. 23, No. 6, pp. 648662, December 2005


or commercial incentives for any party to enter into

long-term collaborative relationships. Rather than
this retreat into short-termism being seen as evidence
of poor relationship management this outcome can
be seen as a perfectly rational response to demand
and supply uncertainty by the majority of upstream
participants in the chain.
As Figure 5 indicates the integrated processors in the
chain potentially have upstream relationships with
three major suppliers. These are the auctions (A),
the buying agents (B) and the farmers (F). However,
for fresh/frozen beef there is no direct relationship
between the processor and auction markets as traceability, provenance, conformability and animal welfare are critical for the buyer. Processors will,
therefore, never (officially) buy beef for multiple
retailers from the auction markets, as typically these
customers specify that processors buy direct from
farmers or via their own or contracted agents direct
from farms. Multiple retailers insist beef is sourced
from either the National Farm Assured Programme
(Red Tractor) or from their own supply programmes.
Auctions are avoided as an unnecessary link and for
animal welfare reasons.
Farmers in general, whether they are supplying
through agents or auctions, experience value erosion
in favour of those further downstream. This is demonstrated by the fact that average farm price for beef
in the 3rd quarter of 2004 was 193 pence per kg
against 419 pence per kg once retailed. The price
spread between farm and retail price has also significantly widened from 40% in 1993 to 54% in 2004
(Meat and Livestock Commission, 2005). There are
also many other suppliers in the chain providing supply inputs (I) for farmers. These relationships are not
discussed in detail here because, whatever power and
leverage farmers have over their supply inputs the
power structures vary (>/=/0/<) based on the scale
and size of the farmers being serviced and the particular products and services being sourced.
Buying agents play an important, if often overlooked, role within the beef supply chain. They are
the interface between the producers and the processors and are highly skilled individuals with the ability to determine the quality of beasts from visual
inspections on the farm. Processors, therefore, rely
on agents to procure the right quality beasts from
the market place. Agents or buyers have varying
power resources depending upon the type of relationship they have with the processor and who the
end customer is. When buying on behalf of processors for the multiple retailers the relationship is normally one of interdependence (=). This is because the
buying agent works predominantly with one processor (or a small number of clients) as a contract buyer.
Their relationship is very close and collaborative.
In the case of a contract buyer, therefore, the power
attributes of the buyer and supplier are as follows:

v Few buyers, with one or more supplier;

v Buyer may have a large, but not necessarily the total,
share of market sales for the supplier;
v Supplier and buyer switching costs relatively high (in
terms of perceived risks of finding either a new buyer
and appropriate supplier);
v Supplier finds buyers account attractive but buyer
highly values the suppliers knowledge and contacts;
v Although search and transactions costs to find alternatives are relatively low for the buyer;
v The supplier has potentially product information asymmetries against the buyer (knowledge of where to source
products that conform to end user requirements) and
has long-term relationships established with the
As the agents are close to the supply market in terms
of their relationships with suppliers they often posses
key information resources over both the farmers and
the processors. Whether they use their role as a middleman to act opportunistically will depend upon the
nature of the relationship. As a contracted buyer for a
large multiple retailer the incentive to act opportunistically and use their potential power position during
times of supply scarcity is restricted by the risk of losing their contract with their primary customers. The
normal relationship management style for buying
agents working with the multiple retailers and processors is therefore also non-adversarial collaboration
based on lean management principles.
The power position between the integrated processors and the farmers is very different. This is because, due to the problem of carcass imbalance, it
can oscillate between buyer dominance (>), interdependence (=) or supplier dominance (>). The power of the
farmer vis-a-vis the processors varies depending
upon supply scarcity. When a particular quality beef
(for instance R4 on the Euro Grid system), as specified by the customer, is in shortage, then farmers in
possession of the desired beasts, during a short
window of opportunity, may be able to obtain very
high returns from supplier dominance (<). There can
also be interdependence (=) power outcomes when
long-term collaborative relationships are established
between farmers and processors, whereby above
normal returns are offered to farmers in return for
greater levels of guaranteed supply. This is an attempt by processors to lock-in opportunistic farmers
to ensure supply continuity and conformity and,
thereby, reduce supply risk. When there is over-supply farmers tend to become price-takers and processors take advantage of this buyer dominance (>)
When there are long-term agreements in place, with
a high degree of information flow between the processors and the farmers regarding demand forecasts,
delivery, quality and conformity, the relationships
are collaborative. Where there is equitable sharing
of any of the gains from improved efficiency and or
conformity then the relationships is best described

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005



as non-adversarial collaborative. (The Waitrose supply chain operates in this way because end customers
are willing to pay for better quality and traceability
in the supply chain and processors and farmers receive above normal industry returns). In most other
multiple retailers supply chains the relationship is
better described as adversarial collaboration with
the benefits from close working relationships being
unequally shared in favour of the processor, who in
turn is forced to pass the majority of the value onto
the multiple retailer.
Overall, however, both the processors and the farmers
normally operate on a short-term adversarial or nonadversarial arms-length basis. This is becausegiven
the volatility and uncertainty in demand and supply
and the problem of carcass imbalancethere are few
incentives available for both parties to pursue lean
supply principles. As a result both parties have tended
to behave opportunistically depending on which of
them has the balance of power given the shortage or
abundance of supply for particular types of beef cuts.
The power position between the buying agents and
the farmers is similar and can be described as oscillating between buyer dominance (>), independence (0) and
supplier dominance (>). The reasons for these changing
power circumstances can be attributed to the same
conditions that operate in the relationship between
processors and farmers. In periods of supply shortages the farmer is often in a strong position, and will
have the option to sell via a range of marketing routes
to obtain the highest returns (for farmers this will include auction markets). Conversely, in some circumstances, the buying agent may find themselves in a
strong position due to their position as middlemen,
especially during periods of excess supply. With
prices depressed, and with high levels of price obscurity, buyers/agents may find themselves in a position
to maximise returns. Again, due to the large number
of potential buying agents within the market as a
whole and the large number of potential suppliers,
the relationship is often one of independence (0), with
the market driving the price. This is similar to the circumstances that exist within a spot market.
The appropriate relationship management styles,
therefore, vary depending on the power relationships that exists but there is a tendencygiven the
volatility and uncertainty of demand and supply
for all relationships to be managed in a short-term
and arms-length manner. A buyer or supplier will
normally choose adversarial over non-adversarial
arms-length relationship styles whenever the power
circumstances favour their bargaining position and
vice versa when it does not. Opportunism is normally
rife in such circumstances and is driven as a rational
response by buyers and sellers to the volatility of demand and supply. This, as we shall see below, is
hardly a conducive environment for the development of a fully integrated and lean supply chain
management approach.

Conclusions: Is a Lean Supply Strategy Feasible

in the Multiple Retailer Fresh/Frozen Beef
Supply Chain?
The findings demonstrate that the power regime that
exists in the fresh/frozen beef supply chain for multiple retailers and integrated processors is not one
that lends itself to the comprehensive adoption of
lean supply or network sourcing. This does not mean
that there is no scope for lean ideas to be introduced
in this chain because individual companies do have
opportunities internally to eradicate non-value adding waste and inefficiency. The findings demonstrate, however, that in this power regime lean
inter-organisational supply relationships based on
collaboration are only really appropriate for the multiple retailers, the integrated processors and their
preferred agents in the chain. This is because it is
only at these points in the chain that the power structures tend towards the buyer dominance and/or interdependence situations that support longer-term
collaborative and lean approaches.
The problem for the integrated processors and buying agents is, however, that this type of collaboration
may not be as beneficial as some proponents of lean
suppose. One of the major critiques of the lean approach is that it may be difficult to implement operationally if flow production is not possible. The
problem of carcass imbalance in this supply chain
militates against continuous flow in production and
this often necessitates a batch production approach.
Relatedly, there is the issue of who will benefit commercially from any long-term collaboration. In this
supply chain it would appear that the major beneficiaries of collaboration are the multiple retailers. This
is because they have the power resources to appropriate the maximum share of value from their own
premium branded products and, while they may
make lower returns from commoditised products,
they can still force their integrated processing partners to pass the majority of value that lean collaboration generates to them.
This leverage is, if anything, increasing against the
integrated processors as the multiple retailers develop their own premium brands. This leads to the conclusion that over time, unless even more effective
consolidation occurs at the integrated processor stage
to counter-balance the power of the multiple retailers, their Janus-faced Dominance will ensure that collaboration becomes a treadmill to oblivion of
continuous operational and commercial improvement by the integrated processors in return for
higher volumes, but with only low returns.
Upstream there is some scope for collaboration between the integrated processors with buying agents,
who are sourcing defined quality beasts from particular farmers, but this relationship does not encompass all buying agents (many of whom behave
opportunistically with multiple clients and suppliers

European Management Journal Vol. 23, No. 6, pp. 648662, December 2005


as demand and supply fluctuates). Elsewhere upstream the scope for continuous collaboration based
on lean is quite challenging because of the problem
of carcass imbalance associated with short-term demand and supply fluctuations. In these circumstances power structures tend to oscillate between
buyer dominance in gluts and supplier dominance in
periods of shortage. These factors explain why
opportunism is rife in the industry upstream and
trust is so low. Rather than criticising supply chain
participants for this behaviour our findings support
the view that short-term, adversarial arms-length
relationship management is a perfectly rational and
appropriate response to the vagaries of demand
and supply upstream in this supply chain.
This means that, overall, attempts to drive lean collaboration based on flow principles throughout the
fresh/frozen beef supply chain are bound to fail because the problem of carcass imbalance cannot be
fully resolved. Furthermore, even if it could be, it is
likely that the major beneficiaries of this would be
the multiple retailers who can use their Janus-faced
Dominance (dominant power and leverage position)
to extract value from lean collaboration elsewhere
in the chain. The lessons for participants upstream
is that they must either use opportunism as best they
can by playing the market, or transform the current
power situation to their advantage by developing
and marketing their own premium brands. Failing
that, upstream members of the chain will be forced
either to exist in their current state of uncertainty,
or be forced to align themselves operationally with
particular multiple retailers, integrated processors
and buying agents and trade low commercial returns
for guaranteed demand operationally. That is to accept the role of a willing supplicant in the beef supply chain.
It means that the adoption of lean management
thinking in red meat supply chains for fresh/frozen
beef in the UK may assist some industry participants
operationally and commercially, but it does not appear to be a recipe for sustainable competitive advantage for very many participants outside the multiple
retailing stage of the chain. It will be interesting to
see if further research confirms that this is a general
rule in food and farming supply chains or unique to
the fresh/frozen beef supply chain in the UK. Whatever the outcome from future research the findings
here provide a note of caution for managers who embark unthinkingly on the adoption of lean management approaches that have worked in some
industries and supply chains but which may not be
easily replicable elsewhere.

(The authors wish to thank the generous support for
this research from the Engineering and Physical Sci-

ences Research Council under Grant No: GR/

T09064/01, the Red Meat Industry Forum and The
North West Food Alliance. Special thanks is also
due to Martin Palmer of the Meat and Livestock
Commission for his advice and support).

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ANDREW COX, Birmingham Business School,

University of Birmingham,
University House, Birmingham, B15 2TT. Email:

School, University of Birmingham,
House, Birmingham, B15
2TT. E-mail: d.d.chicksand@

Andrew Cox is Professor

and Director of the Centre
for Business Strategy and
Procurement at Birmingham Business School. He is
also Chairman of Newpoint Consulting and author of
Win-Win?: The Paradox of Value and Interests in
Business Relationships/Earthgate Press (2004).

Dan Chicksand is Research

Fellow in the Centre for
Business Strategy and
Procurement (CBSP) at
School. His research interests include business strategy
and supply chain management, international business
management and e-commerce.


European Management Journal Vol. 23, No. 6, pp. 648662, December 2005