Navigating the Complex Landscape of Supply Chain Channel Conflict

Can't we all just get along? For manufacturers, that age-old question tends to bubble up any time there is channel conflict within their supply chain. Despite even the best-intended business practices, the most evolved organizations, and the mutual need for success among supply chain partners, conflict happens. In fact, quite regularly, manufacturers have to mop up the messes of channel discord at some point along the chain.

Channel Conflict Creates Speed Bumps

So, what do we mean by supply chain conflict? Simply defined, it refers to the disagreements, tensions, and competition that can arise among different players within a supply chain network. Such disputes typically involve manufacturers, distributors, retailers, and, oddly enough, even end-user consumers (at times). Common challenges include disagreements over product, pricing, resources, and other potentially contentious topics.

Moreover, there are a variety of flavors of such channel speed bumps, including vertical, horizontal, and multichannel conflict, as defined below:

• Vertical Channel Conflict: This occurs between different levels of the supply chain, such as disagreements between manufacturers and retailers over pricing, promotions, or branding strategies. This is a pervasive source of frustration for manufacturers utilizing a Minimum Advertised Pricing (MAP) strategy. Retailers violating MAP can hurt the manufacturer's brand value, erode pricing over time, hurt revenue, and even cause further channel conflict within the supply chain.

• Horizontal Channel Conflict: This type of conflict arises among entities operating at the same level of the supply chain, like when distributors compete with each other for exclusive territories or preferential treatment from manufacturers. Again, for manufacturers utilizing MAP, this type of channel conflict can cause much consternation among distributors, including wholesalers. Wholesalers following MAP requirements are often vocally displeased when other similar types of channel partners break the rules with price violations – because this can potentially hurt the rule-following channel members' position in the marketplace.

• Multichannel Conflict: In today's omni-channel retail landscape, conflicts arise as various channels (e.g., brick-and-mortar stores, e-commerce platforms) compete for resources, attention, and consumer loyalty. Given the power of e-commerce, it's now very easy for channel members to keep an eye on one another. Online resellers are among the biggest offenders of Minimum Advertised Pricing violations, and as such, can create much conflict with their brick-and-mortar competitors, for example. Manufacturers can fortunately also easily monitor MAP violations online with price monitoring services, such as MAPCOP, to head off these situations at the pass.

So Why CAN'T We All Just Get Along?

There are a lot of reasons why channel conflict can emerge in your supply chain. Such factors can include:

• Misaligned Goals: Different supply chain partners often have distinct objectives, such as maximizing profit, market share, or brand visibility. These conflicting goals can lead to friction, especially when some partners along the chain are willing to violate manufacturers' requirements for doing business. We see this a lot with MAP policy violations. While many wholesalers and resellers are willing to follow MAP, there are still others who want to win the "buy box" at all costs and will resort to policy violations. This is a slippery slope if manufacturers do not address such violations; it can result in other channel members moving from compliance to conflict creators.

• Information Asymmetry: Lack of transparency and information sharing among supply chain partners can create uncertainty, making it challenging to make informed decisions. This is why it is critical for manufacturers to make their MAP and other policies crystal clear for their channel partners. When it comes to MAP, manufacturers want to ensure their channel members understand what products are covered under MAP, what the specific requirements of the policy are, and what ensues if there are policy violations.

• Resource Constraints: Limited resources like shelf space, marketing budgets, or delivery capabilities can lead to competition among partners for their allocation. When channel members are vying for any type of limited resources, top positioning, or the same advantages in the marketplace, this is when we can really see the "gloves can come off" in the supply chain. While competition is good, it can quickly become unhealthy if it turns into competition at all costs.

• Channel Proliferation: As businesses adopt multiple channels to reach customers, competition among these channels can intensify, potentially leading to conflict. The larger a manufacturer's supply chain grows, the more important it is to invest in effective resources that can save time, money, and effort by closely monitoring channel members. This allows producers to take a proactive stance on budding conflict along the supply chain. Acting quickly before problems grow too problematic is a much better strategy than mopping up a full-on channel mess. For example, when it comes to conflicts over pricing, monitoring services such as MAPCOP can provide 24/7, real-time data pricing information on online retailers. This gives producers a head start in addressing potential issues.

The Bruises Channel Conflict Can Cause

Conflict is seldom a good thing along the supply chain, with perhaps the occasional advantage of causing new thinking – necessity is, after all, the mother of all invention. However, most often, the effects of channel conflict can ripple through the entire supply chain, causing disruptions that cost money and hinder growth. Among the biggest bruises conflict can cause are:

• Lower Productivity: Conflict can slow down decision-making processes, delay product launches, and undermine the overall efficiency of the supply chain.

• Damaged Relationships: Ongoing conflict can strain relationships between supply chain partners, eroding trust, and hindering collaboration.

• Customer Confusion: Inconsistent messaging and conflicting pricing strategies can confuse consumers, leading to dissatisfaction and decreased loyalty.

• Eroding Profits: Channel conflict may result in unnecessary price wars, eroding profit margins for all parties involved.

Time-Out: What's a Manufacturer to Do?

As with many conflicts, left unresolved, they can grow like a cancer, infecting several parts of a manufacturer’s supply chain. This is the most important reason why proactive management is critical to keep your channel healthy and clear of issues. It's unrealistic to believe there will never be any conflicts along the supply chain, especially the more complex it is. That said, there are key strategies you can employ in order to minimize these problems and their impact; strategies, such as:

• Clear Communication: Establish open lines of communication to share information, address concerns, and align strategies among supply chain partners. For example, if you are using MAP, make sure your entire channel understands your pricing policy and the consequences of violation entirely.

• Conflict Resolution Mechanisms: Develop structured processes for resolving disputes to ensure conflicts are addressed promptly and effectively. When it comes to MAP, make sure you are monitoring pricing regularly and addressing any violations immediately.

• Channel Integration: Embrace technology to integrate various channels, enabling seamless information flow and coordinated efforts. Fortunately, when it comes to price monitoring, MAPCOP has you covered. We provide easy, affordable, and intuitive monitoring, 24/7 and with real-time data. If you haven’t signed up for your free, no-obligation trial of MAPCOP, make sure you do so today!

• Joint Planning and Collaboration: Engage in collaborative planning and joint business reviews to align goals and strategies. Many manufacturers engage their channel partners regularly to provide valuable input on strategies and policies, resulting in a more holistic approach and acceptance within the supply chain.

While supply chain channel conflict can be a real pain to deal with, it’s common and most often fixable. But the more proactive the approach, the better. By fostering transparent communication, building strong partnerships, and implementing effective conflict-resolution mechanisms, manufacturers can navigate the challenges of working with channel members to ensure a healthy and happy supply chain.