week 3: digital supply chain platforms - temple mis...supply chain platforms digital platforms –...

WEEK 3:Digital Supply Chain Platforms

MIS 3537: Internet and Supply Chains

LEARNING OBJECTIVES

■ Understand the idea of a digital platform

■ Supply Chain Digital Platforms

■ eMarkets

Platform

Intermediary that brings together groups of users to facilitate economic or social exchange

• NYSE/Nasdaq exchanges for public equities

• Apple’s “app store” for developers and consumers

• Payment networks: Visa, Mastercard, Paypal

• Social platforms: Facebook, Twitter, Match.com

• Media (papers, websites): advertisers, consumers,

content

Platforms and their economics

■ Network Effects:– the value or demand for a product or service grows as an exponential function of

the number of current adopters of that product/service and/or the number of complementary products/services available for that product/service

■ Critical Mass:– The momentum produced by positive networks is unlikely to be reversed by entry into

the market by an appealing new product/service– Sufficient number of customers such that positive externalities and switching costs

tip a market in favor of a winner (think barrier to erosion).

■ Long-tail effects:– Ability to offer broader variety of products thus tapping into smaller demand from

greater number of customers (i.e., aggregate demand). Digital markets are more able to compete for long-tail customers compared to physical markets.

One-Sided: Customers are primary source of revenue; common revenue paths include purchase of goods or services, subscriptions fees to gain access to goods or services, transaction fees for using services

Two-Sided: Both a customer (often subsidy side) and provider (often paying side) network benefit from network effects and serve as potential revenue sources for platform builders. Platform owners bring together two distinct communities and then broker economic transactions between them. Trying to build and leverage critical mass.

One-Sided versus Two-Sided Platforms

A Two-sided Network

Subsidy-side Money-side

Components- Hardware- Software- Services

Rules- Standards- Protocols- Policies- Contracts

Digital Platform

Network Effects with Two-Sided Platforms

Side 1

Platform

Side 2

Same-side effect: network effect within each side of the platform. Adobe example: benefits derived by users when more people have readers and document sharing is made easierCross-side effect: Potential value one side derives when there are more participants on the other side. Adobe example: adopters of reader software benefit when more providers adopt the Acrobat software making more documents available* Effects can also be negative: think Monster.com

Platforms Beat Pipelines

■ Scale more efficiently by eliminating gatekeepers

■ Unlock new sources of value creation and supply by using data-based tools to create community feedback loops

■ Invert the firm by shifting the focus from internal optimization to external interaction

LEARNING OBJECTIVES: What are Electronic Markets Like?



■ eMarkets

Supply Chain Platforms

■ Digital platforms– connect different stakeholders mobilized throughout the

distribution chain – bring together all the systems, applications, processes

and information in the supply chain– enable data to accumulate from each step of the chain– allow players of all shapes and sizes to reap the benefits

of an agile supply chain.

Supply Chain Platform example

Benefits of supply chain platforms■ Total visibility

■ Uniformity of Data

■ Less manual intervention

■ One stop shop

■ Ease of integration (Platform as a service)

■ AI and forecasting

LEARNING OBJECTIVES: What are Electronic Markets Like?



■ eMarkets

eMarkets – Digital Supply Chain Platform

■ Why do we need a marketplace at all?

■ A marketplace is a common ground for buyers and sellers

ELECTRONIC MARKETPLACES

■ Electronic marketplaces serve as platformsthat connect organizations and transact in areas with little distinctive power in relationships

■ Why a platform?v A marketplace should allow for new entrantsv The more entities joining the marketplace, the

more valuable it becomes (critical mass)

5-16

Concepts, Characteristics, and Models of B2B EC

Comparison

One-to-ManyBuyer or Supplier

Centric

Many-to-ManyNetwork of all, eMarketplace

EVOLUTION OF ELECTRONIC MARKETPLACES

■ Stage 1– Dotcom companies – In the chemicals industry, a lot of new players –

eChemicals, Chemdex, CheMatch and – were born

■ Stage 2– The established players strike back– Companies like Dow Chemical, Du Pont and BASF –

big, existing players – setup their own eMarketplace

12

34

5

EVOLUTION (CONTD.)

■ Stage 3– The best of both worlds meet

v The leading industry players partnered with

v Existing players took between 5 and 10% of the equity share

v Has become the established industry standard

– Other players – eChemicals, CheMatch – have been marginalized

12

34

5

THREE TYPES OF EMARKETPLACES

■ Vertical eMarketplaces– The eMarketplace is focused on one industry, trade,

profession (group of similar customers) – e.g. vertical – retail, chemicals, plastics

– Examples:

TYPES OF EMARKETPLACES

■ Horizontal eMarketplaces

• Provides related services e.g. procurement

• Driven by:– Geographical circumstances– Inter-industry activity

– Special Practice, Products

TYPES OF EMARKETPLACES

Branded private marketplaces– Really big organization can setup an exclusive

eMarketplace

– built its own: Global eXchange Services – one of the worldʼs largest B2B eCommerce networks

Chemicals

Stationery

CRITICAL SUCCESS FACTORS

■ Sustainable business models & realistic expectations� During the dotcom boom, a lot of eMarketplace

providers had high valuations because of future expectations

� As the industry consolidated, few providers remained in business and were profitable

� Long-term viability is critical� Ability to form and sustain relationships


■ Rapidly build key capabilities– A successful eMarketplace should become a one-

stop shop– Must provide a range of transactional and value-

added services– Breadth of services is a key success factor– Services include security, workflow, reporting,

fulfillment, billing and settlement, supplier management etc.


■ Integration of activities with major stakeholders– The platform should be flexible enough to

accommodate diverse needs of stakeholders

– Degree of integration determines long-term success

– Onboarding: Getting companies to build the interfaces to participate in the eMarketplace


■ Management of regulatory relationships– In 2000, MyAircraft, an eMarketplace consortium

of

, & accused of price fixing

– The European Union ruled in favor of MyAircraft, declaring that it was just another business entity

– eMarketplaces across country and continental boundaries must comply with requisite regulations

CHALLENGES

■ Inter-marketplace competition– Different industries have setup their own

marketplaces– Communication across these marketplaces is a

challenge■ Different business models, financial structures, technical

standards ■ Different business processes / practices with

different expectations

CHALLENGES

■ Managing high levels of complexity– Each participant in an electronic marketplace brings his /

her own:■ Set of problems, values■ Business processes / practices

– Integrating each participant properly into the marketplace is critical

– Juggling multiple business models, financial structures, technical standards and business practices

CHALLENGES

■ Sunk costs , lower margins– The eMarketplace provider has to make significant investments

upfront

– While buyers and suppliers might profit, the provider might have to operate with low margins

Building and sustaining relationships are key challenges facing the provider

Next week

■ WWT ClearOrbit Case

■ RFID / Internet of Things

week 3: digital supply chain platforms - temple mis...supply chain platforms digital platforms –...

Documents