Post on 29-Mar-2015
Electronic Marketplaces in Supply Chains
‘Kamesh’ Kameshwaran Skameshn(at)csa.iisc.ernet.inhttp://people.csa.iisc.ernet.in/kameshn/
Dept. of CSA, IISc
Foundations of Global Supply Chain ManagementSept 27, 2003Bangalore
Objectives
To bring out and understand the important role of e-marketplaces in SCM
To understand critical design and implementation issues of e-marketplaces
Categories
C2C: Consumer to consumer marketplaces allow buyers and sellers to trade personal goods (baazee)
B2C: Business to consumer sites sell products to online shoppers (amazon, fabmart)
B2B: Business to business marketplaces automate supply chains and link systems with business partners (this will be our focus)
SCM and e-Marketplaces e-Marketplaces in SCM: Why?
shrinking product lifecycles mass customization massive scalability faster and more flexible fulfillment to attract and serve larger customer bases
The above cannot be handled by the traditional SCM initiatives alone, such as strategic sourcing, contract manufacturing and joint product development
SCM and e-Marketplaces e-Marketplaces in SCM: Where?
Procurement and Selling: plasticsnet, paperexchange, indiamarkets
Subcontracting and Outsourcing of business processes like manufacturing and assembling (allocation.net, inventorydepot)
Logistics: LeanLogistics, infreight, intermodalex, nte, net4cargo, cargoreservations
e-Marketplaces Paper Products: clickpaper, eprintingx, paper2print,
papersite, paperspace Automobiles: autowebex, autotomorrow, edealr, covisint Food Items: foodtrader, foodenterprise, tomatrade,
globalfoodexchange, beverageindustry, candycommerce, terminalmarkets, stctrading, efoods
Energy: cetrade, oz-coal, trade-ranger, houstonstreet, amdax, watt-ex, energywindow, gsn-trade
Agriculture: xsag, ForestOne, farms, acoop, liquiorice, greentrac, theseam, flowergrower, agroinfo2000, florastream
Industrial: worldmetal, rockanddirt, metalsite, primeadvantage, thesteelhub, ironplanet, rollingcost
SCM of e-Marketplaces SCM of e-Marketplaces
Amazon.com delivered more than 789,000 copies of Harry Potter and the Order of the Phoenix across US via the U.S. Postal Service and FedEx Corp. as soon as the book was released
Weight of each book: 1.27 Kg. More than 1100 tons of processing, packaging and distribution.
Dynamic formation of supply chains during festivals and new product releases
Our focus will be on the e-Marketplaces of SC
Taxonomony Vertical: Markets suited to specific industries
like chemical or steel Horizontal: These are region-, functional- or
process-oriented. Usually for indirect materials like office equipment or spare parts
Private: One-to-many markets operated and owned by a single company to support commercial interactions with its own known traders
Public: Many-to-many markets (many sellers and many buyers)
Categories of B2B Independent: Operated by a third party who is
neither a seller or buyer. It is open for all buyers and sellers of particular industry or region (chemconnect, phonetrade)
Sales-oriented: Operated by a group of companies for efficient sales to a large # of buyers (toolstore, findmro)
Purchase-oriented: Operated by a group of buyers in order to obtain an efficient purchasing process (covisint, transora)
Business Models e-catalogues: Catalogue of products,
usually fixed price Market mechanisms: (Dynamic
pricing) Auctions (one seller, many buyers) Reverse auctions (one buyer, many
sellers) Exchanges (many buyers, many sellers)
Design of Markets Primary functions of markets
matching buyers to sellers facilitating exchange of information, goods,
services payments associated with a market
In “our” market: A central auctioneer or market-maker
communicates with the agents (traders) using a predetermined and mutually agreed upon protocol and vice-versa
The market maker determines the trade and price according to a known algorithm
Design of Markets Designing of markets involves designing
of protocols to exchange information between
agents and market (auction, negotiation and game theory)
an algorithm that matches buyers and sellers and determines the amount of goods traded between them (optimization, algorithms)
pricing mechanism (optimization, game theory)
agents' behavior (complementary problem to market design solved using game theory)
Markets Markets are resource allocation mechanisms, that
distribute the constrained resources to the competing agents efficiently through pricing
How does Market design differ from resource allocation mechanisms? Agents have lot of incentives to lie and they can lie Agents are conservative in information revelation as they may
be strategically used by other agents for purposes other than trade
Agents have intelligence to manipulate the allocation or market algorithm e.g. sniping in online auctions
Agents can be mischievous Design a market algorithm that cannot be easily
manipulated by the agents (mechanism design problem)
Auctions English Auctions: Iterative, open-cry,
ascending bid (property liquidation) First-price Auctions: One-shot, sealed bid
(tender auctions) Dutch Auctions: Iterative, descending
price auctions (flower markets) Many online auctions are variations of the
above. See baazee, ebay, amazon, indiatimes (includes B2B, B2C, and B2B)
Exchanges Double Auctions: Open bid,
continuous auctions with discriminatory pricing (stock exchanges)
Call markets: Closed bid, one-shot auctions with uniform pricing
Online exchanges use various combinations of rules
Multi-attribute Matching Matching of buyers and sellers Suitable for goods (raw materials,
sub-assemblies) and services (logistics)
Multiple attributes: Price, delivery time, service cost, quality etc.
Tools: Multi-attribute utility theory, Multiple criteria optimization
Configurable Bids Supplier’s bid for selling a computer:
Processor: (486: Rs. X1), (586: Rs. X2), (686: Rs. X3), …
OS: (XP: Rs. Y1), (ME: Rs. Y2), … Monitor: (14”: Rs. M1), (19”: Rs. M2),… Logical constraints: XP requires at least 586
The buyer configures the computer that meets his demand and budget
0-1 programming techniques and the problem is usually NP-hard
Piecewise Linear Price Fns Price varies non-
linearly with quantity Can express
negotiation strategy: buy more, pay less
Can express economies of scale
Mixed 0-1 programming problem and is usually NP-hard
0
100
200
300
400
500
600
100 200 300 400
Price
Combinatorial Markets Market sells products A, B, C Bids: Single bid price for a combination of
products - ([A, B], Rs. 100), ([B, C], Rs. 125), …
Can express complimentarity among products: A alone is Rs. 50, B alone is Rs. 60, but A and B together is Rs. 150
Allocation problem is NP-hard
Design of Agents Complementary problem to the design of
market protocol Given the rules of the market, what is the
strategy of the agent? In a bargaining situation, what is the first price
offered by the buyer: 50% or 75% of his value?
Experimental economics and game theory Celebrated Nash Equilibrium is a solution
concept to the above problem
Conclusions e-Markets are key to a faster and
more efficient trade e-Markets have positive influence all
through the supply chain There are challenging technical and
theoretical issues in setting up and operating an e-market