Transcript Electronic Marketplaces in Supply Chains

Electronic Marketplaces in
Supply Chains
‘Kamesh’ Kameshwaran S
kameshn(at)csa.iisc.ernet.in
http://people.csa.iisc.ernet.in/kameshn/
Dept. of CSA, IISc
Foundations of Global Supply Chain
Management
Sept 27, 2003
Bangalore
Objectives
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To bring out and understand the important
role of e-marketplaces in SCM
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To understand critical design and
implementation issues of e-marketplaces
Categories
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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
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e-Marketplaces in SCM: Why?
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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
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e-Marketplaces in SCM: Where?
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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
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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
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SCM of e-Marketplaces
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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
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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
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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)
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Auctions (one seller, many buyers)
 Reverse auctions (one buyer, many
sellers)
 Exchanges (many buyers, many
sellers)
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Design of Markets
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Primary functions of markets
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matching buyers to sellers
facilitating exchange of information, goods,
services
payments associated with a market
In “our” market:
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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
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Designing of markets involves designing
of
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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
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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?
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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
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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
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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
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Configurable Bids
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Supplier’s bid for selling a computer:
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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
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Price varies nonlinearly with quantity
Can express
negotiation strategy:
buy more, pay less
Can express
economies of scale
Mixed 0-1
programming problem
and is usually NPhard
600
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300
Price
200
100
0
100
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Combinatorial Markets
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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
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Complementary problem to the design of
market protocol
Given the rules of the market, what is the
strategy of the agent?
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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
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