Outline of the Presentation

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Virtual Partnerships and Supply Chain Management
By Vaibhavi Agwan (00319007) Guided by Prof A.
Subash Babu
Industrial Engineering and Operations
Research Indian Institute of Technology,
Bombay 19th February, 2002
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Outline of the Presentation

• Introduction
• The problem on hand
• Literature Review
• Conceptualizing the system
• Applying SSM
• Overall model
• The working model
• Design of the system
• Computerizing the system
• Conclusions

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Introduction

• Dynamic, flexible and responsive supply chains
• Internet based venue for trade
• e-marketplaces
• Decision support tools
• RD outcome still a fledgling

4
The Problem on Hand

• The Goal
• To develop a system to facilitate formation of
  virtual partnerships in a typical supply chain
  system by using specific framework and models for
  decision making
• The Way
• Develop a prototype of cybermediary which can
  facilitate buying and selling to the satisfaction
  of both buyers and sellers
• The Aim
• Develop the overall framework for the formation
  of virtual partnerships
• Develop the DSS for the same
• Design and develop the prototype of the system

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Literature review

• Supply Chain Management
• Organizational evolution and forms of
  co-operation
• Virtual enterprise
• Requirements and life cycle
• Information infrastructure framework
• Appraisal
• E-commerce and E-marketplaces
• Intermediaries and cybermediary
• Decision-making in the supply chain

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Conceptualizing the system
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Virtual partnerships

• High volume purchases from preferred suppliers
• Respond quickly to market changes participating
  in e-marketplaces
• Need for forming good matches between buyers and
  sellers
• Cybermediary- independent and trustworthy entity

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Virtual partnerships defined

• The short term partnerships formed
  between two companies that want to extend their
  supply chains to exploit an available
  opportunity.
• The buyers and sellers would be operating in
  an e-marketplace.
• Apart from the regular services of an
  emarketplace, a niche service of matching
  buyers and suppliers will be offered by the
• e-marketplace.
• E-marketplace is regulated by cybermediary,
  who is a trustworthy entity.

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Applying Soft System Methodology (SSM)

• A tool for conceptualizing the system and
  analyzing it
• Steps in SSM
• CATWOE Analysis
• Customer
• Actors
• Transformation process
• World View
• Owners
• Environmental constraints
• The Root Definition
• The Stream of Cultural Enquiry
• Analysis of intervention
• Political analysis
• Social system analysis

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Overall system model
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The working model

• The e-marketplace is not limited to a particular
  vertical or horizontal marketplace
• The participants are class A and class B
  buyers and suppliers
• Products are standard, standard-modified and
  custom manufactured products
• Matchmaker niche service involving decision
  support tools

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The working model
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Sub-systems identified
List of suppliers (Or buyers)
Directory listing
Buyers (or suppliers)
Buyers (or suppliers)
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Sub-systems identified
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Design of the system
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System design

• Search service
• Search on product name, company name, location
  and advanced search
• Retrieval of data from appropriate databases
• Directory service
• Listing of the buyers or suppliers
• Retrieval of data from appropriate databases
• Product identification service
• For custom manufactured products
• Class B type of buyers and suppliers
• Post RPI (Request for Product Identification)
• View responses

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Matchmaker

• Current limitations in e-marketplaces
• Information gridlock
• Fatal success
• Buyers sellers treated as separate entities
• Standard and standard modified products
• Class A type of buyers and suppliers and also
  class B type of suppliers.
• Three rankings given to aid decision making
• Cybermediary ranking
• Utility value based ranking on proposal
• AHP based ranking on the business profile

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Tasks in Matchmaker
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Tasks in Matchmaker (cont)
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Utility based ranking

• RFQ (Request For Quote)
• Technical specifications of product
• Objective specifications
• Critical (name, value, units)
• range of value
• order of preference
• Subjective or functional specifications
• Commercial criteria
• Price
• Price expected per unit (Rs./unit)
• Optional
• range of value
• Quantity Required
• Volume required (units)
• Compulsory
• range of value

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Utility based ranking

• RFQ (Request For Quote) (cont)
• Technical criteria
• Quality related (optional)
• Outgoing defect percent 
• Delivery related (compulsory)
• Delivery time required        
• Delivery option ( order of preference)
• Service related (all optional)
• Warranty required (months)
• Replacement required (days)
• Repairs required (days)
• Spares required (days)
• After sales service (order of preference)
• Payment related
• Credit period required (days) optional, range of
  values)
• Payment option (compulsory, order of
  preference)

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Range of value parameters

• Name and units
• Range of values
• Minimum value
• Maximum value
• Weightage
• Scale of 10-100 recommended
• Preference
• Greater the better
• Lesser the better
• Nominal
• Supplier specifies a value provided for the
  parameter

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Utility calculation

• Greater the better case
• Lesser the better case

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Utility calculation (cont)

• Nominal case

y-axis (utility)
U WT
(0, 0)
MAX
x-axis (parameter)
MIN
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Order of Preference parameters

• Name and units
• Weightage
• Scale of 10-100 recommended
• Order of Preference
• Upto four options possible
• Supplier selects either one of the options or
  specifies option provided by him

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Utility calculation

• Arithmetic progression with the difference as
  (weightage / number of preferences).
• The difference (D) for the A.P is calculated as
  80/326.67

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Utility of proposal

• Simple additive utility model used
• Total utility of RFQ
• ? (Weightage of each parameter)
• Parameters
• Utility value of a proposal
• ? (Utility value of each parameter)
• Parameters
• Proposals shown to the buyer in decreasing order
  of total utility.
• Sub-totals of utility of specifications and other
  criteria (includes technical and commercial
  criteria) also shown.

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AHP ranking

• Ranking based on business level profile of
  suppliers
• Can incorporate both tangible and intangible
  factors
• Pairwise comparison procedure and consistency
  check
• Weights assigned to factors, criteria under each
  factor and alternatives i.e. suppliers
• Weights of factors and criteria stored for each
  buyer and can be updated
• No limitation on the number of AHP ranking for a
  given RFQ.

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Hierarchy defined
Overall goal
Factors
Criteria
Alternatives
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Criteria for each factor
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Criteria for each factor (cont)
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Output

• Directory service
• Returns all the suppliers participating in the
  marketplace
• Search service
• Returns more specific and lesser number of
  matches based on the parameter(s) searched for
• Does not assist in decision making process
• Matchmaker service
• Returns the list of suppliers interested in
  supplying the product along with the fitness
  value of their proposal
• Cybermediary ranking reflects the past
  performance of the suppliers
• AHP ranking can be used to rank the suppliers
  based on the buyers preferences of the criteria
  of business profiles
• Product identification service
• Returns the list of suppliers interested in
  supplying the product along with the estimate of
  the product.

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Computerizing the system
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Computerizing the system

• Salient Features
• The system can handle any number of users
• The error handling and verification of the data
  is taken care of
• User friendliness
• Session variables to avoid unauthorized access to
  the system
• The general functions of e-markets like login and
  logout, registration etc.
• The DSS using AHP and Utility theory computerized
  completely
• Tools used for development
• Client server architecture
• LAN based working intended to be web based
• Front end ASP
• Back end SQL Server 7.0
• Client side scripting Jscript
• Server side scripting VBscript

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Directory listing
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Search service
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RFQ Posting
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RFQ Posting (cont)
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Proposal Posting
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AHP Ranking
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Sample Results
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Conclusions

• Literature survey
• Soft Systems Methodology applied to develop the
  logic of the system
• Overall model of the Cybermediary system and
  the working model conceptualized
• Subsystems of search and directory listing
  developed
• Matchmaker service for forming good matches
  between buyers and sellers using the decision
  support tools of utility theory and AHP developed
  
• Product identification service developed for
  customized products
• Computerized Support

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Gains

• Completely new concept of virtual partnerships
  defined
• Cybermediary system for formation of virtual
  partnerships defined
• DSS using AHP and utility theory developed
• System developed is flexible in terms of products
  traded and participants and is not limited to any
  particular vertical or horizontal marketplace
• Web based Computerized system