P1: C-166
Lairson WL040/Bidgoli-Vol III-Ch-32 July 11, 2003 11:52 Char Count= 0
NEWBUSINESSMODELS 379because the value proposition for the firm nearest the
end customer uses an approach for measuring value, this
doesn’t mean all firms in the supply chain can or should
use it.
Are there solutions to these problems? The Internet it-
self may present some new opportunities. The availabil-
ity of real-time information providing visibility across the
supply chain permits formulation of a wide variety of re-
fined measures of supply chain operation and of the ben-
efits of various choices. This high-quality information can
be used to reach agreement where past conflicts were the
result of poor information. Another possible solution to
intrachain conflict is to recognize that in addition to the
different economic interests of firms in a supply chain,
there are also significant differences in economic power
(Cox, Sanderson, & Watson, 2001). Buyers typically have
more power than suppliers and may be in a position to
define the terms of the supply chain and terms for in-
formation sharing and collaboration. Sometimes, as in
the role of Intel or Microsoft as suppliers to the personal
computer industry, this relationship can be reversed. This
power can mean that buyers (or suppliers) may be able
to use their strategic position to determine the division of
profits from the information supply chain and extract the
greatest profits.
Another possibility is to limit the type and scope of in-
formation shared and accept the now limited gains this
can bring (Lamming, Caldwell, & Harrison, 2001). This
way steps back from the ideal of complete supply chain
integration, and is more likely to work in situations involv-
ing a long-term relationship where a series of negotiated
arrangements through time that reflect the relative dis-
tribution of power in the chain and adjust to reflect the
different economic interests of the parties emerges. The
nature of this negotiated outcome may be some combina-
tion of an adversarial and collaborative relationship. One
“federated” approach (Oliver et al., 2001) to the process
advocates supply chain partners working to align their
business objectives, “performance levels, incentives, rules,
and boundaries” in conjunction with developing an un-
derstanding of the trade-offs relating to cost and service.
This approach calls for an ongoing set of negotiations on
broad objectives rather than a detailed one-time specifi-
cation of measures and outcomes. The continuous flow
of high-quality information facilitated by the Internet can
help firms engage in this continuous negotiation over ac-
tions and needs.
This federated, or decentralized, approach is sugges-
tive of the organizational innovations needed to realize
the benefits of an Internet-enabled supply chain. The ex-
change of complex information in real time facilitates
precisely this kind of continuous negotiation and adjust-
ment of goals, operations, and measures. The main pur-
pose of cooperation and collaboration is to reap the ef-
ficiency gains and the production flexibility inherent in
adopting an Internet-based system. The specific meaning
of these benefits is likely to be highly differentiated from
one supply chain to another and even for different product
variations in the same supply chain. Continuous negotia-
tion can make these adjustments and help sustain collabo-
ration. Further, the distributed decision-making environ-
ment of an extended, real-time firm may be much moreconducive to collaboration than the vertical, centralized
model (Tapscott, 2001).NEW BUSINESS MODELS
Assuming the roadblocks to collaboration presented by
technical problems and the differences in economic inter-
ests can be overcome, gaining the benefits of collaboration
facilitated by the Internet also requires the development
of new business models and practices. The application of
Internet technologies expands the business options for the
firm and the role of the supply chain in achieving its goals.
For purposes of illustration, we will emphasize three:- The simultaneous development of products, processes,
and supply chain design. This requires high-level col-
laboration but enables the various firms in the supply
chain simultaneously to develop new products, config-
ure the production processes, and design the supply
chain. When a new product requires both a new set
of production processes and changes in the configu-
ration of the supply chain, simultaneous development
permits these decisions to be coordinated, thereby re-
ducing conflicting needs (Fine, 1998). - Increased ability to use and extract information from
the supply chain, which makes possible efforts to inte-
grate demand management and the supply chain, and
the integration of supply chain management and cus-
tomer relationship management (Lee, 2001). - The development of pull–push strategies to replace
push strategies. This business model allows for reshap-
ing the make/buy decision from the perspective of the
extended enterprise and permits improved flexibility
in developing the capacity for customization (Simchi-
Levy, 2000).
The development of an extended, real-time enterprise
through the Internet requires the supply chain be recon-
ceptualized into three chains—organizations, technolo-
gies, and capabilities—and used to rework the way prod-
ucts are developed in relation to the production processes
across the supply chain (Fine, 1998). This involves un-
derstanding the assets that exist across the supply chain:
knowledge assets, integration assets, decision system as-
sets, communication assets, information extraction and
manipulation assets, and logistics assets. A key element
of an extended enterprise strategy is to direct the design
and redesign of the supply chain in relation to existing and
new products so as to create competitive advantages. Re-
sources for competitive advantage reside across the entire
supply chain, and the chain itself must be designed so as to
take advantage of these assets. Through the Internet, rich
information can be exchanged among various tiers of the
supply chain, which permits the identification of emerg-
ing assets and their organization into increasing compet-
itive advantage. The most important result of this busi-
ness model is the ability concurrently to create products,
develop production processes, and design supply chains.
This capability permits the solution of potential manu-
facturing problems in the supply chain at the point of its
design and in conjunction with design of the product and
thereby reduces time to market. In a competitive world