HT4 - Managing digital operations and supply chains

Question 1

Walker and Weber (1984)

Answer 1

Transaction cost approach to make-or-buy decisions: two features that determine whether the transaction should be internalised by the buyer:
- uncertainty associated with executing the transaction
- the uniqueness or specificity of the assets associated with the goods or serviced transacted
make if: supplier opportunism poses threat, supplier cost advantage is high, volume or technological uncertainty
e.g. Boeing Airlines accident

Question 2

Krajlic (1983)

Answer 2

Strategic supply chain management: 2 key factors - importance of purchasing, complexity of supply market
Classify purchasing materials requirements:
- strategic items: detailed market research, risk analysis
- bottleneck items: security, backup plans
- leverage items: exploitation of full purchasing power
- noncritical items: standardisation, optimisation
Strategic focuses: exploit, balance, diversify

Question 3

Shih (2020)

Answer 3

Post-pandemic supply chain management: need to map supply chains to uncover risks
Alternative sources from diverse locations, new manufacturing technologies, categorising suppliers
2 ways to mitigate risk: diversifying supply base, holding intermediate inventory or safety stock
Taking advantage of process innovations: automation, new processing tech, continuous-flow or additive manufacturing

Question 4

Choi (2022)

Answer 4

Just-in-time after Covid
Toyota: identified parts with long lead times - more risky - kept stocks of these, e.g. chips
Redisigning JIT: identify parts that can be run on JIT basis, and connect these via buffers
Buffers: stockpiles of inventory, excess or flexible capacity, resources shared with others

Question 5

Cutolo et al (2021)

Answer 5

Platform companies are able to influence the dynamics of markets - they can decide what and how to sell
e.g. in 2019, Apple made a deal with Amazon to ban resellers of its products
Platforms are valuable because entry costs are low for sellers and advertisers, and none for customers
Nearly perfect comptition - companies need to rely on differentiation
Easier to adapt to trends and analyse customer behaviour if a company sells on a platform
Platforms can limit the source of competitive advantage in three ways:
1. Limit the construction of unique value proposition: dictating the presentation of products, limiting pricing flexibility
2. Platforms own the customer relationship: prevent off-platform contracts, existential uncertainty for sellers
3. No room to manoeuvre for platform-dependent businesses: competitors can copy setups, platform can dictate trends
Strategies for safety: change channels & multihoming, use platform to market themselves, play algorithm game, diversify income streams

Question 6

Benjafaar and Hu (2020)

Answer 6

The sharing economy refers to business models built around on-demand access to products and services mediated by online platforms that match many small suppliers or service providers to many small buyers
Peer-to-peer resource sharing enables inefficiencies from exclusive resource ownership to be minimised; also known as ‘servicisation’
On-demand rental networks where resources are shared but owned centrally, not by suppliers on the platform (e.g. bike sharing)
Traditional OM models may not apply – platforms may have limited pricing power, limited control of capacity and demand, temporal and spatial mismatches respectively
Inventory management is less about managing timing of supply than matching supply and demand
Revenue management changes since capacity is now endogenous not exogenous – two-sided dynamic pricing and surge pricing
Queueing systems become more dynamic as servers become more random and flexible

Question 7

Bonnet and Westerman (2021)

Answer 7

Transforming digital technology into business capability requires digital capability and leadership capability
Transforming customer experience:
-Customer design experience – transforming pain points into value propositions; e.g. Sephora using AI to match skin tones with foundations
-Customer intelligence – understanding consumer behaviour by integrating customer data
-Emotional engagement – using digital technology to enable customer participation
Transforming operations:
-Core process automation – (e.g. Amazon’s distribution systems)
-Connected and dynamic operations – leveraging cloud computing, IoT software, and real-time analytics to optimise processes
-Data-driven decision-making
Transforming employee experience:
-Augmentation: enhancing employee productivity (obvious e.g.: gen AI)
-Future-readying: greater emphasis on employee digital competencies
-Flexforcing: increasing adaptability of workforce
Transforming business models:
-Digital enhancement: meshing digital channels or turning products into services (eg subscriptions)
-Information-based service extensions: embedding data sensors and analytic capabilities into traditional products to transform the offering into a x-as-a-service
Companies must learn to master their own digital platforms which have three levels: core (back-office), customer-facing, data (analytics)