Ming Fan

A supply chain model with direct and retail channels

Abstract We study a dual channel supply chain in which a manufacturer sells to a retailer as well as to consumers directly. Consumers choose the purchase channel based on price and service qualities. The manufacturer decides the price of the direct channel and the retailer decides both price and order quantity. We develop conditions under which the manufacturer and the retailer share the market in equilibrium. We show that the difference in marginal costs of the two channels plays an important role in determining the existence of dual channels in equilibrium. We also show that demand variability has a major influence on the equilibrium prices and on the manufacturer’s motivation for opening a direct channel. In the case that the manufacturer and the retailer coordinate and follow a centralized decision maker, we show that adding a direct channel will increase the overall profit. Our numerical results show that an increase in retailer’s service quality may increase the manufacturer’s profit in dual channel and a larger range of consumer service sensitivity may benefit both parties in the dual channel. Our results suggest that the manufacturer is likely to be better off in the dual channel than in the single channel when the retailer’s marginal cost is high and the wholesale price, consumer valuation and the demand variability are low.

Decentralized Mechanism Design for Supply Chain Organizations Using an Auction Market

Traditional development of large-scale information systems is based on centralized information processing and decision making. With increasing competition, shorter product life-cycle, and growing uncertainties in the marketplace, centralized systems are inadequate in processing information that grows at an explosive rate and are unable to make quick responses to real-world situations. Introducing a decentralized information system in an organization is a challenging task. It is often intertwined with other organizational processes. The goal of this research is to outline a new approach in developing a supply chain information system with a decentralized decision making process. Particularly, we study the incentive structure in the decentralized organization and design a market-based coordination system that is incentive aligned, i.e., it gives the participants the incentives to act in a manner that is beneficial to the overall system. We also prove that the system monotonically improves the overall organizational performance and is goal congruent.

Short-term and long-term competition between providers of shrink-wrap software and software as a service

Software as a service (SaaS) has moved quickly from a peripheral idea to a mainstream phenomenon. By bundling a software product with delivery and maintenance service, SaaS providers can effectively differentiate their products with traditional shrink-wrap software (SWS). This research uses a game theoretical approach to examine short- and long-term competition between SaaS and SWS providers. We analyze the factors that affect equilibrium outcomes, including user implementation costs, SaaS providers operation efficiency, and quality improvement over time. Bundling software with service lowers software implementation cost for users, and our results suggest that it increases equilibrium prices. In providing software services, SaaS providers have to incur significant operation cost. In the long run, service operation cost may significantly affect SaaS firms ability to improve its software quality.

A Web-based financial trading system

A new electronic financial market is fast emerging. Connected by highspeed networks, buyers and sellers are gathering in virtual marketplaces and revolutionizing the way business is conducted. The financial services industry, among the most innovative and aggressive in its use of IT, has created an entirely new online brokerage industry in just a few years. The principal functions of financial markets are to bring buyers and sellers together and to provide a price discovery mechanism for the assets being traded. The authors describe their financial bundle trading system (FBTS), a Web-based continuous electronic market that traders can use to execute bundle orders. With a bundle order, a trader can order a combination of stocks or assets. FBTS is in an experimental stage and is being extensively used for research at the University of Texas at Austin. Rapid advances in IT and growing competition are causing fundamental changes in the worlds financial services industry. Because the FBTS is based on distributed objects, it has significant advantages over systems built with CGI scripts.

The Internet and the future of financial markets

nologies, particularly the Internet, have profoundly changed the dynamics of financial markets. More people are trading online through the Web instead of using full-service brokerages. According to Jupiter Communications, the

Selling or Advertising: Strategies for Providing Digital Media Online

415 billion online brokerage assets in 1998 will grow by more than sevenfold to

E-loyalty: elusive ideal or competitive edge?

3 trillion in 2003 [4]. Investors Combining new technology with established financial market mechanisms. can now trade stocks, access real-time market information, and conduct investment research in ways they could not dream of just a decade ago. However, if we look at the overall process of trading in financial markets (see Figure 1), which includes order entry by investors, order verification and routing by brokerage firms, and, finally, execution and settlement through various markets, online trading has only replaced telephones with the Web and provided a universal interface for individual investors to participate in the financial markets. It has not necessarily improved the overall efficiency level of the market. Beginning several years ago, the U.S. financial markets have been experiencing a profound change that goes far beyond online trading. It is not an exaggerated claim to describe the ongoing development as a fundamental revolution [2]. Recently, we have witnessed the Nasdaqs acquisition of the American Stock Exchange, the phenomenal growth of the Electronic Communications Networks (ECNs), and the introduction of after-hours trading. Looking at all the changes, ECNs have been among the most significant. ECNs are electronic trading systems that can automatically match buy and sell orders without the intermedi

An analysis of pricing models in the electronic book market

Media and network companies are increasingly providing digital media online. We develop a model to examine optimal strategies for media providers to utilize the online channel to distribute digital media. We examine a number of options for media providers. Our results suggest that media companies should sell programs online when content quality is relative high and online access cost is low. When online access cost is relative high, media providers could use the advertising strategy. Overall, companies are better off providing both pricing and advertising options to consumers. We derive the optimal price and advertising level, and analyze the factors that affect the price and advertising decisions. We find that as advertisement revenue rate increases, advertising level should be kept low. In addition, media companies should set online price and advertising level with consideration of the traditional channel in order to avoid channel cannibalization. We also analyze the advertising level in the traditional channel. Our results suggest that as digital video recorder technologies provide more convenience to consumers, media companies should increase, rather than decrease, revenues from advertising.

An integrative framework for intelligent software project risk planning

Business-to-consumer (B2C) e-commerce has grown at a phenomenal rate and the best may be yet to come. The steady growth of B2C e-commerce over the last three holiday seasons is indicative of the remarkable potential of online retailing as an alternative to the traditional bricks-and-mortar mode of shopping. However, many consumers are hesitant to adopt this new way of doing business. Their satisfaction with and loyalty toward online shopping have been stalled by multiple episodes of frustration with online transactions, as illustrated by the following quote from an industry publication: “Last season’s troubles were many. Some retail sites buckled under the weight of traffic, resulting in pages that loaded slowly or not at all. Others couldn’t keep up with customer service requests. Still others were spotty in fulfilling orders on time—Toysrus.com had to issue gift certificates when toys weren’t delivered in time for Christmas” [7]. Thus, while there seems to be a surge in online traffic, there is also a general consumer wariness about electronic shopping. For businesses, the equation is further complicated by high customer acquisition costs, low customer retention, and negative cash flows in B2C electronic commerce—all of which highlight the need to better understand customer interactions. This article aims to provide insights into the critical factors that create online customer loyalty. Jeff Bezos, founder and CEO of Amazon.com, stated that creating a compelling online experience for cyber customers is the key to attaining competitive advantage on the Internet [11]. Our focus in this article is on consumer experience with online shopping. Using a paired sample approach in which customers’ online shopping experience is contrasted with their conventional shopping experience, we address the dimensions along which they perceive similarities and differences between the two modes of shopping. We aim to accomplish three objectives:

The design and development of a financial cybermarket with a bundle trading mechanism

In this paper, we develop a game theoretic model to study the pricing of e-books and e-readers under two pricing models: wholesale and agency. We analyze pricing strategies for a publisher and a retailer. We identify the complementary relationship between e-books and e-readers as the main reason for the retailer to set a low e-book price in the wholesale model. Comparing the wholesale and the agency models, we find, in a wide range of market conditions, the price for e-book readers is lower in the agency model, leading to a higher e-book market share. However, a higher e-book price in the agency model lowers e-book consumption. Overall social welfare is lower in the agency model than in the wholesale model. While total consumer surplus is slightly higher in the agency model, largely because of a lower e-reader price, business profit is lower. The publisher, surprisingly, is worse off under the agency model.