The Business Value of Digital Supply Networks:
A Program of Research on the Impacts of Globalization
The 5th Annual International Business Research Forum
The Temple University CIBER and The Irwin Gross eBusiness
Institute at the Fox School of Business and Management
March 27, 2004
Presenter: Detmar Straub, Georgia State University
1
The Business Value of Digital Supply Networks:
A Program of Research on the Impacts of Globalization
Authors:
Jonathan Wareham, Lars Mathiassen,
Arun Rai, & Detmar Straub
Georgia State University
CIS Department
2
Agenda
 The
Problem
 Information
visibility (operational and strategic)
in supply networks
 Lack of work on more complex networks (with
appropriate measures)
 Literature
 Dyadic
literature
 Game theory symmetries
3
Agenda
 Methods
 Symmetry
of information sharing, performance,
mediating variables considered
 Snowballing
 Case
Study of Global Network
 Contributions
4
Agenda
 The
Problem
 Information
visibility (operational and strategic)
in supply networks
5
The Problem
“While the idea of sharing
information such as forecasting data,
inventory levels, and order status with
business partners is not altogether
unique, today’s Web technology is
helping to create tighter partnerships
and greater overall value.”
(Stein, 1998)
6
The Problem
7
The Problem
Fragmented global digital networks
8
The Problem
9
The Problem
Low levels…
Low levels…
Low levels…
Strategic
Information
Sharing
Operational
Information
Sharing
+
+
Responsiveness
High levels…
Error
Control Variables
Market
Performance
Low levels…
Operational
Performance
…Network externalities
…Cultural barriers
10
The Problem
Process, interface, and communications
standards across inter-national boundaries
Control Variables
…Network externalities
…Cultural barriers
11
Agenda
 The
Problem
 Information
visibility in supply networks
 Lack of work on more complex networks (with
appropriate measures)
12
Agenda
 Literature
 Dyadic
literature
13
Literature

Prior Empirical Work
 Lamming
(1993)
 Seidman & Sunarajan
(1997)
 Lee et al. (1997)
 Rangan and Bell (1999)
 Malhotra et al. (2000)
 Mudambi et al. (2004)
 Kotabe et al. (2004)
 Straub et al. (2004)

Dyadic Samples Will Not
Generalize to Alternate
Network Configurations
 Anderson
et al. (1994)
 Iacobucci (1994)
 Levy & Grewal (2000)
 Moller & Wilson (1995)
 Hakansson & Snehota
(1995)
 Wilkinson (1991)
14
Information Sharing &
Supply Network Performance
- from Straub et al. (2004)
15
Drawbacks in Literature

Dyadic Samples Will Not Generalize to More
Complex (k configuration) Networks
 Triadic configurations
 Quadradic
configurations
 5-nodal configurations
[Temple
 Overall,
101.xls]
k, varying from 3 to n configurations
16
Drawbacks in Literature

Dyadic Samples Will Not Generalize Well to
More Complex Networks
 Proposition: “A network
is different than the sum of
its dyadic relationships.”
 More
difficult when one considers “hopping” of tiers
and exchanges within a tier
17
Drawbacks in Literature
 Chains
versus Networks
 Chains
are rigid, lock-step and linear
processors
 Limited,
sparse connections
 Networks
are flexible, iterative, and parallel
processors
 Density
of connections is higher
18
Supply Chain versus Supply Network
19
Supply Chain versus Supply Network
20
Information Flows
SOLECTRON
IBM
IBM
INGRAM
INGRAM
MICRO
MICRO
CompUSA
CompUSA

Product Flow
Malhotra, Arvind, Omar El-Sawy and Sanjay Gosain, "Rethinking
Value Chain Processes for e-Business Applications,"
Presentation at University of Minnesota, November 3, 2000
2000.
21
Improving order management
Product Flow
INGRAM
MICRO
SOLECTRON
IBM
Information Flows
CompUSA

Improving new product introduction
Product Flow
INGRAM
MICRO
SOLECTRON
Information Flows
IBM

CompUSA
22
Agenda
 Literature
 Dyadic
literature
 Game theory symmetries plus network
externalities
23
Game Theory Analysis
 Prisoner’s
Dilemma (Deutsch, 1958)
 John Nash’s Nobel prize
24
Game Theory Analysis
Vendor
Cooperate
Sparingly
Client
Cooperate
Extensively
Be Responsive
Ignore User
10
10
15
-10
-5
0
0
0
25
Game Theory Analysis
Vendor
Cooperate
Sparingly
Client
Cooperate
Extensively
Be Responsive
Ignore User
20
10
15
-10
-5
0
0
0
26
Game Theory Analysis
 Cooperative
game theory argues that all
players can benefit from sharing
information
 Some players could gain higher rents (at
least in the short term) by being
opportunistic and withholding information
 In the long term, the system benefits will be
maximized with high levels of symmetric
information sharing
27
Effects of Visibility Seeking Strategies
Information Shared by Vendors
Order
Mgmt.
Warehouse
& Order
Fulfillment
Shipping
/ Delivery
Returns
Customer
Service
Analysis &
Reporting
Information Shared by Clients
Effects of Symmetric Sharing Strategies
28
Example


Relationship A
 Client shares
5 of 10
 Vendor shares 9 of 10
 Total 14 of 20
 Symmetry 0.556
Relationship B
 Client shares
7 of 10
 Vendor share 7 of 10
 Total 14 of 20
 Symmetry is 1.0
Relationship C
Client shares 4 of 10
Vendor shares 5 of 10
Total 9 of 20
Symmetry 0.8
29
0
.2
.4
.6
.8
1
.4
•C
•A
.6
•B
CLIENT
.2
.8
1
VENDOR
30
Agenda
 Methods
 Symmetry
of information sharing, performance,
mediating variables considered
31
Dyadic
Degree Symmetric Measures
Measure
Definition
Formulae for Derived Items
CVi & VVi Client / Vendor Value
Measure of the total magnitude of the
construct for the client /vendor "i"
Sum of (CVi, VVi ) transformed to
a value between 0 and 1
DVi Degree Value
Measure of the total magnitude of the
construct within the client /vendor
relationship "i"
Measure of the symmetry of construct
within the client/ vendor relationship
"i"
Measure of the symmetry and
magnitude of the construct within the
client/vendor relationship "i"
Sum of ( CVi + VVi ) transformed
to a value between 0 and 1
SVi Symmetry Value
DSVi Degree of Symmetry Value
CVi / VVi
Sum of ( DVi + SVi ) transformed
to a value between 0 and 1
…where i is a partner in the relationship, n is the last partner in a
given sample of n firms, and i varies from 1 to n
32
Degree Symmetric Measures
Construct
Dependent Variables (DV)
Market Performance
Operational Performance
Definition
Possible Measures (All measures are
network level degree-symmetric)
Measures that capture the overall
effectiveness of the supply
network from a customer
perspective
Efficiency of the supply network
Revenues/sales per employee average
deltas over 5 years; customer loyalty
measures; customer satisfaction
measures
Inventory turnover;inventory
performance statistics & ratios; working
capital employed; capacity utilizations
statistics
33
Degree Symmetric Measures
Construct
Independent Variables (IVs)
Strategic Information Sharing
Definition
Possible Measures (All measures are
network level degree-symmetric)
Information sharing that changes
the ownership of information and
decision making roles and affects
the relative competitive balances
between agents and firms
Measures used by Straub et al. (2004)
and Klein (2002) to capture strategic
level information sharing
Operational Information Sharing Data relevant to the planning or
execution of specific processes
or transactions
Order status data; manufacturing
process data; logistics flow data; stock
keeping unit movement information;
other information directly pertinent to
the planning or execution of
operations
34
Degree Symmetric Measures
Construct
Mediating Variables
Responsiveness
Error
Definition
Possible Measures (All measures are
network level degree-symmetric)
Responsiveness of the network to
unpredictable changes in
demand and supply,
environmental and regulatory
conditions, shifts in competitive
strategy, or internal process
disruptions
Extent to which variances
associated with key operational
processes are amplified across a
supply network; nonlinear
expansion of order variability as
different tiered partners make
purchase decisions lacking
complete information
Questions about speed of product
introduction, adjustment of product and
service offerings, and agile alignment
of offerings with changes in customer
requirements associated with different
channels, geography, and segments
Measures of information flow as well
as the consequent delays,
amplifications and distortions that
affect overall entropy and efficiency in
the network; ratio of change in order
variability at different tiers of the
supply network
35
Non Degree Symmetric Measures
Construct
Control Variables
Network Structure
Tier Configuration
Partner Trust
Definition
Possible Measures (All measures are
network level degree-symmetric)
Number of dominant partners
and links between them in a
network
Number of tiers in a network
Straight-forward mapping of network
nodes and links
Mutual perception of ability,
intentions, predictability, and
disposition of partner
Straight-forward counting of network
links by tier
Measures based on McKnight et al.
(2002)
36
Methods
 Snowballing Technique
(i)
(ii)
Used for Sampling
(iii)
37
Testing the Model
Responsiveness
Market
Performance
Error
Operational
Performance
Strategic
Information
Sharing
Operational
Information
Sharing
Control Variables
38
Agenda
 Case
Study of Global Network
39
Omnexus
40
Omnexus
Plastics Industry one of world’s largest
 589 billion dollars in revenue
 Employs 1.5 million people


BASF
 Bayer
 Dow
 Dupont
 Ticona/Celanese
41
Agenda
 Contributions
42
Contributions
1.
Move beyond Dyads

Examine More Complex Networks
Cooperative Game Theory Perspective
Combined with Network Externalities
3. Snowballing Technique
4. Case Study of Global Network Demonstrating
Main Concepts
2.
43