Scalable Enterprise Systems: Contract-Market Enterprise Models - Factoring, Pricing and Forecasting

Cornell University, Ithaca NY

Investigators

Abstract

The research considers an open view of enterprise based on the extreme premise that information is free - only physical transactions have cost. This approach holds that specialized markets will become the integrating element of supply chains, performing functions once performed by corporations. Examples include markets that reserve capacity on manufacturing facilities at future points in time, or stockpile inventory in geographic regions to hedge against demand fluctuations. The modeling effort will postulate functions and services required by supply chains, and mechanisms by which contracts for these functions and services could be priced and traded in an open market. Characteristics of Nash equilibria for these markets, such as a predicted shift in market power to consumers through the use of on-line auctions, will be studied analytically. A computer simulation for studying the behavior of non-stationary, evolving contract markets in supply chains will be created. Potential applications of the simulation include a market in which companies specializing in product design sell design services, and new generations of a product enter the market. A game version of the market simulator will be created and disseminated for educational use. Most enterprises have many activities that are shielded from the marketplace. Enterprises that adopt an open view will increasingly price functions that they perform and consider contracting them out. This continuous competitive valuation of all services will drive dramatic improvements in economic efficiency. This research will test the hypothesis that the benefits of centralized planning and vertical integration in supply chains can be obtained through dynamic markets. It will identify new opportunities in e-business and supply chain integration. It will gauge the potential for new markets and describe plausible rules to govern these markets. Finally, it will shed light on the capabilities that will allow enterprises to thrive in the future.