Chapter 14A Many Suppliers

- 2 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Recommended References K. Larson, T. Sandholm: Deliberation in Equilibrium: Bargain in Computationally Complex Problems. Proc. AAAI 2000, AAAI Press 2000, p DE.C. Parkes, L.H. Ungar: Iterative Combinatorial Auctions: Theory and Practice. Proc. AAAI 2000, AAAI Press (both papers are mathematically oriented). M. Woolridge, S. Parsons: Languages for Negotiation. Proc. ECAI 2000 (ed. W. Horn), IOS Press 2000, p

- 3 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Two Views Instead of a 1-1 scenario there is now a many-many scenario. Customer’s view: There are many suppliers. Some are known, others are not. There is no specific knowledge about other customers. Supplier’s view: There are many suppliers. Several customers approach, others might come. Knowledge about other suppliers is available and should be used. The additional knowledge influences the behavior and in particular the strategy of both partners. Also, some new actions can be carried out. There are increased demands on the knowledge management.

- 4 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Agents The participants ijn the scenario (humans as well as software systems) are often called agents. In this chapter as well as in the previous once we use the term agent in a naive way. In a formal system where formalisma play the role of agents one needs, however, a formal notion of the agent concept. This formal approach will be discussed in chapter 14B.

- 5 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Search and Retrieval We distinguish different steps: –search in an open world (many and partially unknown suppliers): often supported by agents –search in a closed world: one or several data bases exist: select some base, possibly using agents –similarity-based retrieval: generate a data base query apply the query for data base retrieval These steps may be invisible to the customer if there is an institution which calls the agents which again call the retrieval operators.

- 6 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Customer’s View (1) The customer can enter several shops simultaneously. Shops can be left and reentered without notifying the supplier. Obtaining product information and performing negotiations can be done in parallel, offers can be compared. Complex products are often not available in one shop. Additions to products (e.g. graphic cards for PC) may be cheaper in another shop. Some parts of products can then be bought from some supplier and other parts from different suppliers. There are heterogeneous products, e.g. services which complement each other but need different expertise and are sold or provided by different suppliers.

- 7 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Customer’s View (2) Some shop may not have enough quantities of the intended product (e.g. heating oil, electricity). The customer can buy different quantities at different shops subject to the specific costs and the availability. The customer will appreciate support –in finding suppliers –getting advice for comparison and completion of offers. The customer has in addition to compare all aspects of the sale as –after sales support –consequences for subsequent sales –etc.

- 8 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Supplier’s View (1) The supplier knows that the customer –has different suppliers to choose from – but knows nothing about the actual activities of the customer in other shops. Problems: –Increased difficulties to keep the customer already in a single sales talk –The customer may use the information service about products in other shops (which are cheaper but give less information). Advantages: –The supplier may satisfy the customer even if the demand is incompletely satisfies by recommending other suppliers, i.e. performing as a helpful agent. –In case of heterogeneous products different suppliers are necessary.

- 9 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Supplier’s View (2) Consequences for suppliers: –Suppliers can structure themselves and cooperate –Such structures can be viewed as virtual companies –The connections can be of various degrees of strenght –A loose connection is simply to exchange information –Other organizational forms are possible which offer additional service to the customer. In this case the competition is more between such organizations then between the shops themselves. –We will discuss several such structures. Of particular interest in E-C is the keep phase which is more sensitive than in ordinary commerce.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Supplier’s View (3) The supplier needs an extended process model. The model has to describe actions for new situations as –There are missing parts to satisfy customer demands –There is missing expertise in the company –The company cannot deliver the demanded quantity The actions can include –advice to contact other suppliers –establishing the connection to other suppliers –contacting other supplier and satisfying the demand invisible to the customer The process model has to transformed in a workflow in order to be executed

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern The Keep Phase There are two basic ways to keep the customer –force the customer to stay –convince the customer to stay Forcing the customer can be achieved, e.g. by –contracts –making products not compatible with products of competitors Convincing the customer be achieved, e.g. by –satisfying the customer because his history is known and taken care of –making entrance to a known shop easier –rewarding old customers

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Organizational Structures The purpose of an organization among suppliers is to control the competition and to improve cooperation. The cooperation includes joint services and reflects the view of a virtual enterprise. The aspects of distributed workflows for realizing the services play a major role. The competition is, however, not totally excluded. This aspect makes the organization interesting for the customer. The keep phase for the organization is that the customer makes continuous business with the organization; in the actions concerning the keep phase “supplier” is replaced by “supplier organization”.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern E-Malls E-malls are the electronic version of ordinary malls: Many different and independent shops are in one house. These shops can cooperate in a more or less integrated manner, e.g.: –One entrance –Cooperative advertising –Links between the shops –Unified services Here we have many suppliers, organized in a closed world. The suppliers may be competitors. Today there are many examples of e-malls.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern E-Malls: Supplier’s View There are additional tasks for the suppliers and for the organization. The common actions (like advertising, form of payment etc.) need to formulated on a general abstract level such that they can be instantiated for each supplier. Communication channels have to established –among the suppliers –between the suppliers and the organization. With each shop the mall has to agree on a protocol for the communication.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Malls - Customer’s View A mall allows access to several shops under one address. At the entry to the mall an overview over all shops in the mall is given. There is a unified graphical interface. Mall-wide search functions. Comparative shopping: Functions to compare products in different shops. Unified services (for payment, delivery, after sales support etc.) are possible. The success of the mall depends largely on such services.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Example

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Auctions (1) This is not an organization in the proper sense but rather a place for communication. The purpose of the communication is to agree on a certain price for the product. Specific support functions are: –Search and selection functions –Agents who make price offers by order of a customer (a bidder) following an agreed strategy up to a certain maximum –Recording and analyzing histories of previous auctions

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Auctions (2): Example In auction agents deliver bids. One possibility for a bid is: S1 XOR S2 which means: either all items of S1 or all items of S2 but not both. With each bid a bid price p(t, bid) is associated (t is the round of the auction) which indicates maximum offer; furthermore an increase d is given which denotes the increment in each round for the price, starting with the ask price of the auctioneer. The XOR constraints have to be observed by the auctioneer. Termination: All agents make the same bids in two consecutive rounds or all get a bundle.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Complex Processes and Portals (1) Many sales processes involve more aspects than simply selling a certain product. Example: Building a house: –The customer wants an overall information, e.g. about the area etc. –A lot for the house has to be bought –An architect has to be found –Financial aspects are important (e.g. mortgage) –Insurances are needed –A notary is needed –Contracts have to be formulated Similar situations arise in financial advice or insurance business.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Complex Processes and Portals (2) It is characteristic for such complex processes that a twofold expertise is required: –Expertise for the individual aspects. Such expertise is naturally distributed over suppliers and there is no or little competition between them –Expertise about the whole product: What are the relations between the parts, when to contact whom etc. This is usually not provided by the specific suppliers. An organization or a process package (regarded as a virtual company) can offer such services in an overall package. The entrance to such a package is called the process portal.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Portals - Customers View Structured information is provided Selection and search functions are provided Many search tasks are provided by agents and invisible to the customer CRM aspects: –Customer is treated individually –Customer classes can be modeled –There is care taken of complex demands –Dialogues can be offered –Demands can be completed and corrected if necessary elements are missing or wrong

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Negotiations (1) Because of the competitive situation dialogues will often be of negotiation type. Topics are, e.g. –quality of products –prices and terms of payment –quantities –guaranties on products –conditions on after sales service. Even if there is no explicit negotiation these topics are always implicitly present. Precise determination of customer classes is important for optimal behavior of the supplier.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Negotiations (2) Negotiation dialogues can also be performed by static and dynamic forms or as free dialogues. Such dialogues have to aspects –the information aspect –the competition aspect Both partners have the common target to come to an agreement. This target restricts the competition. There are new types of knowledge about the partner: –What are restrictions of the partner, i.e. which choices does he not have? –Which pressures does the partner have (must buy or sell something)? –Which time pressures does the partner have ?

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Negotiations (3) The forms used or the dialogue strategies should reflect formally –the competitive aspects –the knowledge about the partners, in particular their abilities and their limitations –knowledge about the products and the possible functionalities –laws –security If more flexibility is needed dialogues may become necessary. Even then pre-configured forms are helpful. Text pieces can allow to configure contracts.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Negotiations (4) The description of the dialogues can follow the same pattern as for information type dialogues, in particular the three level approach (see chapter 11). The type of actions distinguishes e.g. questions, answers offers, acceptance, demands etc. The subtypes include negotiation oriented actions like conditional acceptance, modification demands etc. The instantiations deal with aspects like payment forms, delivery aspects which arise in the individual partner situation.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Change of Role Each partner has one of the roles customer or supplier. The roles are only invariant in a specific situation but not in general: –In one situation A can be the customer and B the supplier but in another situation they can have the reversed roles. –Supplier A can be a customer of another supplier C in the same sales process. Supplier A can also search for another supplier. This arises if supplier A –does not manufacture the products and has buy them or parts of them or raw products. –cannot fully satisfy the specific demands of customers. Such situations arise dynamically and require an interleaving of buying and selling actions.

(c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Summary This chapter describes the many-many relation between customers and suppliers. Both partners have additional degrees of freedom which give rise to new types of actions. There are several ways to organize many suppliers. The intention is to provide services which a single supplier cannot supply. The competitive aspect dominates the scenario and one purpose of organizations is to keep it under control.