 Welcome back to this session on supply chain digitization. In this session, we will be continuing upon our discussion of how we relate platform economy to supply chain management. This is an interesting aspect which needs to be covered because traditionally supply chain management is not considered as a part of platform economy discussions. However, we are now in the digital era and almost every aspect of industry is connected to platform economy in some way or the other. Customers are connected to the platform economy, vendors are connected. So, the supply chain has to actually function in this era. And what would be very interesting for us to understand is how this physical structure of the supply chain is connected with the digital environment. So, in this particular discussion, there will be many topics that I will be picking up as a series. The first part of the discussion that I will pick up in this session is on channel structures in the supply chain. This is an important aspect because considering the nature of the course, which is on supply chain digitization, we need to understand the process aspects of supply chain management and how they can map to the platform economy. And this is an important aspect because almost everyone who are working in supply chain management, whether they are in logistics, whether they are in transportation, warehousing, whether they are in manufacturing, retail, distribution, whether they are also part of financing, logistics, financing, supply chain financing, banking and regulations aspects. Almost every entity that is connected to the supply chain needs to understand how the supply chain is related to the platform economy. So, the first and foremost aspect that we will pick up in this relation is channel structures in the supply chain. This is a very popular topic in supply chain management in general and we will see how this is connecting to the platform economy. Now, when we look at this aspect, the first question that is going to drive our discussion in this session is currently we know that we are in this era of platform economy. We are functioning in a domain where you know there is a digitization aspect in almost every part of our transactions that we carry out. Whether it is the use of the UPI, whether it is the use of internet banking, whether it is the use of e-commerce, we see that the platform economy is everywhere, all around us in some way or the other and we are very quickly moving from the traditional markets which were physical in nature to more digital markets. In fact, India is one of the fastest economies in terms of adopting the digital aspects in a business. So, given that we are going to be this in such an economy and we are currently in this economy, it is impossible for us to work in this economy without understanding how the supply chain functions in this. It is not a traditional supply chain that functions within such economy, we need to understand how that is connected. So, for that aspect, first and foremost we need to understand or go back to what we thought was the platform economy. We know that the platform economy that we work in nowadays is a digital platform that connects a variety of parties and these parties range from the sellers, the customers, transportation service providers who will move the product from sellers to customers, the financing institutions and also any other parties such as warehousing partners, packaging partners or other entities, even regulatory entities who would be connecting on this platform and we have seen different types of examples of platforms as well. This is what we understand is the platform economy and we also saw that the benefits of this platform economy is in that it is able to provide seamless information interfaces and communications between different kinds of players, make the markets more visible to players whether it is on the customer side or on the seller side and hence provide an efficient way for searching through the markets. Now, given that this is our platform economy, what we need to understand is this is the digital or e-business environment that we are functioning in right and how does this connect to this which we have seen in so many different sessions and you would have seen this in many textbooks also or other sessions of supply chain management any other course you would have come across this description which is nothing but a traditional supply chain. So, this is our traditional supply chain and as we can understand from this traditional supply chain, this is the physical product environment for the supply chain. So, what do we mean by that? We can see that this is the physical product environment in which the product is actually moving from one portion of the industry to this portion where we have the market environment. Whereas, over here as we can see in this particular portion of the slide, this is the digital form of the economy there is no product that is moving over here right. You can see that they are all connected on this platform they are able to see who is the other party to some extent. So, it would be possible for the seller to see who is the customer when they make a purchase, it would be possible for the customer to see who are the available sellers in the market. It would be possible for the seller to work on dealing with the end customer with the help of a transportation service provider and they would be able to connect with them. As we can see the digital platform is not providing any physical movement of the product, but it is providing digital connectivity right. So, very simply speaking we are primarily speaking about digital connectivity through the digital platform that we see. Whereas, over here we can see this is physical connectivity and the physical connectivity may or may not happen through a digital environment that also we have seen in the earlier discussions. If this manufacturer has to obtain products from the suppliers over there they do not necessarily require a digital platform. However, we have seen in the past that the digital platform provides us a very easy way to find suppliers quickly. Similarly, for the supplier the digital platform would find or would provide a way to find the manufacturers easily and map to the right kind of manufacturers that they want whether it is through an e-procurement system, e-bidding system whichever way that is. In the same way the manufacturer may want to connect with that end customer right. Now, if they know what the end customer actually wants very easily then they can make the right kind of products. This is possible through physical connectivity with the customer also that is they actually do door to door marketing or they find some means of advertising the products to the customer understanding how they are purchasing and accordingly they can connect to the customer. However, as we can see this might not be a very inefficient this may not be a very efficient way of working. So, we can see here that the physical connectivity that is being provided is between the supplier, manufacturer, distributor, retailer and customer for the purpose of moving the product. Now, this connection can be there with or without the presence of a digital platform. The supplier can connect with manufacturer or the manufacturer can connect with the supplier by searching for each other in the market in the industry or through prior experience with each other or with similar kinds of players. This can be done through a very rigorous exercise of meeting the suppliers and vendors and carrying out that process. But as we have seen the digital platform actually provides a very efficient way of searching for the right kind of suppliers and mapping them to the manufacturer. In the same way the manufacturer may directly want to understand how the end customer use their product or estimate how the end customer actually buys their product what kind of prices work within so on and so forth. This can be done without the presence of a digital environment also. They can physically connect with the customer through various channel partners or by themselves in order to find out what could be the demand how the product is getting sold using the data and the information collected as physical records and analyzing it. And as we have again seen earlier the digital platform helps us connect the entity such as a manufacturer with the end customer who is physically very very distant also. So, for example if I am a seller who is making a product in the north of India I am able to connect with a customer who is present in the south of India, but also perhaps to an international customer in almost real time. This is the kind of benefit that the digital platform is actually providing these days. And it is not simply a platform where one can trade emails, but it is a platform where one can view a lot of such sellers on the market. So, this is the main connectivity that the digital platform actually provides to various parties within the supply chain. So, this is you know one of the major benefits that we can understand when it comes to integrating digital platforms with traditional physical supply chains. And one of the benefits that we can think of is definitely it is going to reduce a lot of time that is going to be there in moving the products. For example, if there is a signal of demand at the end customer it might take a lot of time in the absence of a digital platform to convey that kind of information to the manufacturer. And as a result of this it is possible that at places like this such as the retailer such as the distributor we would have a lot of inventory which is simply waiting to be sold basis a signal from the end customer. The digital platform provides this real-time visibility among players and it allows them to connect at speeds that can move the product quickly. So, this is one of the major benefits that we see when we are trying to integrate the digital platform with the physical supply chain. However, this leads to a very interesting observation and that is the platform is providing a means to coordinate the supply chain which means the platform acts as the place in a virtual environment or a digital environment where parties can connect where parties can relay the right kind of information at the right kind of time and where parties can also confirm transactions that are occurring and this can be connected to the physical domain. So, it is a very important means whether this platform is digital or not platforms are required because they help coordinate the supply chain. However, one very interesting question does arise over here who will own this platform will coordinate the supply chain. This is a very important question that arises when it comes to supply chain management whether we are working with a digital platform or without a digital platform. We come across this question very often in supply chain management and that question is primarily that is who or who all are going to coordinate the supply chain and why is this important? It is important to coordinate the supply chain such that they are the right kinds of benefits being passed down to the end customer and what do we mean by the right kinds of benefits? The customer should get the right kind of product that they wanted. The customer should also be able to get it at a price that is reasonable and the customer should also be able to use that product to the complete satisfaction. These are some of the benefits of course, but at the same time there are many other players within the supply chain who also should be benefiting and if they do not benefit from working within a supply chain there would be no reason for them to work with each other within a supply chain and there would be no way of sending the product from this manufacturer to the end customer. Hence, this is a very very important aspect for supply chain management which is supply chain coordination and supply chain coordination is treated in different ways. It is a very rich literature area within supply chain management and we see a lot of practical relevance for this as well across industries. So, our discussion overview for this session is actually going to be on channel structures in the supply chain which can enable us to bring about supply chain coordination or which provide us the context in which supply chain coordination has to be studied. So, when we speak about channel coordination or supply chain coordination we can understand that supply chain coordination refers to an approach in which decision making is carried out within the supply chain. So, what do we mean by these decisions? What kind of decisions can be taken up within a supply chain? Remember a supply chain is a vast network of a variety of players who are dealing with each other in order to transport a product to an end customer or several end customers across various kinds of markets and many a times these supply chain networks are also interacting across industries. For example, the supply chain of the oil and gas industry would be interacting with the supply chain of the drilling equipment industry. Because drilling equipments are required in order to gather the resources from the earth in order to convert it into the final resources used in fuel. These are two entirely different supply chain networks, but they are interacting with each other. Similarly, a supply chain related to plastic production would be interacting with the supply chain related to electronic components or the supply chain related to toys or other such types of products. May not be completely related at first glance, but we can see that there is some interaction. We see a lot of interaction nowadays between the supply chains for minerals and the supply chains of electronic appliances. So, we see that the networks nowadays that we have are not simple. They are quite complex in nature and they cut across industries. So, it is very important to understand who is coordinating the supply chains or if not the entire supply chain network a portion of the supply chain network at least. And it is important to understand in this how decision making is being carried out and what kind of decisions could be there in such supply chains or any supply chains. Typical decisions that are usually taken up in a supply chain, this is again I am purely looking at it from a traditional physical supply chain perspective. What should be the price of the product as it moves through the supply chain? The price of the product which is observed at retail is not necessarily the price that is going to be present after it has been initially manufactured. So, the manufacturer may sell the product to intermediate parties at a different price altogether. And the product which is going to finally be sold to the end customer would be priced at a different price altogether. So, definitely there would be decisions to be taken as to how much should a manufacturer price the product, how much should the retailer price the product to the end customer. So, this is one example of a decision. Decisions could be related to how much should be the order quantities to be placed. So, this decision is taken up even by the end customer and end customer who is going to let us say a retail environment such as a grocery store might have to decide how many kilos of rice or how many liters of oil has to be purchased in that one visit. Similarly, the intermediate parties who are going to be present at the wholesale and distributor levels would need to decide considering the aggregate requirements for the products in the market as to how many quintals of rice or tonnage of product has to be procured. Similarly, the question over here might also be asked to the manufacturer or the producers to keep it more generalized. The producer could be a farmer, the producer could be in mining, the producer could be a manufacturer in the automotive industry. These are various types of producers and they might also have their own ordering decisions or batching decisions to be carried out. How many products should they make at once? How many products should they purchase at once? How many components should they purchase? So, these are the decisions that are related to how much to order and as we can observe over here this is going to be asked by almost every supply chain player which is going to be present within the network. Another decision which could be taken up could be pertaining to the location where the supply has to be made. For example, do you want to supply the product directly to the end customer or should the customer come and pick it up from the store? So, this is the decision to be taken. Should you leave this decision to the customer or should you be taking the decision as a supply chain? This is a question to be asked. It could also be related to where we procure from. If we can decide where we have to supply to, we can also have a similar decision as to where we need to procure from, whether we procure from local sources, whether we procure from regional sources or whether we procure from international sources. This is also a decision to be taken up. We can also have decisions related to the design of the product itself and here the design can be related to how it is going to work within the supply chain. For example, as an end customer, you may be more interested in purchasing the product in a loose form. So, you do not want additional packaging. So, decision has to be taken up as to whether we provide packaging for the product or not. As a customer, you might be interested in not receiving the product as a whole. For example, furniture. You might want to receive the products as parts which can be put together. So, a decision needs to be taken up at the level of product design. And actually speaking, furniture design which is compartmentalized in such a way is very popular nowadays in the furniture industry. We have seen a lot of e-commerce players enter this industry who provide not just the furniture, but also the service of assembly of furniture at the customer location. So, this is a design decision that is taken up and it has implications for how the supply chain is actually going to be designed because this is going to help in transportation of the product which is the furniture in the form of components that can be assembled later. So, this is a product design decision that needs to be taken up. Similarly, nowadays we have a lot of focus on sustainability that is coming up in terms of what is the kind of pollution impacts that companies have, whether it is air pollution, water pollution, sound pollution, any kind of pollution we are considering what are the actions of the industry. It is also related to what kind of employment is being generated, are there any adverse impacts on nearby societies, nearby you know localities and populations. These are all the aspects that are being considered as part of sustainability initiatives. But this is not taking place only at the level of one company. Nowadays there is a lot of focus which is happening on whether the supply chain itself is sustainable or not which means not just one party within the supply chain, but are all the parties within the supply chain functioning in a sustainable manner. And one of the examples for sustainability I have picked up is emission norms. So, should the emissions be carried out to large amounts by all players or should they be controlled, how much should the manufacturer be permitted to pollute, how much should the retailer be polluting the environment. And these are very interesting decisions that can you know define how well the supply chain is actually contributing to the greenness of the environment. So, this is an additional decision nowadays that we are observing. So, the list of decisions that need to be taken up as you can observe in a supply chain are a variety of decisions and they can be of nature related to a market orientation such as pricing, location orientation, design orientation, sustainability aspects, operations aspects such as how much to order, another related question to how much to order is when should we place the order, when should the order be received, when should the order be processed. These are decisions that need to be taken up within the supply chain. And if these decisions are coordinated well between the various players that is all of the players are aligned on these decisions then we can see value are happening to the end customer. So, this decision making can actually be carried out in two ways which comes under supply chain coordination and that is what we call as centralized and decentralized decision making. I will give a brief overview of what is centralized and decentralized decision making and then we shall be picking up examples which will be pertaining to this both in the traditional models as well as in the digital models that we see nowadays. When we consider decentralized channels versus centralized channels the distinction is actually quite simple. In any supply chain of this nature we have a variety of parties who are going to be present within the supply chain and as we have seen a variety of decisions that need to be taken up. So, in such cases in a centralized channel structure the decision making for these metrics with respect to any of the functions. Let us say it is procurement, let us say design, let us say it is warehousing, logistics these decisions can be taken up by only one of the supply chain entities. So, that is what we call as centralized decision making. So, for example, it is very common to observe in a lot of cases that the manufacturer decides what will be the design of the product. The manufacturer will also decide what could be the price of the product. Since they will also own the rights to the product it is quite common to observe this. But nowadays in an era of contract manufacturing and contract logistics we see that this is not necessary that the manufacturer has to carry this out. In fact, nowadays in the era of the digital platforms we see that such decisions are taken up by the platform owners. For example, Amazon, Flipkart, Mintra they are examples of platform owners who can actually take decisions related to some aspects of the supply chain that is what kind of product should even be advertised on their channels. So, in such a case we observe that one of the entities within the supply chain is actually taking up the decision. In a decentralized channel structure decision making is actually distributed among various partners. And so, for example, you could have the retailer deciding how much of product should actually be ordered from the distributor and sold to the end customer. Or in other words how much product has to be procured and perhaps showcase to the end customer the end customer will take a decision whether to purchase or not. So, here the manufacturer or the supplier is not determining what exactly the retailer is deciding in terms of how much they are going to order. Similarly, a distributor can take up similar kind of decision perhaps in terms of what kind of transportation service they are going to purchase or procure in order to distribute the products to the various retail points. And here also the manufacturer or a supplier might not have any say in this decision making. So, but here we see multiple supply chain entities are actually taking up decisions which are key to the entire supply chain's function. And when we speak about such structures we can also observe that for the same physical structure you could have a decentralized decision making or centralized decision making. So, for example, for this same physical structure that we observe over here which is supplier, manufacturer, distributor, retailer and end customer. We could have a scenario in which the manufacturer is taking all decisions how much should be purchased, how much should be distributed, where it should be positioned, how much should be sold to the retailer or sold by the retailer to the end customer, what will be the prices that the retailer offers to the end customers. So, that would be controlled entirely by the manufacturer in which we have centralized decision making. And at the same time perhaps for another supply chain with the same kind of structure these decisions can be completely decentralized as well. So, the retailer will decide what price has to be marked on the end product for selling to the end customer and the manufacturer might not have any say on that aspect. So, we can have the same structure as we see that the decision making could be centralized or decentralized. Now, which of these is actually better? So, this is where it is very important to understand whether decentralized decision making is better or centralized decision making is better. And what we understand from this discussion is the selection of the right channel design will determine the overall effectiveness of the supply chain. And it could be possible that decentralized supply chains are actually going to work out better than centralized supply chains and both of them have their merits and demerits. The selection of the right kind of supply chain coordination system is very very important in order to see to that there is value which is added by the supply chain. And value which is derived by each of the partners within the supply chain as well. If the partners do not derive the kind of value from that kind of a supply chain they might not even function within that supply chain and perhaps then a business opportunity is completely lost. So, now in the next few sessions we shall try to connect this with the role of the platform economy and how does it help us to manage decentralized and centralized channels. So, with this I end the session on channel structures for supply chains and in particular how this could be related to the platform economy. In the future sessions within this particular module I will also be considering certain examples which demonstrate what are the benefits of decentralized and centralized supply chains. So, thank you everyone and we will meet in the next session.