Continuous Demand Chain Management: A Downstream Business Model for E-Commerce

Abstract

The demand side of supply chain management has drawn considerable research attention, with focus on disintermediation and syndication models. In this chapter, we evaluate new business models for establishing a continuous demand chain structure to streamline the logistics between the vendor and its direct consumers. The Continuous Demand Chain Management (CDCM) model of E-Commerce is one in which the physical products for sale are delivered directly to the customer without the use of a third party logistics provider, such as a common carrier, and in which the physical product may be continuously “pulled” from the seller. We present three submodels of CDCM. The CDCM Model A applies to business-to-consumer (B2C) online sellers of physical goods who own or control their own delivery vehicles, and may provide further services to extend the value proposition for the buyer. The online grocer is a typical example of businesses in this category. The CDCM Model B applies to business-to-business (B2B) sellers of physical goods, who also own a significant portion of their delivery fleet and deliver goods on demand to local distributors or business customers. Office supply E-Merchants provide an example of this model. The CDCM Model C applies to businesses that typically provide virtually instantaneous delivery of third party goods to consumers or businesses. Businesses in this category own or control their own delivery fleet and add value by delivering items within very short periods of time, usually one-hour delivery. In order to analyze these models, we conducted structured interviews with key senior managers of one representative business each in the CDCM Model A and Model B categories. We extensively surveyed recent literature on companies in the CDCM Model C category. We use the results of our study to analyze different aspects, such as revenue streams, cost structure, and operational peculiarities of businesses following the CDCM model and, finally, discuss the long-term viability of the sub models.