Electronic transportation marketplaces

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Industrial Marketing Management 32 (2003) 187 – 198

Electronic transportation marketplaces: a transaction cost perspective Thomas J. Goldsbya,*, James A. Eckertb,1 a

Fisher College of Business, The Ohio State University, 554 Fisher Hall, 2100 Neil Avenue, Columbus, OH 43210, USA b Haworth College of Business, Western Michigan University, Kalamazoo, MI, USA

Abstract Electronic transportation marketplaces (ETMs) are Internet-based mechanisms that match buyers and sellers of transportation services. With claims of reducing the administrative costs of transportation procurement to virtually nothing, the allure of ETMs is considerable. Shippers (transportation buyers) must therefore determine whether to pursue the new-founded opportunity and buy transportation services through an Internet-based intermediary or to buy services in a traditional manner. To date, there has been little structured thought on the topic to guide managers. Transaction cost economics (TCE) provides a robust framework toward this end. The TCE framework is adapted to present the procurement decision as one of ‘‘make’’ versus ‘‘buy.’’ The analysis is designed to help firms navigate their own determination to use an ETM and, when considered, the most appropriate form of ETM. The merits and caveats of ETM adoption are presented in the article. D 2002 Elsevier Science Inc. All rights reserved. Keywords: Electronic transportation marketplace; Transaction cost economics; Business-to-business

1. Introduction The Internet’s provision of low-cost, efficient interconnectivity among people has had a dramatic influence on the way in which business is conducted. Business logistics has not been absent from this Internet revolution. In fact, logistics and supply chain management are viewed to be among the most promising areas of application for Internet technology [1]. The maturing of the Internet has created opportunities for new logistics services and intermediaries in the supply chain. Among these new services is the Internetbased electronic transportation marketplace (ETM), intermediaries that bring buyers and sellers of transportation together by electronic means. This simple description embodies a wide variety of service offerings. According to Armstrong [2], marketplaces refer to several different types of websites, usually incorporating an exchange or auction, an information portal, and assorted value-added services. They range from basic load-posting and -matching services to complex offerings that encompass not only transportation transactions but complete order fulfillment services. They

Corresponding author. Tel.: +1-614-292-2901; fax: +1-614-292-0440. E-mail addresses: goldsby@cob.ohio-state.edu (T.J. Goldsby), jim.eckert@wmich.edu (J.A. Eckert). 1 Tel.: +1-616-387-0363.

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may also be hosted by a variety of parties: individual shippers, carriers, or independent intermediaries. The rise of ETMs has been of great interest to practitioners and academics over the past few years. In a short period of time, the market has witnessed the enthusiastic rise in the number of ETMs, followed quickly by a sharp decline. Many intermediaries fell victim to the recent ‘‘dotcom bust.’’ Evidence of this decline in the number of electronic procurement services is found in a survey of elogistics service providers in February and November 2001. In February, the survey identified 75 fully operating ETMs. Merely 9 months later, only 52 of those companies still existed in their original form. Nineteen had ceased operations altogether, while four had been acquired. Many service providers that ceased operations failed to generate sufficient revenues given a nonexistent or poorly conceived value proposition. Those ETMs acquired by other firms likely possessed a recognized brand name, valuable technologies, or marketable proprietary logic. The services offered by surviving ETMs, however, have been viewed as worthwhile among shipping customers who use the...
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