Overview
The Southfresh B2B exchange was created to connect customers and suppliers of tangible products. The software provides a platform for suppliers to post offers and customers to obtain information about product price and availability. It also provides "back office" support functions such as invoice processing, dispatch management and stock management. Southfresh created this platform upon realisation that their internal brokerage processes could be automated, enabling lower cost and more timely transactions that would be beneficial to the New Zealand fish industry. This triggered entrepreneurial expansion into marketing a B2B portal that served a number of tangible products. The Southfresh portal was disestablished in 2002, as it was proving less successful than anticipated. The software was subsequently purchased by supermarket chain Foodstuffs, who re-branded it Freshnet and now operate it as a proprietary supply chain management system for perishable products such as fish and meat.
Although conceptually sound within its fish brokerage application, implementation of the Southfresh B2B exchange highlights many issues that businesses must consider in order to capitalise on innovative solutions both within and between industries. The case highlights a need to understand all the elements of a business process, including cost structures, relationships, the nature of the industry and the players in the market when both computerising existing processes and generalising successful models into other sectors.
The most cogent lessons from this case study hinge around participants knowing their business, their industry and the way that money is made in that industry. This is important not just for the design and implementation of ICTs, but also in the design of institutions such as marketplaces that serve these value chains. Some of the problems encountered by Southfresh can be partially explained by an incomplete understanding by the designers of the Southfresh marketplace of the economic reasons for the particular organisational forms prevailing in the fish industry, and the consequent incomplete understanding of the applicability of these models to other product markets. Whilst there are clearly other issues relating to the levels of understanding by the suppliers and buyers in this market in relation to their business models and transaction costs, if the operator of the marketplace does not understand the underlying economic structure of the particular marketplace then the marketplace is more likely to fail.
The Southfresh case is an example where an ICT application can perform perfectly to specifications, but the system fail due to inadequate marketplace design specifications. Nonetheless, it also demonstrates that learning from such experiences is a valuable step in a technology application and innovation lifecycle. Whilst the marketplace model in this application has failed, the technically well-designed software has been applied in a new business model that recognises its limitations as a marketplace and utilises the applications in a proprietary supply chain management system. Southfresh was an important and essential part of the product development cycle without which Foodstuffs would have never developed the applications or acquired the benefits of the technology.
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