# Market Structure in Modern Supply Chains

## Platform Intermediaries

A platform intermediary in a supply chain context is a company that does
not itself produce or consume goods but instead controls the infrastructure
through which buyers and sellers transact. Platform intermediaries include
e-commerce marketplaces (Amazon, Alibaba), logistics platforms (Flexport,
FreightOS), and procurement networks (Coupa, Ariba). Their value lies not
in physical capital but in network effects: the platform becomes more
valuable to each participant as the total number of participants grows.

Platform intermediaries extract value by charging transaction fees, selling
data analytics, providing financing, or leveraging their position to capture
margin that previously accrued to producers or carriers. Their market power
derives from control of the matching infrastructure: a seller who abandons
the platform loses access to the buyer network; a buyer who abandons the
platform loses access to the supplier network.

Unlike traditional merchant intermediaries — who bought and sold goods,
bearing inventory risk — platform intermediaries transfer inventory risk to
the counterparties. The platform earns commission on each transaction but
holds no stock; the asymmetry concentrates profit in the intermediary while
concentrating risk in producers and carriers.

## Monopsony and Buyer Power

Monopsony is market power on the buyer's side: a situation in which a
single buyer (or a small number of buyers acting in concert) faces many
sellers. In supply chains, monopsony manifests when a large retailer or
manufacturer is the dominant customer for a category of suppliers. The
buyer's ability to credibly threaten to switch suppliers — or to reduce
purchase volumes — gives it negotiating leverage that suppliers cannot
easily counter.

Buyer power is exercised through price pressure (demanding lower unit costs
in each contract renegotiation), terms pressure (extending payment terms,
imposing fines for delivery failures), and specification creep (adding
requirements without cost compensation). Suppliers facing strong buyer power
are systematically squeezed: their margins decline, their ability to invest
in quality and capacity is constrained, and their bargaining position
deteriorates further as the buyer grows.

The long-run consequence of sustained monopsony pressure is supplier
consolidation — weaker suppliers exit, leaving the buyer with fewer but
larger suppliers — and supply fragility, as the surviving suppliers have
insufficient margin to hold safety stock or invest in resilience.

## Market Concentration and Single-Source Dependencies

Single-source dependency occurs when a supply chain relies on one supplier
for a critical component or material with no readily substitutable
alternative. Single-source situations arise from supplier specialisation
(only one firm has the required capability), geographic concentration (all
competent suppliers are in one region), or deliberate buyer policy (choosing
the best supplier and extracting maximum scale economies).

Single-source dependencies concentrate supply chain risk. When a
single-sourced supplier fails — due to fire, flood, earthquake, insolvency,
or geopolitical disruption — the buyer has no immediate alternative. The
semiconductor industry exemplifies this: certain advanced logic chips can
only be produced by one or two foundries globally, making entire sectors
of the world economy dependent on the operational continuity of a small
number of facilities in Taiwan and South Korea.

From a market structure perspective, single-source suppliers possess
temporary monopoly power: during a supply disruption, they can charge
prices far above their normal level, because no substitute exists. Smith's
analysis of monopoly price — that it is the highest that can be squeezed
from buyers — applies directly: a disrupted single-source supplier in a
critical category faces demand that is inelastic in the short run.
