A flexible combinatorial auction bidding language for supplier selection and order allocation in a supply chain with price sensitive demand

Abbaas, Omar; Ventura, Jose A.

doi:10.1016/j.cie.2024.110373

Computers & Industrial Engineering

2024

DOI: 10.1016/j.cie.2024.110373

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A flexible combinatorial auction bidding language for supplier selection and order allocation in a supply chain with price sensitive demand

Omar Abbaas,

Jose A. Ventura

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An Iterative Procurement Combinatorial Auction Mechanism for the Multi-Item, Multi-Sourcing Supplier-Selection and Order-Allocation Problem under a Flexible Bidding Language and Price-Sensitive Demand

Abbaas,

Ventura

2024

Mathematics

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This study addresses the multi-item, multi-sourcing supplier-selection and order-allocation problem. We propose an iterative procurement combinatorial auction mechanism that aims to reveal the suppliers’ minimum acceptable selling prices and assign orders optimally. Suppliers use a flexible bidding language to submit procurement bids. The buyer solves a Mixed Integer Non-linear Programming (MINLP) model to determine the winning bids for the current auction iteration. We introduce a buyer’s profit-improvement factor that constrains the suppliers to reduce their selling prices in subsequent bids. Moreover, this factor enables the buyer to strike a balance between computational effort and optimality gap. We develop a separate MINLP model for updating the suppliers’ bids while satisfying the buyer’s profit-improvement constraint. If none of the suppliers can find a feasible solution, the buyer reduces the profit-improvement factor until a pre-determined threshold is reached. A randomly generated numerical example is used to illustrate the proposed mechanism. In this example, the buyer’s profit improved by as much as 118% compared to a single-round auction. The experimental results show that the proposed mechanism is most effective in competitive environments with several suppliers and comparable costs. These results reinforce the importance of fostering competition and diversification in a supply chain.

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An Iterative Procurement Combinatorial Auction Mechanism for the Multi-Item, Multi-Sourcing Supplier-Selection and Order-Allocation Problem under a Flexible Bidding Language and Price-Sensitive Demand

Abbaas,

Ventura

2024

Mathematics

View full text Add to dashboard Cite

show abstract

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A flexible combinatorial auction bidding language for supplier selection and order allocation in a supply chain with price sensitive demand

Cited by 1 publication

References 63 publications

An Iterative Procurement Combinatorial Auction Mechanism for the Multi-Item, Multi-Sourcing Supplier-Selection and Order-Allocation Problem under a Flexible Bidding Language and Price-Sensitive Demand

An Iterative Procurement Combinatorial Auction Mechanism for the Multi-Item, Multi-Sourcing Supplier-Selection and Order-Allocation Problem under a Flexible Bidding Language and Price-Sensitive Demand

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