Auction procurement

Multi-unit Auctions Multiattribute Auctions Procurement Reverse Auctions Capacity constrained allocation mechanisms Double Auctions and Exchanges... 

Electronic marketplace/E-commerce In addition to the many databases available and person-to-person contacts, E-commerce in plastics has been conducted through suppliers web sites or the dot-commerce independent web sites that link material buyers with sellers in transactions or auction formats. During the year 2000 five plastic producers/suppliers and various elastomer producers/suppliers created a new and important business model of a joint-venture web site. It provides multiple companies to join forces to do business. This is a strategy some observers call competition and others regard as just another form of selling in. an electronic format. Regardless of how it is perceived, the model will help propel e-commerce into the mainstream of processor procurement due to the size and wealth of the companies involved. The plastic model example is the largest online business-to-business site todate. 

Marquez, AC, Blanchar C (2004) The procurement of strategic parts. Analysis of contracts with suppliers using a system dynamics simulation model. International Journal of Production Economics 88 (1) 29-49 Mason S (2002) Simulation software buyer s guide. HE Solutions May 45-51 McAfee R, McMillan J (1987) Auctions and Bidding. Journal of Economic Literature 25 699-738... 

A reverse auction is where a buyer solicits offers from sellers by specifying terms of trade that include product specification, price, delivery schedule and so on. Once interested sellers are notified and assembled, they may compete by lowering their offers until one is accepted by the buyer. Alternatively, offers may be accepted as sealed bids until one is chosen. In this regard, a reverse auction is more akin to a buyer auction, commonly found in business procurement and government contracting. 

The networked environment on the Internet offers a possibility of allowing such portfolio-based transactions. In essence, the desired auction mechanism must unbundle and rebundle offers and bids presented by both sellers and buyers. A prototype of such a mechanism is a portfolio trading algorithm developed for the investment community (Fan et al. 1999 Srinivasan et al. 1999). Its basic setup, however, can extend into procurement process in manufacturing as well as bundle trading in physical products tmd persontil services. 

ShefB, Y. Combinatorial Auctions in the Procurement of Transportation Services. Interfaces, 34(4) 245-252, 2004. 

The research community has responded to the E-Business challenge. Despite the infamous dot-com bust in the early 2000 s, scores of research initiatives, workshops, technical papers, and special journal issues have been devoted to the subject. E-Business remains a critical subject not only in the research community, but also in corporate boardrooms. Instead of the revolution that would replace every facet of business, the rise of E-Business might be viewed as the emergence of new economic intermediaries that offer opportunities for innovation. These new intermediaries offer different means to respond to market demands (e.g., Internet vs. traditional channels), to facilitate sourcing, procurement, and price discovery (e.g., electronic auctions), and to develop new mechanisms for coordination and execution (e.g., dynamic pricing, revenue management, and collaborative forecasting). 

There have been a number of applications of the revelation principle in the supply chain literature e.g., Chen (2001) studies auction design in the context of supplier procurement contracts Corbett (2001) studies inventory contract design Baiman et al. (2003) study procurement of quality in a supply chain. 

Market Structure An auction provides a mechanism for negotiation between buyers and sellers. In forward auctions a single seller is selling resources to multiple buyers. Alternately, in reverse auctions, a single buyer is sourcing resources from multiple suppliers, as is common in procurement. Auctions with multiple buyers and sellers are called dou-... 

Reverse auction. Combinatorial auctions are also proposed for procurement problems in markets with one buyer and multiple sellers. The reverse combinatorial auction is formulated as a set covering problem rather than a set packing problem. An interesting (and complicating) issue that arises in this setting is that there are various business rules that are used to constrain the choice of winners. These business rules appear as side constraints in the winner determination problem. The winner determination problem with no side constraints can be written as ... 

Multiattribute auctions [25] extend the traditional auction setting to allow negotiation over price and attributes, with the final characteristics of the item, as well as the price, determined dynamically through agents bids. For example, in a procurement problem, a multiattribute auction can allow different suppliers to compete over both attributes values and price. 

Davenport et al [32] have studied the use of reverse multi-unit auctions with volume discounts in a procurement setting. Winner determination formulations are provided in Section 3.2.2, where we also discuss the introduction of business rules as side constraints, which is an important consideration in practical electronic markets. A combinatorial auction is used for single units (lot) of multiple items, with all-or-nothing bids are allowed and nonlinear prices are used to feedback information. Volume discount auctions are also used, when multiple units of multiple items are being procured and for the restricted case of bids that are separable across items. Another consideration in procurement auctions is that the outcome should be such that the final prices should be profitable for both the buyer and the suppliers, i.e. a win-win outcome. The competitive equilibrium property can be used to operationalize this notion of achieving a win-win outcome [32]. 

An emergent research direction is the examination of mechanisms for decentralized allocation (for multi-item procurement) in the presence of capacity constraints at the suppliers. We discuss two mechanisms that have been proposed in the literature. Both are reverse auctions with a single buyer and multiple suppliers but differ in (i) bid structure that they support and (ii) the feedback that is provided. Both mechanisms assume that a partial allocation against a bid is acceptable to the bidders. 

Andrew Davenport, Abigail Hohner, and Jayant Kalagnanam. Combinatorial and quantity discount procurement auctions with mutual benefits at Mars, Inc. Interfaces, 2002. Forthcoming. 

Andrew Davenport and Jayant Kalagnanam. Price negotiations for procurement of direct inputs. In Brenda Dietrich and Rakesh Vohra, editors. Mathematics of the Internet E-Auction and Markets. IMA Volumes in Mathematics and its Applications, Springer-Verlag, 2001. 

Wedad Elmaghraby and Pinar Keskinocak. Combinatorial auctions in procurement. Technical report. National University of Singapore, 2002. 

Marta Eso, Soumyadip Ghosh, Jayant R Kalagnanam, and Laszlo Ladanyi. Bid evaluation in procurement auctions with piece-wise linear supply curves. Technical Report RC 22219, IBM TJ Watson Research Center, 2001. 

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