Optimizing Supply Decisions in a B2B Exchange Environment

Authors

Nagesh Murthy, The DuPree College of Management, Georgia Institute of Technology, Atlanta, USAFollow
Samit Soni, The DuPree College of Management, Georgia Institute of Technology, Atlanta, USAFollow
Soumen Ghosh, The DuPree College of Management, Georgia Institute of Technology, Atlanta, USAFollow

Document Type

Article

Abstract

The advent of the Internet is reshaping the landscape of B2B commerce in a significant manner. Emerging e-marketplaces are offering firms an opportunity to optimize their supply chain decisions across a variety of sourcing scenarios. In this paper, we have specifically focused on decision-making for systematic sourcing of make-to-order (MTO) items. We minimize sourcing and purchasing costs in the presence of fixed costs, shared capacity constraints, and volume-based discounts for bundles of items. We consider a private-exchange that facilitates collaborative sourcing and enables a buyer firm to aggregate demand across different units to gain savings from volume-based discounts on individual items or groups of items, avoiding the duplication of tooling investments, and reducing setup costs. Due to the computational complexity of this problem, we develop a heuristic procedure based on Lagrangian relaxation technique to solve the problem. The computational results show that the procedure is effective under a variety of scenarios.

Recommended Citation

Murthy, Nagesh; Soni, Samit; and Ghosh, Soumen, "Optimizing Supply Decisions in a B2B Exchange Environment" (2001). ICEB 2001 Proceedings (Hong Kong, SAR China). 144.
https://aisel.aisnet.org/iceb2001/144