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.
Murthy, Nagesh; Soni, Samit; and Ghosh, Soumen, "Optimizing Supply Decisions in a B2B Exchange Environment" (2001). ICEB 2001 Proceedings. 144.