Capacity Allocation among Multiple Suppliers in an Electronic Market
An electronic marketplace typically provides industrial suppliers an alternative option for selling their capacity in addition to the traditional open market. However, suppliers face different sets of costs and risks in open market and in electronic market. Consequently, suppliers participating in an electronic market are likely to offer their capacity at a different price compared with traditional open market. We analyze this problem and derive the price-capacity function for the supplier. We also derive a basis for allocating buyer's requirements among multiple suppliers so as to minimize his cost. Our models shows that suppliers with large capacities would quote a lower price in the electronic market. It also predicts that the unit bid price increases with bid quantity in the electronic market. Based on the price-capacity curve, we model a scenario where the buyer announces, a priori, the number of suppliers to be selected for award that will minimize its costs.
Technology and Innovation
Production and Operations Management
Hazra, J.; Mahadevan, B.; and SESHADRI, Sudhi.
Capacity Allocation among Multiple Suppliers in an Electronic Market. (2004). Production and Operations Management. 2, (2), 161-170. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/658