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Multi-period supplier selection under price uncertainty

Author

Listed:
  • Alper Sen

    (Bilkent University, Ankara, Turkey)

  • Hande Yaman

    (Bilkent University, Ankara, Turkey)

  • Kemal Guler

    (Hewlett-Packard Laboratories, Palo Alto, USA)

  • Evren Korpeoglu

    (Hewlett-Packard Laboratories, Palo Alto, USA)

Abstract

We consider a problem faced by a procurement manager who needs to purchase a large volume of multiple items over multiple periods from multiple suppliers that provide base prices and discounts. Discounts are contingent on meeting various conditions on total volume or spend, and some are tied to future realizations of random events that can be mutually verified. We formulate a scenario-based multi-stage stochastic optimization model that allows us to consider random events such as a drop in price because of the most favoured customer clauses, a price change in the spot market or a new discount offer. We propose certainty-equivalent heuristics and evaluate the regret of using them. We use our model for three bidding events of a large manufacturing company. The results show that considering most favored customer clauses in supplier offers may create substantial savings that may surpass the savings from regular discount offers.

Suggested Citation

  • Alper Sen & Hande Yaman & Kemal Guler & Evren Korpeoglu, 2014. "Multi-period supplier selection under price uncertainty," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 65(11), pages 1636-1648, November.
    • Handle: RePEc:pal:jorsoc:v:65:y:2014:i:11:p:1636-1648
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    Citations

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    Cited by:

    1. Güler, Kemal & Körpeoğlu, Evren & Şen, Alper, 2018. "Newsvendor competition under asymmetric cost information," European Journal of Operational Research, Elsevier, vol. 271(2), pages 561-576.
    2. Wang, Fa & Chen, Jing & Yang, Hui & Yu, Bo, 2022. "Supplier selection with information disclosure in the presence of uninformed consumers," International Journal of Production Economics, Elsevier, vol. 243(C).
    3. Faiza Hamdi & Ahmed Ghorbel & Faouzi Masmoudi & Lionel Dupont, 2018. "Optimization of a supply portfolio in the context of supply chain risk management: literature review," Journal of Intelligent Manufacturing, Springer, vol. 29(4), pages 763-788, April.
    4. Zhang, Guoqing & Shi, Jianmai & Chaudhry, Sohail S. & Li, Xindan, 2019. "Multi-period multi-product acquisition planning with uncertain demands and supplier quantity discounts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 132(C), pages 117-140.
    5. Li, Zhaolin & Ou, Jinwen & Liang, Guitian, 2021. "Optimizing hospital drug procurement with rebate contracts," Omega, Elsevier, vol. 105(C).

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