IDEAS home Printed from https://ideas.repec.org/a/spr/flsman/v30y2018i4d10.1007_s10696-017-9300-z.html
   My bibliography  Save this article

Analysis of a group purchasing organization under demand and price uncertainty

Author

Listed:
  • Oktay Karabağ

    (Koç University)

  • Barış Tan

    (Koç University)

Abstract

Based on an industrial case study, we present a stochastic model of a supply chain consisting of a set of buyers and suppliers and a group purchasing organization (GPO). The GPO combines orders from buyers in a two-period model. Demand and price in the second period are random. An advance selling opportunity is available to all suppliers and buyers in the first-period market. Buyers decide how much to buy through the GPO in the first period and how much to procure from the market at a lower or higher price in the second period. Suppliers determine the amount of capacity to sell through the GPO in the first period and to hold in reserve in order to meet demand in the second period. The GPO conducts a uniform-price reverse auction to select suppliers and decides on the price that will be offered to buyers to maximize its profit. By determining the optimal decisions of buyers, suppliers, and the GPO, we answer the following questions: Do suppliers and buyers benefit from working with a GPO? How do the uncertainty in demand, the share of GPO orders in the advance sales market, and the uncertainty in price influence the players’ decisions and profits? What are the characteristics of an environment that would encourage suppliers and buyers to work with a GPO? We show that a GPO helps buyers and suppliers to mitigate demand and price risks effectively while collecting a premium by serving as an intermediary between them.

Suggested Citation

  • Oktay Karabağ & Barış Tan, 2018. "Analysis of a group purchasing organization under demand and price uncertainty," Flexible Services and Manufacturing Journal, Springer, vol. 30(4), pages 844-883, December.
    • Handle: RePEc:spr:flsman:v:30:y:2018:i:4:d:10.1007_s10696-017-9300-z
    DOI: 10.1007/s10696-017-9300-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10696-017-9300-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10696-017-9300-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yingxue Zhao & Xiaoge Meng & Shouyang Wang & T. C. Edwin Cheng, 2016. "Contract Analysis and Design for Supply Chains with Stochastic Demand," International Series in Operations Research and Management Science, Springer, edition 1, number 978-1-4899-7633-8, December.
    2. Tella, Eija & Virolainen, Veli-Matti, 2005. "Motives behind purchasing consortia," International Journal of Production Economics, Elsevier, vol. 93(1), pages 161-168, January.
    3. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, November.
    4. Saif Benjaafar & William L. Cooper & Joon-Seok Kim, 2005. "On the Benefits of Pooling in Production-Inventory Systems," Management Science, INFORMS, vol. 51(4), pages 548-565, April.
    5. Krishnan S. Anand & Ravi Aron, 2003. "Group Buying on the Web: A Comparison of Price-Discovery Mechanisms," Management Science, INFORMS, vol. 49(11), pages 1546-1562, November.
    6. Zhou, Erfeng & Zhang, Juzhi & Gou, Qinglong & Liang, Liang, 2015. "A two period pricing model for new fashion style launching strategy," International Journal of Production Economics, Elsevier, vol. 160(C), pages 144-156.
    7. Gérard P. Cachon & Marshall Fisher, 2000. "Supply Chain Inventory Management and the Value of Shared Information," Management Science, INFORMS, vol. 46(8), pages 1032-1048, August.
    8. Yang, Yu-Chen & Cheng, Hsing Kenneth & Ding, Chao & Li, Shengli, 2017. "To join or not to join group purchasing organization: A vendor's decision," European Journal of Operational Research, Elsevier, vol. 258(2), pages 581-589.
    9. Kamran Moinzadeh, 2002. "A Multi-Echelon Inventory System with Information Exchange," Management Science, INFORMS, vol. 48(3), pages 414-426, March.
    10. Tran, Thanh & Desiraju, Ramarao, 2017. "Group-buying and channel coordination under asymmetric information," European Journal of Operational Research, Elsevier, vol. 256(1), pages 68-75.
    11. Bariş Tan & Yalçin Akçay, 2014. "Assortment-based cooperation between two make-to-stock firms," IISE Transactions, Taylor & Francis Journals, vol. 46(3), pages 213-229.
    12. K. Raghunandanan & S. A. Patil, 1972. "On order statistics for random sample size," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 26(4), pages 121-126, December.
    13. Yimin Yu & Saif Benjaafar & Yigal Gerchak, 2015. "Capacity Sharing and Cost Allocation among Independent Firms with Congestion," Production and Operations Management, Production and Operations Management Society, vol. 24(8), pages 1285-1310, August.
    14. Qiaohai (Joice) Hu & Leroy B. Schwarz & Nelson A. Uhan, 2012. "The Impact of Group Purchasing Organizations on Healthcare-Product Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 14(1), pages 7-23, January.
    15. Rong Zhang & Bin Liu, 2017. "Group buying decisions of competing retailers with emergency procurement," Annals of Operations Research, Springer, vol. 257(1), pages 317-333, October.
    16. Zhou, Maosen & Dan, Bin & Ma, Songxuan & Zhang, Xumei, 2017. "Supply chain coordination with information sharing: The informational advantage of GPOs," European Journal of Operational Research, Elsevier, vol. 256(3), pages 785-802.
    17. Jin, Mingzhou & Junfang Yu, Andrew, 2015. "Procurement auctions and supply chain performance," International Journal of Production Economics, Elsevier, vol. 162(C), pages 192-200.
    18. Zhang, Guoquan & Shang, Jennifer & Yildirim, Pinar, 2016. "Optimal pricing for group buying with network effects," Omega, Elsevier, vol. 63(C), pages 69-82.
    19. Zhou, Yuan & Xie, Jinxing, 2014. "Potentially self-defeating: Group buying in a two-tier supply chain," Omega, Elsevier, vol. 49(C), pages 42-52.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grzegorz Zimon & Hossein Tarighi, 2021. "Effects of the COVID-19 Global Crisis on the Working Capital Management Policy: Evidence from Poland," JRFM, MDPI, vol. 14(4), pages 1-17, April.
    2. Grzegorz Zimon & Vitalina Babenko & Beata Sadowska & Katarzyna Chudy-Laskowska & Blanka Gosik, 2021. "Inventory Management in SMEs Operating in Polish Group Purchasing Organizations during the COVID-19 Pandemic," Risks, MDPI, vol. 9(4), pages 1-16, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sun, Shuxing & Zhang, Bin, 2022. "Operation strategies for nanostore in community group buying," Omega, Elsevier, vol. 110(C).
    2. Huang, Yeu-Shiang & Ho, Jyh-Wen & Lee, Chang-Lin, 2024. "Group buying in multiple channels with consideration of heterogeneous customers," International Journal of Production Economics, Elsevier, vol. 270(C).
    3. Zhou, Maosen & Dan, Bin & Ma, Songxuan & Zhang, Xumei, 2017. "Supply chain coordination with information sharing: The informational advantage of GPOs," European Journal of Operational Research, Elsevier, vol. 256(3), pages 785-802.
    4. In, Joonhwan & Bradley, Randy V. & Bichescu, Bogdan C. & Smith, Antoinette L., 2019. "Breaking the chain: GPO changes and hospital supply cost efficiency," International Journal of Production Economics, Elsevier, vol. 218(C), pages 297-307.
    5. Grzegorz Zimon & Marek Sobolewski & Grzegorz Lew, 2020. "An Influence of Group Purchasing Organizations on Financial Security of SMEs Operating in the Renewable Energy Sector—Case for Poland," Energies, MDPI, vol. 13(11), pages 1-17, June.
    6. Lang Xiong & Tingting Xiao & Fuhai Nie, 2022. "Group Buying of Competing Retailers with Strategic Inventory," Sustainability, MDPI, vol. 14(20), pages 1-18, October.
    7. Yan, Yingchen & Zhao, Ruiqing & Lan, Yanfei, 2017. "Asymmetric retailers with different moving sequences: Group buying vs. individual purchasing," European Journal of Operational Research, Elsevier, vol. 261(3), pages 903-917.
    8. Behzad Hezarkhani & Greys Sošić, 2019. "Who’s Afraid of Strategic Behavior? Mechanisms for Group Purchasing," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 933-954, April.
    9. Peng, Wenli & Merckx, Gilles & Chaturvedi, Aadhaar & Chevalier, Philippe, 2022. "Purchasing together or alone? Tradeoffs for information sharing," International Journal of Production Economics, Elsevier, vol. 252(C).
    10. Guanqun Ni, 2019. "A pricing model for group buying based on network effects," PLOS ONE, Public Library of Science, vol. 14(1), pages 1-18, January.
    11. Schouten, Jop, 2022. "Cooperation, allocation and strategy in interactive decision-making," Other publications TiSEM d5d41448-8033-4f6b-8ec0-c, Tilburg University, School of Economics and Management.
    12. Zissis, Dimitris & Ioannou, George & Burnetas, Apostolos, 2015. "Supply chain coordination under discrete information asymmetries and quantity discounts," Omega, Elsevier, vol. 53(C), pages 21-29.
    13. Kaijie Zhu & Ulrich W. Thonemann, 2004. "Modeling the Benefits of Sharing Future Demand Information," Operations Research, INFORMS, vol. 52(1), pages 136-147, February.
    14. Sven Axsäter & Johan Marklund, 2008. "Optimal Position-Based Warehouse Ordering in Divergent Two-Echelon Inventory Systems," Operations Research, INFORMS, vol. 56(4), pages 976-991, August.
    15. Thokozani Patmond Mbhele, 2014. "Antecedents of Quality Information Sharing in the FMCG Industry," Journal of Economics and Behavioral Studies, AMH International, vol. 6(12), pages 986-1003.
    16. Peng Liu & Rong Zhang & Bin Liu, 2023. "Information sharing under agency selling in an e-commerce supply chain with competing OEMs," Operational Research, Springer, vol. 23(3), pages 1-27, September.
    17. de Kok, Ton & Grob, Christopher & Laumanns, Marco & Minner, Stefan & Rambau, Jörg & Schade, Konrad, 2018. "A typology and literature review on stochastic multi-echelon inventory models," European Journal of Operational Research, Elsevier, vol. 269(3), pages 955-983.
    18. Howard, Christian & Marklund, Johan, 2011. "Evaluation of stock allocation policies in a divergent inventory system with shipment consolidation," European Journal of Operational Research, Elsevier, vol. 211(2), pages 298-309, June.
    19. Bi, Gongbing & Geng, Botao & Liu, Lindong, 2019. "On the fixed and flexible funding mechanisms in reward-based crowdfunding," European Journal of Operational Research, Elsevier, vol. 279(1), pages 168-183.
    20. Vernon N. Hsu & Guoming Lai & Baozhuang Niu & Wenqiang Xiao, 2017. "Leader-Based Collective Bargaining: Cooperation Mechanism and Incentive Analysis," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 72-83, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:flsman:v:30:y:2018:i:4:d:10.1007_s10696-017-9300-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.