Elkafi Hassini, McMaster University, hassini@mcmaster.ca

Reverse auctions are becoming more popular for purchers as a means of lowering acquisition costs. While there are many examples of the successful implementation of reverse auctions, there are also numerous case studies in which one or both of the purchasers or suppliers are unhappy with the process. The challenge for purchasers is to assess which approach is best suited to their particular business situation. In cases where a reverse auction process is chosen, it is also important to identify the structural characteristics of the reverse auction that might help them achieve the best results. This paper provides some insight into the reverse auction dynamics, through simulation of a number of auctions and structures. While some theoretical insight is available in the literature, there has not been any work that explicitly incorporates the bidding process into a reverse auction model. We develop a simulation model that explicitly follows the bidding process to determine expected auction outcomes and present the results. In the context of these results, we discuss some strategic elements that purchasers should consider in making a reverse auction decision and suggest some reverse auction specifications which might help lower acquisition costs under certain conditions – notably when the number of participants is small.

Elkafi Hassini, McMaster University, hassini@mcmaster.ca

The impact of bundling of products and services in the supply chain management context has not been very well studied in the operations literature. We propose to study the impact of using bundles as a lever for supply chain coordination, using optimal prices and inventory as key measures, we analyze the impact of these decisions on profit. We propose that bundling of products and services not only leads to higher profits but also can function as a coordination mechanism between suppliers and retailers. We consider a two product supply chain with one retailer and one supplier where customer valuations of products and services are known to both parties. The retailer is a price setter for the end product and makes the purchasing decision. We analyze the case where the products are either offered as individual components or offered as a bundle to the consumer. We provide extensive numerical examples.