Analysis of a group purchasing organization under demand and price uncertainty

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).

An empirical analysis of the main drivers affecting the buyer surplus in E-auctions

“…The author denotes that the auctions where the number of bidders is high result in a lower purchasing price. Karabag and Tan (2017) develop an analytical model to analyze the impact of the existence of an e-auction provider in the market on the buyers and suppliers. Consistent with the previous results, their numerical analysis indicate that as the number of bidders increases in the auctions the purchasing price reduces.…”

“…Additionally, in the operations management literature, there exist several analytical studies that deal with the notion of group purchasing. Keskinocak and Savaşaneril (2008) Similarly, Karabag and Tan (2017) analytically show that under the certain conditions, a group purchasing organization helps buyers and/or suppliers to mitigate demand and price risks and so it could be beneficial for all parties in the market.…”

“…In practice, the market makers not only offer the infrastructure and know-how that facilitates to conduct the reverse auctions, but also provide a practical framework to benefit from cooperation in purchasing. For this purpose, they operate group purchasing programs in which the buyers across different sectors can participate in for procuring common products through the online reverse auctions (Karabag and Tan 2017). Within this context, the market maker acts as an intermediary firm that is authorized to conduct the auction on behalf of a group of buyers.…”

“…In the literature, this mechanism is also referred to as joint procurement, purchasing consortium, and cooperative purchasing (Nollet and Beaulieu 2005). For a more detailed discussion on the group purchasing programs, we refer the reader to the works of Chen et al (2009), Hu et al (2012), and Karabag and Tan (2017).…”

“…The ease of access to the procurement event conducted with online reverse auction would also lead to a broader supplier base for the buyers. From the suppliers' perspective, most important motivations that drive the decision to participate in are the chances of reaching new buyers and having an outlet to sell the excess capacity (Karabag and Tan 2017). The reverse auctions also help the suppliers to gain valuable information about the existing market, providing a better understanding of competitors' cost structures.…”