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Leveraging Enterprise-Wide Purchase Volumes

Anant BalakrishnanHarihara Prasad Natarajan

其他書名	Optimal Supplier Assignment in Multi-Division Firms
出版	SSRN, 2013
URL	http://books.google.com.hk/books?id=9wzizwEACAAJ&hl=&source=gbs_api

註釋Procurement has become a vital strategic function as firms increasingly pursue supply chain partnerships and outsourcing options. By coordinating procurement policies across multiple divisions and leveraging firm-wide purchasing power to negotiate significant volume discounts from suppliers, large firms can save millions of dollars in procurement costs. Coordinated procurement entails deciding which suppliers to use to meet each division's purchasing needs and sourcing preferences so as to minimize overall procurement costs. Motivated by this supplier assignment problem facing a large industrial products manufacturer, we propose an integrated optimization model that simultaneously considers both corporate volume discounts and divisional order management costs. Since this large-scale integer program is difficult to solve using general purpose methods, we develop a tailored solution approach to generate tight lower and upper bounds. We derive several classes of valid inequalities to strengthen the linear programming relaxation, establish polyhedral properties of these inequalities, and develop both a cutting plane method and a sequential rounding heuristic procedure. Based on extensive computational tests for realistic problems, we demonstrate that optimally solving our integrated sourcing model can yield significant economic benefits, and establish the effectiveness of our composite solution method. The integrated approach yields average savings of 7.5% in total procurement costs compared to autonomous divisional policies, and our composite solution method generates near-optimal solutions (within 0.75% of optimality) within reasonable computational time.