Composing Supply Chains Through Multiunit Combinatorial Reverse Auctions With Transformability Relationships Among Goods

Abstract

In this paper, we introduce a novel auction-based decision support system to help a firm readily assemble supply chains. At this aim, we tackle the problem of deciding whether to outsource some production processes or not-the so-called make-or-buy decision problem. The solution to the make-or-buy decision problem is an optimal supply chain whose operations are either performed in-house or outsourced. We propose to employ a novel extension of combinatorial reverse auctions, the so-called Multiunit Combinatorial Reverse Auction with Transformability Relationships Among Goods, which allows the following: 1) a buyer/auctioneer to express transformability relationships among goods (some goods can be transformed into others at some transformation cost) and 2) bidders to express their preferences over bundles of goods.