Mars Incorporated: Online Procurement Case Solution
1. What are the basic types of auctions?
There are three types of basic auctions, which include:
- Absolute auctions: It is used in selling property at the highest bid irrespective of the price of the property and creates maximum response from the market.
- Minimum bid auction: The bids are accepted by the auctioneer at or above published minimum price, which is specified in the advertisements or brochures at the time of auction.
- Reverse auction: It is a type of auction in which sellers bid for the property at the price they are willing to sell their goods.
Features of Mars material buying reverse auction:
- Maximum limit (2) Minimum Limit (3) Bundles
Their objective is to determine the set of all bids, which would result in a decrease in the procurement cost and from theses bids, which would minimize the sum of time stamps for the bids.
2. What features of the proposed Mars’ auction present implementation challenges?
The proposed auction of Mars is “online reverse auction”, which includes the number of suppliers competing for the buyers’ request in a real time and suppliers can provide the multiple bids from the options which are publicly available. Along with this, reverse options have short duration and it is mainly used in order to purchase the bundle of commodity goods and services.
The challenge faced by Mars was regarding the increased number of suppliers and each had separate contract. Therefore, Mars was involved in an online procurement process in order to generate positive out comes for companies as well as for suppliers with which it it collaborates.
One such challenge was that Mars did not have any desire to be dependent on the suppliers. Moreover,Mars had a solution for that problem by using the passwords in order to gain access to auction website. This indicated that all the suppliers that Mars wanted to bid can have access and can bid in the auction. Along with this, they used the process of Request for Quotation (RFQ) by the means of letter or email, which make it visible regarding the announcement to prospective suppliers and as well as to advertise their websites to apply for bid.
3. Using a linear programming framework and the data from case Exhibit 1, formulate and solve the problem of finding the cost-minimizing set of bids that meet Mars’ business requirements and determines the winning suppliers.
This case gives a quantifiable objective to which quantifiable requirements were applied, and the solver function in Excel produced an optimized solution for the problem above.
With the end goal, Mars should actualize the online procurement auction framework. Mars needs to identify a technique in order to decide its winning bids and to know how the organization could utilize these winning low cost set of bids in order to fulfill its procurement objectives.
Mars used the combinatorial bid approach, which is the best framework in order to meet the organization's procurement objectives as well as it influences the quality of every bidding supplier.
By observing the Excel model provided with this case analysis, the linear programming model is used as direct programming measure. The steps to finish this model first involve characterizing the model's general target or objective, which is to minimize the organization's costs by using an online procurement reverse auction exchange. The model's decision variables, which are the key that variables we have to determine, are either 0 or 1, reject or accept the bid, and they cannot be in negative values. One could consider them like dummy variables, which were utilized as a part of regression computation.
There are twelve decision variables which speak for Mars, M&M, Snickers, and Three Musketeers’ confine sizes given in the problem set. The target capacity of the model is to reduce all costs, which are due to the minimization of the condition...........................
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