THE MARS INCORPORATED Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

THE MARS INCORPORATED Case Study Analysis

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.

With the end goal, Mar’s needs to identify a technique in order to decide its winning bids and to know that how the organization could utilize these wining low cost set of bids in order to fulfill its procurement objective. By observing the Excel model provided with this case analysis, the linear programming model is used as a 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. All the assumptions are taken according to the case such as the required material for each product.After creating the variables, an excel solver was used to providing the selection of the optimal combination of bids comparing with Bid no.05, who was offering all the display boxes at the rate of $4,639.The decision variable is depending upon the unit cost that would be determined by the optimal combination of bids. The variables are the items and constrain are the bids. The objective function is:

Objective Function = 1000 x1 + 2500 x2 + 4000 x3 + 800 x4 + 1500 x5 + 2500 x6 + 400 x7 + 750 x8 + 1200 x9 + 100 x10 + 100 x11 + 50 x12.

How can the requirement that first bid wins in the case of ties be met within the optimization framework?

As Mars did not want to rely on a small number of suppliers for its procurement, which that is why the company has chosen the option of RFQs. By using this method, numerous suppliers would enable to take part in bidding as well as they would choose different bundles to form multiple bids. Each supplier would enable us to bid for each item more than one time.

In case of a tie, the company would follow the rule of the round by round auction which was the first submitted bid would be the winner. And in the second round of auction, the bidder has to quote a new price which would be the minimum from the current price.

Could a Mars-type combinatorial auction be operated without the use of optimization?

Combinatorial auction is the one in which the bidders have an option to place bids on multiple items or a combination of goods rather than just a single good. In a combinatorial auction, both the buyer and the supplier can express their preference and used the auction to improve theeconomic efficiency of the business. The combinatorial auction advantage both i.e. buyer and seller. Mar’s could able to operate the combinatorial auction without the use of optimization because the company would not want to depend on a few suppliers. Furthermore, the company used different types of auctions such as standard reverse auction and sequential round by round auction. In standard reverse auction, the RFQ is used to select the single bid, which is based on the minimum price however, in sequential round by round auction in the firstround the company identify that which bidders meet the company’s requirement and in second round the company communicate with the bidders in order to finalize the bidder. However, time constraints can bea great challenge for the company to select the best bid among all the bids placed.

Conclusion

On the basis of above analysis, it is concluded that if the company switch its traditional business operations towards the online procurement then it would be beneficial for the company in such a way that it enables the company to increase its purchasing power by paying lower purchasing cost with largely available options that would ultimately affect the profitability of the company............................

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