SHORT‐TERM E‐PROCUREMENT STRATEGIES VERSUS LONG‐TERM CONTRACTS

The main contribution of this paper is that it does not assume a single procurement strategy, but rather compares three alternatives, and determines for the online search and combined strategy the optimal number of suppliers to contact for a price quote.

Abstract

In this paper we compare the following procurement strategies based on their expected costs: strategic partnership, which is based on a long‐term relationship with a single supplier; online search, which is a short‐term strategy; and a combined strategy, which is some combination of the first two strategies. In addition, we determine for the online search and combined strategy the optimal number of suppliers to contact for a price quote, and analyze how it depends on the various cost and demand parameters. The main contribution of this paper is that it does not assume a single procurement strategy, but rather compares three alternatives.