Strategic Sourcing in Procurement

Seminario Micro

Daniel Cardona (with L. Bru)

Universitat de les Illes Balears

26-Jan-2015

Seminar 3 – 14:30

In this paper, we study how a big buyer may coordinate the demands of its smallish units in order to obtain a low procurement price. We show that when the capacity of the big buyer is relatively large, the optimal policy will consist on creating some purchasing groups, each acting independently. The number of these (optimal) groups would depend on the number of potential suppliers as well as the total requirements of this buyer; and in general, a unique purchasing group is not the optimal policy. Moreover, we also show that it may be optimal to keep some smallish units to procure their goods independently.