case mac peasrson
Mars Incorporated: On-line procurement
Shelly Rungta
Li Zhang
Chih-Chang Chen (josh)
Team Datamonsters
Executive Summary:
Mars is one of the world’s largest privately owned businesses with annual purchasing of $4 billion. The company is now running an online auction to induce competition and reduce the sourcing cost. In this case, the objective is to buy packages from multiple suppliers at the minimum possible cost. There are 12 different SKUs to be fulfilled from 7 different suppliers. Here is the bidding sequence:
During the analysis, we will analyze the problem and ignore the constraint of the number of winning bidders and maximum total winning bids by each supplier.
Analysis:
First, we decide to build base model for analysis. In the base model, we find there are two allocation methods both achieving the minimum possible cost $ 4470. But based on the tie-breaking rules, we find out the option 2 can fulfill the bidding requirement earlier than option 1. Therefore, we recommend to choose Option 2.
Option 1 Option 2
Supplier 2, 1, 6, 3, 7 consist the bidding package. During the optimization, we impose binary constraints to the number of bid instead of integer constraints since we assume Mars can not accept the same bid for multiple times.
What if Scenario:
To exam the sensitivity of constraints, we run the sensitivity report as below:
Final
Shadow
Constraint
Allowable
Allowable
Cell
Name
Value
Price
R.H. Side
Increase
Decrease
$P$8
1000 large LHS
1
677
1
1
0
$P$9
2500 medium LHS
1
23
1
0
1
$P$10
4000 small LHS
1
1350
1
0
0
$P$11
800 large LHS
1
501
1
0
1
$P$12
1500 medium LHS
1
999
1
1E+30
0
$P$13
2500 small LHS
1
0
1
0
1E+30
$P$14
400 large LHS
1
0
1
0
1E+30
$P$15
750 medium LHS
Shelly Rungta
Li Zhang
Chih-Chang Chen (josh)
Team Datamonsters
Executive Summary:
Mars is one of the world’s largest privately owned businesses with annual purchasing of $4 billion. The company is now running an online auction to induce competition and reduce the sourcing cost. In this case, the objective is to buy packages from multiple suppliers at the minimum possible cost. There are 12 different SKUs to be fulfilled from 7 different suppliers. Here is the bidding sequence:
During the analysis, we will analyze the problem and ignore the constraint of the number of winning bidders and maximum total winning bids by each supplier.
Analysis:
First, we decide to build base model for analysis. In the base model, we find there are two allocation methods both achieving the minimum possible cost $ 4470. But based on the tie-breaking rules, we find out the option 2 can fulfill the bidding requirement earlier than option 1. Therefore, we recommend to choose Option 2.
Option 1 Option 2
Supplier 2, 1, 6, 3, 7 consist the bidding package. During the optimization, we impose binary constraints to the number of bid instead of integer constraints since we assume Mars can not accept the same bid for multiple times.
What if Scenario:
To exam the sensitivity of constraints, we run the sensitivity report as below:
Final
Shadow
Constraint
Allowable
Allowable
Cell
Name
Value
Price
R.H. Side
Increase
Decrease
$P$8
1000 large LHS
1
677
1
1
0
$P$9
2500 medium LHS
1
23
1
0
1
$P$10
4000 small LHS
1
1350
1
0
0
$P$11
800 large LHS
1
501
1
0
1
$P$12
1500 medium LHS
1
999
1
1E+30
0
$P$13
2500 small LHS
1
0
1
0
1E+30
$P$14
400 large LHS
1
0
1
0
1E+30
$P$15
750 medium LHS