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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ejor.2007.10.039 Byline: Jishnu Hazra, B. Mahadevan Keywords: Supply chain management; Supplier selection; Capacity reservation Abstract: In this paper we model a scenario where a buyer reserves capacity from one or more suppliers in the presence of demand uncertainty. We explicitly derive suppliers' capacity reservation price, which is a function of their capacity, amount of capacity reserved by the buyer and other parameters. The buyer operates in a 'built-to-order' environment and needs to decide how much capacity to reserve and from how many suppliers. For a strategy of equal allocation of capacity among the selected suppliers we develop closed form solutions and show that the model is robust to the number of suppliers from whom capacity is procured through reservation. When the parameters of demand distribution changes the supply base is likely to remain more or less the same. Our analysis further shows that increasing the number of pre-qualified suppliers does not provide significant advantages to the buyer. On the other hand, a pre-qualified supply base with greater capacity heterogeneity will benefit the buyer. Author Affiliation: Indian Institute of Management Bangalore, Bannerghatta Road, Bangalore 560 076, India Article History: Received 27 March 2007; Accepted 22 October 2007

A dynamic model is used to illustrate a purchasing department problem. The decision maker must purchase a certain amount of a particular product at the lowest price during specific time periods. The purchasing department manager must decide whether to pay a fee to search for a new source of the product, realizing that the price established by the manager could be rejected.

The simple EOQ model is used as a basis for the optimal stock replenishment strategy to take advantage of a temporary price reduction. A composite EOQ model that can be decomposed into a family of hybrid models offering greater operational flexibility was developed to enable flexibility in dealing with various operational requirements. These operational requirements include freight rate discounts, quantity discounts, credit situations, modified quality reject policies and resource limitations.

A dynamic model of market evolution effects on firm's make or buy decisions is examined. The model is tested via time series analysis of aggregate vertical integration in 41 industries from 1948-83. It is shown that vertical integration and adjustment costs vary systematically across industries. Model observations also indicate that changes in profitability, technological innovation and adjustment costs interact in a sophisticated manner to condition vertical integration policy.

A study of entry and research and development (R and D) in procurement contracts is presented. A model describing competitive procurement and contracting is analyzed. The model assumes precontract R and D, the presence of homogenous firms and sealed-bidding. It is shown that sealed-bid first price auctions equal second-price auctions when diminishing returns to scale are assumed. In addition buyers exhibit preference for free entry under selected reservation prices.

Issues relating to total order quantity commitment (TOQC) are discussed. This is a particularly important dimension between buyer and supplier and it is shown to possible to obtain this mathematically.

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