Procurement Mechanisms with Post-Auction Pre-Award Cost-Reduction Investigations

Integrating Cost Reduction and Supplier Selection Activities Manufacturers who outsource production may find ways to reduce suppliers’ cost lower the contract price. Conventionally, this is done after supplier selection. However, in practice, a sizable portion of degree which manufacturer can help could be learned before starts production. This opens up possibility better integrate selection cost-reduction activities. In “Procurement Mechanisms with Postauction Preaward Cost-Reduction Investigations,” Chen, Beil, Duenyas explore an alternative procurement process wherein, initial pricing bids are collected, investigates cost-saving potential then leverages information select winner. They provide analytical numerical evidence that integrated not only helps manufacturers significantly, but also benefits suppliers many plausible scenarios.