An Allocation Heuristic for Multi-Attribute Supply Chain Reverse Auctions

Today’s supply chains require more dynamic trading practices to better match suppliers with their customers. Additionally, the purchase decisions faced are rarely made on price alone; but rather on a bundle of attribute values. With ubiquitous computing and Internet connectivity, newer types of negotiation are emerging such as reverse auctions. This paper presents a heuristic algorithm for multi-attribute reverse auction bid selection that considers two tiers of the supply chain. The suppliers place bids to meet just-in-time requirements of a manufacturer to quote their consumers’ RFQs. The heuristic solution is a collection of near optimal bids that attempt to maximize overall profit subject to capacity constraints, supplier delivery dates, and component costs, as well as consumer late delivery penalties.