Supply Chain Coordination under E-procurement Auction

This paper proposes an online auction with buyback contracts to coordinate supply chains under the circumstance of E-procurement auctions. We show that traditional catalog auctions generally cannot coordinate supply chains because the bidding mechanism distorts the wholesale price decisions and results in a lower order quantity than that optimal for the whole supply chain. The proposed buyback auction can not only benefit the retailer with a low wholesale price as catalog auctions, but also benefit him with the supply-chain-wide optimal order quantity and a buyback price higher than her salvage price. And we show that the supplier-chosen-rule in the proposed buyback auction is also simple to apply like in the catalog auction. Decisions of the suppliers and the retailer in the buyback auction are analyzed and illustrated with numerical examples.