Title: Supplier selection in dynamic competitive environments

Authors: Taeil Kim, R. Ufuk Bilsel, Soundar Kumara

Addresses: Harold and Inge Marcus Department of Industrial & Manufacturing Engineering, The Pennsylvania State University, University Park, Pennsylvania, USA. ' Harold and Inge Marcus Department of Industrial & Manufacturing Engineering, The Pennsylvania State University, University Park, Pennsylvania, USA. ' Harold and Inge Marcus Department of Industrial & Manufacturing Engineering, The Pennsylvania State University, University Park, Pennsylvania, USA

Abstract: Supplier selection is one of the most critical decisions in a supply chain. While good suppliers can contribute to the supply chain|s overall performance, incorrect selection can drive the whole supply chain into disarray. In this paper, we focus on the problem of supplier selection in a manufacturing firm. We allow each supplier to compete with each other to be selected by the buyer for procurement. The competition is modelled in an auction framework as a bidding process where a supplier cannot observe immediate actions of other suppliers but has complete knowledge of their previous actions. We allow a supplier to use this knowledge in guessing other suppliers| future actions and bid accordingly. Our model enables repeated games, which can be assumed to be more flexible compared to most game theory applications in the supplier selection literature. Reinforcement learning and fictitious play are used in the auction framework to implement repeated games.

Keywords: fictitious play; reinforcement learning; repeated games; supplier selection; supply chain management; SCM; manufacturing industry; auctions; bidding process.

DOI: 10.1504/IJSOI.2008.021340

International Journal of Services Operations and Informatics, 2008 Vol.3 No.3/4, pp.283 - 293

Published online: 19 Nov 2008 *

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