A Purchasing Framework for B2B Pricing Decisions and Risk-sharing in Supply Chains

F. J. Arcelus
University of New Brunswick, Faculty of Administration, P.O. Box 4400, Fredericton, N.B. E3B 5A3, Canada, email: arcelusf@yahoo.com

T. P. M. Pakkala
Mangalore University, Department of Statistics, Mangalagangotri 574 199, India,
email: tpm_pakkala@yahoo.com

G. Srinivasan
University of New Brunswick, Faculty of Administration, P.O. Box 4400, Fredericton, N.B. E3B 5A3, Canada, email: srini@unb.ca

Abstract. This paper presents a common modelling structure for (i) the implementation of operational policies by individual purchasing managers of risk-sharing agreements among supply-chain partners, and (ii) the integration of brick and click purchasing policies in a B2B. The problem of price uncertainty created within these two environments is modelled as a stochastic repetitive-sales problem, applicable to any probability distribution. The model identifies sufficient conditions for regenerative ordering cycles, which allows for the use of the renewal reward theorem. The end result is a two-price purchasing policy, which may substantially ease implementation problems across a global corporation’s purchasing managers world-wide and across B2B markets.

Subject Areas: Global Operations Management, Inventory Management, Stochastic Processes, and Supply Chain Management.