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Vendor Selection with Bundling *
Author(s) -
Rosenthal Edward C.,
Zydiak James L.,
Chaudhry Sohail S.
Publication year - 1995
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1995.tb00836.x
Subject(s) - purchasing , vendor , computer science , quality (philosophy) , operations research , selection (genetic algorithm) , product (mathematics) , variety (cybernetics) , stock (firearms) , software , microeconomics , business , marketing , economics , mathematics , mechanical engineering , philosophy , geometry , epistemology , artificial intelligence , engineering , programming language
Product bundling has become increasingly prevalent not only in consumer goods but also in the industrial sector. We study a purchasing problem in which a buyer must obtain necessary numbers of various stock items from a variety of vendors who charge different prices, have limited capacities and different levels of quality, and offer bundled products at discounted prices. We examine relationships among different bundling scenarios and show that the most general scenario is one in which free items are given to the buyer when sufficient quantities are purchased. We develop a mixed integer linear program that finds the purchasing strategy for the buyer that minimizes the total purchase cost. We present computational results which indicate that the problem is very tractable to solve optimally on a personal computer with standard optimization software. Finally, three extensions of the model are discussed.