1. Insert Your Title Here Insert Authors Here
Department or institution name
Abstract
Sequential bidding by suppliers on complex engineering/manufacturing contracts has become pervasive in many manufacturing industries. In maturing industries, such as autos, relational ties between suppliers and the OEMs they serve have become key ingredients in profit performance, initial and subsequent pricing, and the probabilities of winning sequential contracts. Yet, the literature is relatively barren in studies that explore this phenomenon. In this paper, we attempt to fill this void. We develop alternative models of sequential bidding by a tier one supplier in the automotive industry. We show how optimum bid prices for each bidding cycle over a fixed time period can be derived through the use of backward dynamic programming. This unique approach takes into account the supplier’s ability to learn from its experiences with a particular OEM and explores the value of relational ties with that OEM and the use of loss-leader pricing when developing a long-term, sequential bidding strategy.
Assumptions
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Objectives & Observations Continued
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Detailed Analysis Continued
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Example
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What is new / contributions
Sequential bidding by suppliers on complex engineering/manufacturing contracts has become pervasive in many manufacturing industries. In maturing industries, such as autos, relational ties between suppliers and the OEMs they serve have become key ingredients in profit performance, initial and subsequent pricing, and the probabilities of winning sequential contracts. Yet, the literature is and the use of loss-leader pricing
Objectives & Observations
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Detailed Analysis
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Critical Modeling Parameters
Competitive advantage
δ: Amount new supplier will have to underbid an existing supplier in order to win first contract.
Percentage savings to the OEM
Factored into calculation of probability of winning the bid
Cost reduction
Cost reduce by % through a) Learning , b) Start-up cost
Conclusions
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