Combinatorial Auction in Limited Supplier Base

Use of auction in B2B procurement scenario negatively affects the buyer-supplier relationship as the buyer always intends to minimize the procurement cost. Degraded buyer-supplier relationship may result in insufficient participation. It becomes increasingly difficult for a buyer to use auction where there are limited number of suppliers. The buying organizations are interested to rationalize the supplier base so as to decrease supplier development cost and to establish workable relationship. In this circumstance, suitably designed auction mechanism may enable the buyer to use it as a procurement tool to derive benefits from both auction and supplier base rationalization. In this paper we design an auction mechanism for combinatorial business allocation in limited supplier base.