Optimal Offer Proposal Policy in an Integrated Supply Chain Management Environment

Abstract

In this work, we present a novel approach that provides decision support in making optimal offer proposals during the negotiation process between customers and suppliers that takes place in chemical industry supply chains (SC). The proposed approach takes into account the tradeoff between the quality of the offers made to customers, i.e., the level of satisfaction perceived by the client, and the expected profit to be achieved in the short-term operation of the SC. Therefore, a two-stage stochastic formula is derived that considers the uncertainty associated with reactions to future demand in an attempt to compute a set of Pareto-optimal solutions to the proposed problem. Each of these solutions comprises an SC schedule and a set of values for the parameters of the offers. Through comparison of the Pareto curve and the solution that would be obtained without negotiation, a set of offers representing contracts that are desirable from the supplier's perspective is obtained. This set of values may be offered by the supplier to reach an agreement with the customer during the negotiation procedure. The proposed approach facilitates a rational negotiation, in the sense that it enables the negotiator to simultaneously process many more data related to production and transport plans and customer preferences, thus avoiding having to rely exclusively on the negotiator's beliefs and interests.