A Combinatorial Auctions Approach to Capacity Sharing in Collaborative Supply Chains

Abstract

In supply chains the collaboration between manufacturing companies is crucial to ensure resilient and efficient operation in the face of uncertainty. This is especially true for manufacturers with global supply chains in highly competitive markets with fluctuating demand. We develop a novel approach to sharing of manufacturing capacity in supply chains. The approach is based on combinatorial auctions in which suppliers and buyers submit bids for manufacturing capacity. We present the mixed integer programming formulation of the winner determination problem and evaluates the efficiency and complexity of the approach on several realistic instances. We find that the number of accepted bids increases up to 10-fold compared to a situation without capacity sharing.