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Mars Incorporated Online Procurement

Solution Id Length Case Author Case Publisher
2673 1764 Words (6 Pages) Peter C. Bell Ivey Publishing : 9B05E004
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One of the biggest privately held companies in the world is Mars. The company was founded on five main key principles: quality, accountability, reciprocity, efficiency, and freedom. More than 4 billion pounds of material are annually obtained by Mars from a small number of highly regarded vendors. Using online procurement auctions resulted in savings of 5% for any significant companies. The business also considered driving an online auction to achieve savings. Using the online purchasing option, a business can post a supply contract (known as RFQ or request for Quote) and invite bids from potential suppliers. The lowest bidder wins the contracts because this is a reverse auction. Consequently, the case focuses on how Mars began by imposing some restrictions and guidelines before awarding a supply contract. The instance displays the opening phase of the online auction hosted by Mars and the bids submitted by several vendors using various item combinations.

Following questions are answered in this case study solution:

  1. Describe a model that Mars can use to operate an online procurement auction. Start with a basic model where all demands are met and cost is minimized. 

  2. How much can bid 1 charge and still be picked?

  3. How low does bid 6 have to go before it will be picked?

  4. What are your suggestions to bid 6 to get picked?

  5. What other suggestions do you have based on your observations?

Case Study Questions Answers

1. Describe a model that Mars can use to operate an online procurement auction. Start with a basic model where all demands are met, and cost is minimized. 

Mars Incorporated may create a cost minimization primary aim utilizing the linear programming technique that will satisfy all requirements while also reducing all costs. The set of linear constraints is the base of a linear function, according to the definition of a linear programming issue, which is the challenge of maximizing profits or minimizing expenses. The limitations could be due to equality or inequality. The Objective Function is also known as Linear Function, so mars Incorporated was seriously threatened by the fact that both rivals and non-competitors were using an online system for purchasing materials to cut costs by about 5%. The issue with the material procurement system at Mars Incorporated was that the prior technique was unable to take advantage of the competitive supply conditions, which had a negative impact on the company's performance. Because the procedure was so drawn out and chaotic, the previous system was also risky in terms of time consumption. The traditional procedure with other big brands and other SBUs did not produce supply synergies and economies of scale, which made the management of mars incorporated eager to adopt the online procurement process to save money, and time, and earn money in line with market trends. The business has chosen to use online auction portals to carry out reverse auctions, in which a predetermined buyer and predetermined providers bargain at a secret web-based exchange. Keep in mind that the bottom bidder won the reverse auction. Mars should use Linear Programming model as the cost minimization function = Bid1(2050 x1) +Bid2(350 x2) +Bid3(1199 x3) + Bid4(220 x4) + Bid5(4639 x5) + Bid6(199 x6) + Bid7(1199 x7) + Bid8(1350 x8) + Bid9 (350 x9) + Bid10(2200 x10) + Bid11(999 x11) + Bid12(1700 x12). This shows fully how Mars's demands are fully satisfied. The cost of the procurement process at this point is minimized fully.

2. How much can bid 1 charge and still be picked?

Reverse auctions are held on the web procurement platform. There is only one buyer in the process, and there are many suppliers involved. The suppliers engage in online, private negotiations. Reverse auctions are those in which the lowest bidder prevails. When Mars Incorporated began operating and implementing this system, buyers completed a supplier contract, and bidders competed for that. Materials for Mars such as sugar and cocoa were ideal, but smaller orders like packing were deemed time-consuming, necessitating a large supply contract where providers could compete for sets produced by them. The corporation requested display boxes in small, medium, and big sizes in 4 different types when the first round of bidding began (mars. M&M, snickers, and 3 musketeers).

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