Designing Multi-Attribute Procurement Mechanisms for Assortment Planning

Abstract

This research investigates how to design procurement mechanisms for assortment planning. We consider that a retailer buys directly from a manufacturer who possesses private information about the per-unit variable cost and per-variety setup cost. We first develop a screening model to assist the retailer in integrating assortment planning into supply chain contracting processes when only one manufacturer is available. We demonstrate that the screening mechanism is optimal among all feasible procurement strategies. When there are multiple competing manufacturers, we propose a supply contract auctioning mechanism and evaluate its performance. In this mechanism, the retailer announces a contract ..