Model for negotiating the price and due date for a single order with multiple suppliers in a make-to-order environment

Abstract

The nature of the business of a make-to-order company complicates its procurement activities. This paper is concerned with the development of a model for price and due-date negotiations between a manufacturer and its multiple suppliers in fulfilling a single order from a customer in a make-to-order environment. The developed negotiation model incorporates several established negotiation theories: aspiration level, limit level, natural forces acting on a negotiator and effective alternatives. Instead of presenting a single alternative for an offer in the current round of negotiation, we apply the Interactive Weighted-Tchebycheff method to generate a set of effective alternatives for presentation to the decision-maker in each round of the negotiation process. By giving a set of alternatives, we provide a degree of freedom to incorporate the decision-maker's preference in making offers and counter-offers during the negotiation process.