Competitive Sourcing for Internet Commerce

Abstract

In electronic commerce on the Internet, a customer can choose among several competitive suppliers, but because of the nature of the Internet, the reliability and trustworthiness may vary significantly. The customer's goal is to maximize its utility, by minimizing the expense required to fulfill its request, and maximizing its probability of success by some deadline. The customer creates a request strategy, describing which suppliers to contact under what conditions. The customer executes this strategy, and evaluates whether it should be modified based on incremental results. In this paper we describe models for representing sourcing options, reliabilities, delivery timeliness profiles, customer deadlines, and request strategies. We also develop decision procedures for selecting request strategies that maximize expected utility under certain scenarios.