Mars Incorporated free essay sample

Mars is one of the world’s largest privately owned businesses with annual purchasing of $4 billion. The company is now running an online auction to induce competition and reduce the sourcing cost. In this case, the objective is to buy packages from multiple suppliers at the minimum possible cost. There are 12 different SKUs to be fulfilled from 7 different suppliers. Here is the bidding sequence: During the analysis, we will analyze the problem and ignore the constraint of the number of winning bidders and maximum total winning bids by each supplier. Analysis: First, we decide to build base model for analysis. In the base model, we find there are two allocation methods both achieving the minimum possible cost $ 4470. But based on the tie-breaking rules, we find out the option 2 can fulfill the bidding requirement earlier than option 1. Therefore, we recommend to choose Option 2. Option 1 Option 2 Supplier 2, 1, 6, 3, 7 consist the bidding package. During the optimization, we impose binary constraints to the number of bid instead of integer constraints since we assume Mars can not accept the same bid for multiple times. We will write a custom essay sample on Mars Incorporated or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page What if Scenario: To exam the sensitivity of constraints, we run the sensitivity report as below: Therefore, the manager should defer the additional order to the next procurement cycle. (instead, he will encourage retailers to buy other Mars products) As we see the shadow price is 999 for 1500 medium LHS hence the cost will increase by $999. additional constraints for procurement: As noted in the case, cost is not the only objective that Mars cares about. Since these suppliers have worked with Mars for many years, factors such as fairness, reciprocity, and balance influence actual allocation of winners. However, before Mars address these issues, they need to think about the impact on the procurement cost. Keanu and Steve decide to examine one issue at a time in isolation. Location: [Fairfox initiative] Suppliers 6 and 7 are located near Mars headquarters in Fairfox, VA. If Mars wants to guarantee that at least one of the package suppliers is located in Fairfox, the total procurement cost would have no change. Since the optimal option does include supplier 7. Should Mar’s Guarantee Business for Strategic Suppliers? MAR’s considers suppliers 1, 3, 5 as strategic partners for MARS as they supply packages for both confectionary and non-confectionary food products. If a constraint is placed that each of these suppliers win at-least one bid what are the effects on the cost? What is supplier 1 has a minimum order amount? Supplier 1 refuses to supply if the winning amount total is less than $500. MAR’s needs to decide whether to allocate any orders to supplier 1 or no. Assumption: The above constraint that 1,3,5 are strategic partners is relaxed and the solution with lowest cost is most optimal We decomposed this into two scenario’s detailed in the excel as Q5 (1) and Q5 (2) For scenario 1 the constraint we placed is that the sum value of orders for supplier 1 be greater than equal to 1 The sourcing cost turns out to be $5147 and the supplier combination is as below Bid.