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 of suppliers may vary significantly. The customer's goal is to maximize its utility, by minimizing the expense required to fulfil its request, and maximizing its probability of success by some deadline. To this end, the customer creates a request strategy, describing which suppliers to contact under what conditions. We describe models for representing request strategies complete with supplier reliabilities, delivery timeliness profiles, and customer deadlines. We also develop decision procedures for selecting request strategies that maximize expected utility under certain scenarios, and more efficient heuristics that approximate the optimal solution.