The Impact of E-Auctions in Adjusting Procurement Strategies for Specialty Coffee

33 Pages Posted: 16 Aug 2007 Last revised: 3 Aug 2014

M. Laura Donnet

Universidad Austral - Facultad de Ciencias Empresariales

Thomas D. Jeitschko

Michigan State University - Department of Economics

Dave D. Weatherspoon

Michigan State University

Multiple version iconThere are 2 versions of this paper

Date Written: November 24, 2009

Abstract

Supply relationships and e-auctions are complementary procurement forms that specialty coffee roasters can utilize when designing a procurement strategy. We model the roasters’ optimal choices of procurement strategies using an extended newsvendor model. By comparing the optimal strategies in a benchmark case solely based on relationships to a case in which auctions can be utilized, we derive the impact of e-auctions on the procurement quantity and profit under conditions of demand uncertainty. The two stage model predicts that the adjustment of procurement using e-auctions is most beneficial under market circumstances of high demand variability and small firm size. We use industry data to illustrate the market conditions for specialty coffee and discuss the potential impact of e-auctions on procurement strategies for specialty coffee based on our model. The theoretical propositions in conjunction with current industry data suggest that e-auctions have great potential to become an integral part of and shape roasters’ procurement approaches in the specialty coffee market.

Keywords: Procurement, E-Auctions, Differentiated Supply Chains, Specialty Coffees, Newsvendor Model

JEL Classification: D2, D44, L14, L22, Q1, Q13

Suggested Citation

Donnet, M. Laura and Jeitschko, Thomas D. and Weatherspoon, Dave D., The Impact of E-Auctions in Adjusting Procurement Strategies for Specialty Coffee (November 24, 2009). Available at SSRN: https://ssrn.com/abstract=1007413 or http://dx.doi.org/10.2139/ssrn.1007413

M. Laura Donnet (Contact Author)

Universidad Austral - Facultad de Ciencias Empresariales ( email )

S2000FZF Rosario
Argentina

Thomas D. Jeitschko

Michigan State University - Department of Economics ( email )

110 Marshall-Adams Hall
East Lansing, MI 48824
United States
517-355-8302 (Phone)
517-432-1068 (Fax)

HOME PAGE: http://www.msu.edu/~jeitschk/

Dave D. Weatherspoon

Michigan State University ( email )

East Lansing, MI 48824
United States

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