Optimization of Flight Contingent Procurement Considering Quantity Discounts and Contract Negotiations

16 Pages Posted: 30 Jan 2015

See all articles by Kathrin Armborst

Kathrin Armborst

Ruhr University of Bochum

Stefan Schmidt

Ruhr University of Bochum

Brigitte Werners

Ruhr University of Bochum

Date Written: December 30, 2014

Abstract

Current results of revenue management and pricing policy research enable suppliers to identify and realize optimal sales strategies and decisions. In response, a corporation which has to deal with results of pricing policies is compelled to optimize its purchase. New developments in the aviation sector and airline industry along with a highly competitive flight ticket market and the importance of strategic procurement reveal the necessity of creating new decision support solutions based on quantitative models.

The developed decision support system assists the decision making process of a corporation in annual contract negotiations with airlines to minimize its flight travel costs. Considering provided quantity and volume discounts with varying tiers and targets both operational and strategic decision support is provided. It combines the developed decision process with the use of a mathematical model. The proposed decision support system leads to optimal airline selection and flight contingent allocation considering traditional airlines and low-cost carriers as suppliers. It is addressed to a multinational corporation with numerous global host countries, branch offices, trading partners and customers with world-wide flight demand.

Keywords: procurement, business travel, decision support

JEL Classification: C6

Suggested Citation

Armborst, Kathrin and Schmidt, Stefan and Werners, Brigitte, Optimization of Flight Contingent Procurement Considering Quantity Discounts and Contract Negotiations (December 30, 2014). Available at SSRN: https://ssrn.com/abstract=2557484 or http://dx.doi.org/10.2139/ssrn.2557484

Kathrin Armborst (Contact Author)

Ruhr University of Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Stefan Schmidt

Ruhr University of Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Brigitte Werners

Ruhr University of Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44801
Germany

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