Production planning and order acceptance in business to business electronic commerce

Following the exponential growth of the Internet and the increasing number of software solutions enabling business-to-business electronic commerce, we study negotiation processes in a make-to-order (MTO) environment. In many industries, the value chain is fragmented both horizontally and vertically and manufacturing firms operate upon an MTO basis. In this application domain, the main decision process consists of interfirm negotiation upon requests-for-quotation distributed by customers and upon bids submitted by suppliers. At the same time, the negotiation process is tightly integrated with production planning and requires appropriate decision-support techniques. This paper discusses in detail the structure for a standardised negotiation process occurring in a multi-enterprise setting and represents three mixed-integer linear programming models that may be used by the different parties involved.