Optimal procurement of long-term contracts in the presence of imperfect spot market

Xu, Jinpeng; Feng, Gengzhong; Jiang, Wei; Wang, Shouyang

doi:10.1016/j.omega.2014.10.003

Cited by 33 publications

(18 citation statements)

References 32 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Xing, Liu, and Wang () study the channel choice, pricing, and procurement strategies for manufacturers and suppliers who are risk averse under a B2B spot market. Xu, Feng, Jiang, and Wang () explore the optimal forward and option order quantities for a risk‐neutral buyer and analyze the effects of the two forward contacts under a B2B imperfect spot market. The spot price in the above articles can only be affected by an exogenous factor.…”

Section: Literature Reviewmentioning

confidence: 99%

Advance Selling in the Presence of Market Power and Risk‐Averse Consumers

Sethi

et al. 2018

Decision Sciences

View full text Add to dashboard Cite

We consider a manufacturer who procures raw material through a long-term contract as well as in a spot market to produce goods for selling to consumers, a fraction of whom are risk averse. We assume that the manufacturer has the market power to influence the spot market price of raw material. To increase consumer demand and obtain demand information, the manufacturer may implement an advance selling program that depends on his market power and consumer risk aversion. We investigate whether the manufacturer should offer the advance selling program and how his decision and performance are influenced by the program. We find that the advance selling program should be offered when consumer risk aversion is low, or when it is high, and the manufacturer has high and low market power. By contrast, the advance selling program should not be offered when consumer risk aversion is high and the market power is medium. Our results also reveal that even with no promotion cost of the advance selling program, the manufacturer may not always offer it. Finally, the manufacturer benefits more from advance selling when consumers are myopic and/or risk neutral. We sincerely thank the editors and two anonymous reviewers for their insightful comments and suggestions.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Advance Selling in the Presence of Market Power and Risk‐Averse Consumers

Sethi

et al. 2018

Decision Sciences

View full text Add to dashboard Cite

show abstract

“…Some other studies, for instance Spinler and Huchzermeier (), Inderfurth and Kelle (), and Xu et al. (), investigated outsource planning problems based on call options while taking into account the possibility of outsourcing from spot suppliers. Barnes‐Schuster et al.…”

Section: Literature Reviewmentioning

confidence: 99%

Outsource planning with asymmetric supply cost information through a menu of option contracts

Nosoohi

Nookabadi

2017

Int Trans Operational Res

View full text Add to dashboard Cite

This paper investigates a supply contract design by a dominant manufacturer who faces a stochastic demand during a selling season. The manufacturer has several estimations of the supplier's cost with corresponding probabilities, that is, asymmetric cost information. The manufacturer designs a menu of call option contracts that include three variables: a supply order, an option, and an exercise price. We determine the optimal negative correlation between option and exercise prices as well as closed-form formulas for the optimal supply orders. The results show that in the optimal menu of contracts either the option or the exercise price may be omitted from the menu, whereas the supply orders should always be customized for each supplier type. We show that in this problem, optimal profit assignment between contract partners under put and bidirectional option contracts is the same as call option contract studied. Numerical analysis including managerial insights is presented.

show abstract

“…Chen et al [16] characterize the optimal procurement policy for a firm procuring through a long-term contract with minimumorder commitment and spot trading. Xu et al [17] study a procurement problem where the spot market is assumed to be imperfect. They examine both forward and spot markets and consider market liquidity and transaction cost.…”

Section: Literature Reviewmentioning

confidence: 99%

Forward Sourcing or Spot Trading? Optimal Commodity Procurement Policy with Demand Uncertainty Risk and Forecast Update

Niu

Chu

2017

IEEE Systems Journal

View full text Add to dashboard Cite

We consider a commodity procurement problem where a firm satisfies a future customer demand with uncertainty risk via spot trading and forward sourcing. Although the firm can make demand forecast update and hence, remove demand uncertainty when the selling season arrives, it is still susceptible to a high emergency logistics cost at that time spot. Therefore, in this paper, the tradeoff between the mismatching cost of supply and uncertain demand (highest at the beginning of the planning horizon) and the high at-once delivery cost (highest at the ending of the planning horizon) is investigated. We develop a two-stage model and derive the optimal procurement policy for the firm. We also characterize the optimal parameters by assuming demand follows a bivariate normal distribution. Finally, extensive Monte-Carlo simulation is conducted and we quantify the value of forward contracts and the value of information update, using the crude oil data.

show abstract

Optimal procurement of long-term contracts in the presence of imperfect spot market

Cited by 33 publications

References 32 publications

Advance Selling in the Presence of Market Power and Risk‐Averse Consumers

Advance Selling in the Presence of Market Power and Risk‐Averse Consumers

Outsource planning with asymmetric supply cost information through a menu of option contracts

Forward Sourcing or Spot Trading? Optimal Commodity Procurement Policy with Demand Uncertainty Risk and Forecast Update

Contact Info

Product

Resources

About