Procurement Risk Management in Beef Supply Chains

• Main Authors: BOYABATLI, Onur, KLEINDORFER, Paul R., KOONTZ, Steve R.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2011
• Subjects: beef supply chains; contract markets; GIPSA Report; procurement risk management; Operations and Supply Chain Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3058; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4057/viewcontent/BoyabatliKleindorferKoontzChapter_11Jan2011.pdf
• Institution: Singapore Management University

This chapter develops the theoretical model and provides the optimal solution for the procurement portfolio of the packer. It describes the computational results for the above model based on data for the U.S. beef industry described in the GIPSA Report, and complemented by industry demand and supply studies. The chapter determines the impact on the optimal procurement portfolio of spot price and demand uncertainty, the degree of substitution between products in final markets, as well as the cost characteristics of the packer and the nature of quality and cost differences in the contract and spot markets. It provides insights about integrated risk management of input and output risks for the central player in the beef supply chains, the packer. The chapter also provides numerical simulations to illustrate the comparative statics of model results for processing, product market, and spot market parameters of interest.