Supply Management in Multiproduct Firms with Fixed Proportions Technology

This paper studies the supply management of a primary input, where this input gives rise to multiple products in fixed proportions. My objective is twofold. First, I study fixed proportions technology under demand uncertainty in comparison with flexible and the dedicated technologies. I show that fi...

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Main Author: BOYABATLI, Onur
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2015
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/3082
https://ink.library.smu.edu.sg/context/lkcsb_research/article/4081/viewcontent/Supply_Management_in_Multiproduct_Firms_.pdf
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spelling sg-smu-ink.lkcsb_research-40812019-10-15T05:49:12Z Supply Management in Multiproduct Firms with Fixed Proportions Technology BOYABATLI, Onur This paper studies the supply management of a primary input, where this input gives rise to multiple products in fixed proportions. My objective is twofold. First, I study fixed proportions technology under demand uncertainty in comparison with flexible and the dedicated technologies. I show that fixed proportions technology has a cost- pooling value over dedicated technology, which is larger than the capacity-pooling value of flexible technology over dedicated technology. I identify the critical role that demand correlation plays with the fixed proportions technology: In contrast to the capacitypooling value which decreases in demand correlation, the cost-pooling value increases in demand correlation. Second, focusing on the fixed proportions technology, I study supply management in the presence of contract and spot markets. I investigate how the optimal supply management strategy should respond to changing market uncertainties, and the differences in this response based on the contract type. I find that when the exercise price of the contract is high, a higher contract market dependence is the best response to the increasing demand correlation or spot price variability. However, a lower contract market dependence is the best response to the same when the exercise price is low. Managerially, these results are important because they imply that the supply management strategy adopted as a response to a change in the business environment should differ depending on the contract type. My results have implications about the new product strategy, and the procurement contract choice of the processors in the agricultural industries. 2015-12-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/3082 info:doi/10.1287/mnsc.2014.2055 https://ink.library.smu.edu.sg/context/lkcsb_research/article/4081/viewcontent/Supply_Management_in_Multiproduct_Firms_.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Contracting Risk Management Multi-product Newsvendor Flexibility Spot Market Agriculture Coproduction Operations and Supply Chain Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Contracting
Risk Management
Multi-product Newsvendor
Flexibility
Spot Market
Agriculture
Coproduction
Operations and Supply Chain Management
spellingShingle Contracting
Risk Management
Multi-product Newsvendor
Flexibility
Spot Market
Agriculture
Coproduction
Operations and Supply Chain Management
BOYABATLI, Onur
Supply Management in Multiproduct Firms with Fixed Proportions Technology
description This paper studies the supply management of a primary input, where this input gives rise to multiple products in fixed proportions. My objective is twofold. First, I study fixed proportions technology under demand uncertainty in comparison with flexible and the dedicated technologies. I show that fixed proportions technology has a cost- pooling value over dedicated technology, which is larger than the capacity-pooling value of flexible technology over dedicated technology. I identify the critical role that demand correlation plays with the fixed proportions technology: In contrast to the capacitypooling value which decreases in demand correlation, the cost-pooling value increases in demand correlation. Second, focusing on the fixed proportions technology, I study supply management in the presence of contract and spot markets. I investigate how the optimal supply management strategy should respond to changing market uncertainties, and the differences in this response based on the contract type. I find that when the exercise price of the contract is high, a higher contract market dependence is the best response to the increasing demand correlation or spot price variability. However, a lower contract market dependence is the best response to the same when the exercise price is low. Managerially, these results are important because they imply that the supply management strategy adopted as a response to a change in the business environment should differ depending on the contract type. My results have implications about the new product strategy, and the procurement contract choice of the processors in the agricultural industries.
format text
author BOYABATLI, Onur
author_facet BOYABATLI, Onur
author_sort BOYABATLI, Onur
title Supply Management in Multiproduct Firms with Fixed Proportions Technology
title_short Supply Management in Multiproduct Firms with Fixed Proportions Technology
title_full Supply Management in Multiproduct Firms with Fixed Proportions Technology
title_fullStr Supply Management in Multiproduct Firms with Fixed Proportions Technology
title_full_unstemmed Supply Management in Multiproduct Firms with Fixed Proportions Technology
title_sort supply management in multiproduct firms with fixed proportions technology
publisher Institutional Knowledge at Singapore Management University
publishDate 2015
url https://ink.library.smu.edu.sg/lkcsb_research/3082
https://ink.library.smu.edu.sg/context/lkcsb_research/article/4081/viewcontent/Supply_Management_in_Multiproduct_Firms_.pdf
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