Procurement management in agricultural commodity processing
This chapter provides insights on the optimal procurement decisions of a commodity processing firm that sources a primary input from a quantity flexibility contract (which is characterized by a unit reservation price and a unit exercise price), to produce two outputs in fixed proportions. The firm f...
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| 格式: | text |
| 語言: | English |
| 出版: |
Institutional Knowledge at Singapore Management University
2022
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| 主題: | |
| 在線閱讀: | https://ink.library.smu.edu.sg/lkcsb_research/6939 https://ink.library.smu.edu.sg/context/lkcsb_research/article/7938/viewcontent/Procurement_Management_in_Agricultural_Commodity_Processing.pdf |
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| 總結: | This chapter provides insights on the optimal procurement decisions of a commodity processing firm that sources a primary input from a quantity flexibility contract (which is characterized by a unit reservation price and a unit exercise price), to produce two outputs in fixed proportions. The firm faces uncertainties in input spot price and output demands. Our objective is twofold. First, in a single-contract setting, we investigate the role of demand correlation in the presence of fixed proportions technology and show that the firm benefits from a higher demand correlation. Second, we investigate the firm’s optimal contract selection strategy between the two available quantity flexibility contracts. Focusing on deterministic output demands, we characterize a contract index in closed form that determines the optimal contract choice. We find that a higher expected spot price always increases the reliance on the contract with the lower exercise price. However, a higher spot price variability does the same only when the expected spot price is low and the difference between the exercise prices of two contracts is sufficiently high. Otherwise, a higher spot price variability increases the reliance on the contract with the lower reservation price. |
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