Journal
IEEE SYSTEMS JOURNAL
Volume 11, Issue 3, Pages 1526-1536Publisher
IEEE-INST ELECTRICAL ELECTRONICS ENGINEERS INC
DOI: 10.1109/JSYST.2016.2540648
Keywords
Forward sourcing; information update; operation management; spot trading; volatile price
Categories
Funding
- National Natural Science Foundation of China [71571194, 71301032, 71201175]
- Excellent Young Teachers Program of Guangdong Universities and Colleges [YQ2015014]
Ask authors/readers for more resources
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.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available