The Application of Options in Supply Chain Risk Management

Zhong NING;Jun Jun DAI

Systems Engineering - Theory & Practice ›› 2005, Vol. 25 ›› Issue (7) : 49-54.

PDF(216 KB)
PDF(216 KB)
Systems Engineering - Theory & Practice ›› 2005, Vol. 25 ›› Issue (7) : 49-54. DOI: 10.12011/1000-6788(2005)7-49
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The Application of Options in Supply Chain Risk Management

  • Zhong NING,Jun Jun DAI
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Abstract

This paper explores the application of options in supply chain risk management when consumer demand is uncertain. The analysis is based on an environment involving a single supplier and multiple retailers. Each retailer can either buy product directly from the supplier, or purchase options on product. An option gives the retailer the right to buy an additional unit of product. We first derive optimal replenishment policies for the retailers, the optimal production policy for the supplier. We then show how o...

Key words

supply chain risk management / option / replenishment flexibility / risk sharing / information sharing

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Zhong NING , Jun Jun DAI. The Application of Options in Supply Chain Risk Management. Systems Engineering - Theory & Practice, 2005, 25(7): 49-54 https://doi.org/10.12011/1000-6788(2005)7-49
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