Optimal procurement strategies for online spot markets

Seifert, Ralf W.; Thonemann, Ulrich W.; Hausman, Warren H.

doi:10.1016/s0377-2217(02)00754-3

Cited by 176 publications

(112 citation statements)

References 22 publications

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“…Hong et al 2014or Seifert et al 2004. To analyze the effect of demand, recycling price and recycling quantity uncertainties, we perform sensitivity analyses, where base values are-unless otherwise stated-fixed as stated in the column ''base case'' in Table 3.…”

Section: Numerical Analysismentioning

confidence: 99%

Sustainable sourcing of strategic raw materials by integrating recycled materials

2017

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In this paper we investigate a manufacturer's sustainable sourcing strategy that includes recycled materials. To produce a short life-cycle electronic good, strategic raw materials can be bought from virgin material suppliers in advance of the season and via emergency shipments, as well as from a recycler. Hence, we take into account virgin and recycled materials from different sources simultaneously. Recycling makes it possible to integrate raw materials out of steadily increasing waste streams back into production processes. Considering stochastic prices for recycled materials, stochastic supply quantities from the recycler and stochastic demand as well as their potential dependencies, we develop a single-period inventory model to derive the order quantities for virgin and recycled raw materials to determine the related costs and to evaluate the effectiveness of the sourcing strategy. We provide managerial insights into the benefits of such a green sourcing approach with recycling and compare this strategy to standard sourcing without recycling. We conduct a full factorial design and a detailed numerical sensitivity analysis on the key input parameters to evaluate the cost savings potential. Furthermore, we consider the effects of correlations between the stochastic parameters. Green sourcing is especially beneficial in terms of cost savings for high demand variability, high prices of virgin raw material and low expected recycling prices as well as for increasing standard deviation of the recycling price. Besides these advantages it also contributes to environmental sustainability as, compared to sourcing without recycling, it reduces the total quantity ordered and, hence, emissions are reduced.

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Section: Numerical Analysismentioning

confidence: 99%

Sustainable sourcing of strategic raw materials by integrating recycled materials

2017

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“…This category of work can be further subdivided into single and multi-period models. [28] considered a single period model where a supply contract is signed at the start of the period, demand is realized, and then the buyer can either make purchases on the spot market to meet demand, or salvage excess inventory. Optimal purchasing quantities were determined for this setting.…”

Section: Literature Review and Our Workmentioning

confidence: 99%

Optimal spot market inventory strategies in the presence of cost and price risk

Guo

Kaminsky

Tomecek³

et al. 2010

Math Meth Oper Res

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We consider a firm facing random demand at the end of a single period of random length. At any time during the period, the firm can either increase or decrease inventory by buying or selling on a spot market where price fluctuates randomly over time, and the revenue the firm gets by meeting demand at the end of the period is a function of the spot market price at that time. We first demonstrate that this control problem is equivalent to a singular control problem of higher dimensions. We then use this insight combined with a novel control-theoretic approach to show that the optimal policy is completely characterized by a simple price-dependent two threshold policy. In a series of computational experiments, we explore the value of actively managing inventory during the period rather than making a purchase decision at the start of the period, and then waiting for demand.

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“…Lariviere and Porteus (2000) investigate contractual arrangements between a seller and a retailer in a newsvendor setting . Optimal procurement strategies in the presence of spot markets are analyzed by Seifert et al (2002), however, from the buyer's perspective only with exogenously set contract price. In this setting, they elaborate on risk attitudes of the buyer.…”

Section: Literature Reviewmentioning

confidence: 99%

The Valuation of Options on Capacity

Spinler

2003

Lecture Notes in Economics and Mathematical Systems

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Options contracts can provide trading partners with enhanced flexibility to respond to uncertain market conditions and allow for superior capacity planning thanks to early information on future demand. We develop an analytical framework to value options on capacity for production of non-storable goods or dated services. The market set-up is as follows: During the contract market, period 0, the seller as the von Stackelberg leader announces a two-part tariff (r, e), consisting of an immediately payable reservation fee r and an execution fee e, due in the event the option is executed in period 1. The buyer in turn decides on how many options Q to purchase. Decisions are made under uncertainty: The buyer's future demand, the seller's future marginal costs as well as the future spot price are uncertain, the latter being impacted neither by the buyer nor the seller. During the spot market session, i.e., in period 1, the buyer may execute his options or satisfy his entire or additional demand from a competing seller in the spot market. The seller allocates reserved capacity now being called and attempts to sell remaining capacity into the spot market. Analytical expressions for the buyer's optimal reservation quantity and the seller's optimal tariff are derived, making explicit the risk-sharing benefits of options contracts accruing to both buyer and seller. The combination of an options contract and a spot market is demonstrated to be Pareto improving as compared to alternative market schemes. An analysis of the determinants of the efficiency gain characterizes industries particularly suitable to the options approach.

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Optimal procurement strategies for online spot markets

Cited by 176 publications

References 22 publications

Sustainable sourcing of strategic raw materials by integrating recycled materials

Sustainable sourcing of strategic raw materials by integrating recycled materials

Optimal spot market inventory strategies in the presence of cost and price risk

The Valuation of Options on Capacity

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