{"title":"Supply contracts for critical and strategic materials of high volatility and their ramifications for supply chains","authors":"K. Min, L. Lilienkamp, J. Jackman, C. Wang","doi":"10.1080/0013791x.2020.1712508","DOIUrl":null,"url":null,"abstract":"Abstract For critical and strategic materials such as a rare earth element or crude oil, we study a supply chain consisting of an intermediary/producer facing a highly volatile market to its customers and a local supplier at a different region subject to a fixed term supply contract. By viewing the opportunity to sign this contract as a real option, we construct a supply contract model and analytically derive the optimal contract-signing threshold price from the intermediary/producer perspective. Based on this threshold, we show how the relationship among the threshold price, lead time, and contract duration results in a classification of the supply chain’s preferences for lead time length, and to concrete guidelines for using the lead time and contract duration as tradable negotiation tools for supply chain contracts.","PeriodicalId":49210,"journal":{"name":"Engineering Economist","volume":"65 1","pages":"266 - 287"},"PeriodicalIF":1.0000,"publicationDate":"2020-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/0013791x.2020.1712508","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Engineering Economist","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1080/0013791x.2020.1712508","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 3
Abstract
Abstract For critical and strategic materials such as a rare earth element or crude oil, we study a supply chain consisting of an intermediary/producer facing a highly volatile market to its customers and a local supplier at a different region subject to a fixed term supply contract. By viewing the opportunity to sign this contract as a real option, we construct a supply contract model and analytically derive the optimal contract-signing threshold price from the intermediary/producer perspective. Based on this threshold, we show how the relationship among the threshold price, lead time, and contract duration results in a classification of the supply chain’s preferences for lead time length, and to concrete guidelines for using the lead time and contract duration as tradable negotiation tools for supply chain contracts.
Engineering EconomistENGINEERING, INDUSTRIAL-OPERATIONS RESEARCH & MANAGEMENT SCIENCE
CiteScore
2.00
自引率
0.00%
发文量
14
审稿时长
>12 weeks
期刊介绍：
The Engineering Economist is a refereed journal published jointly by the Engineering Economy Division of the American Society of Engineering Education (ASEE) and the Institute of Industrial and Systems Engineers (IISE). The journal publishes articles, case studies, surveys, and book and software reviews that represent original research, current practice, and teaching involving problems of capital investment.
The journal seeks submissions in a number of areas, including, but not limited to: capital investment analysis, financial risk management, cost estimation and accounting, cost of capital, design economics, economic decision analysis, engineering economy education, research and development, and the analysis of public policy when it is relevant to the economic investment decisions made by engineers and technology managers.
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