Journal article
A real-options-based analysis for supply chain decisions
IIE transactions, Vol.37(10), pp.945-956
10/01/2005
DOI: 10.1080/07408170591008073
Abstract
Flexibility allows firms to compete more effectively in a world of short product life cycles, rapid product development, and substantial demand and/or price uncertainty. We develop a supply chain model in which a manufacturing firm can have the flexibility to select different suppliers, plant locations, and market regions and there can be an implementation time lag for the supply chain operations. We use a real options approach to estimate the value of flexibility and to determine the optimum strategy to manage the flexibility under uncertainty in the currency exchange rate. To price the operational flexibility, we develop a Monte Carlo simulation technique that is able to incorporate a large number of variables into the valuation. We show that without considering time lag impact, the value of the operational flexibility can be significantly overestimated.
Details
- Title: Subtitle
- A real-options-based analysis for supply chain decisions
- Creators
- Harriet Black Nembhard - Harold and Inge Marcus Department of Industrial and Manufacturing Engineering, The Pennsylvania State UniversityLeyuan Shi - Department of Industrial Engineering , University of Wisconsin-MadisonMehmet Aktan - Department of Industrial Engineering , Atatürk University
- Resource Type
- Journal article
- Publication Details
- IIE transactions, Vol.37(10), pp.945-956
- Publisher
- Taylor & Francis Group
- DOI
- 10.1080/07408170591008073
- ISSN
- 0740-817X
- eISSN
- 1545-8830
- Language
- English
- Date published
- 10/01/2005
- Academic Unit
- Engineering Administration; Industrial and Systems Engineering
- Record Identifier
- 9984121965102771
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