 Hedging strategic flexibility in the distribution optimization problemChun-Ta Lin and Yee Ming Chen Omega, 2009, vol. 37, issue 4, 826-837 Abstract: Motivated by the increasing prevalence of flexibility hedging in corporate-level risk management programs, this paper focuses on the treatment of hedging operational risks in the coordinated replenishment and shipment for distribution systems. The forward option pricing model with the generalized autoregressive conditional heteroskedasticity (GARCH) model for stochastic demand forecasting is adopted for constructing inventory volume flexibility. We therefore propose a hedge-based coordinated inventory replenishment and shipment (HCIRS) methodology for flexibly making inventory hedging and optimal routing assignment decisions as well as coordinating replenishment and shipment policies. The HCIRS methodology provides insight into strategic flexibility adopted for a real-life inventory-distribution problem faced by one of the major East Asia food supply networks and turns out to be very efficient. The proposed HCIRS methodology has provided evidence of better results than the traditional operational techniques for the presented case in this paper. Keywords: GARCH; model; for; forecasting; Forward; option; pricing; model; for; inventory; hedge; Supply; chain; network (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:37:y:2009:i:4:p:826-837 Ordering information: This journal article can be ordered from Access Statistics for this article Omega is currently edited by B. Lev More articles in Omega from Elsevier |
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