Capacity Options: Convergence of Supply Chain Management and Financial Asset Management

Stefan Spinler () and Arnd Huchzermeier ()
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Stefan Spinler: HHL
Arnd Huchzermeier: WHU

A chapter in Risk Management, 2005, pp 699-717 from Springer

Abstract: Abstract Risk Management is still relatively new to Operations Management (OM), but of ever increasing importance given new legislation such as Basel II. The consideration of risk in operations recently led to the emergence of a research interface between OM and Finance. The present article reviews the evolution of the literature on supply contracts towards this interface with the new focal point represented by the application of real options to capacity management in capital intensive industries. It will be shown that options on capacity enable risk-sharing among trading partners, improve economic efficiency and enhance the viability of online trading platforms. As a consequence, we view the establishment of longterm and short-term contracting as an essential step towards superior supplychain efficiency as well as a means of incorporating risk in operations management.

Keywords: Capacity Options; Capital Intensive Industries; Flexibility Contracts; Portfolio of Contracts; Risk Management (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-26993-9_36

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DOI: 10.1007/3-540-26993-2_36

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