The purpose of this paper is to assess the value of postponement as strategy for mitigating supply chain disruptions. To accomplish this objective, we develop a real option computational model that quantifies the value of postponement in mitigating both supply and demand disruptions by taking into account the value of managerial flexibility to decide whether exploiting or not the strategy, if and when disruptions occur, and whenever product differentiation proves valuable based on information available at that time. Numerical experiments show the importance of incorporating an option valuation method when pricing the value of postponement. This ensures managers implement postponement only when it is valuable, thus avoiding burdening the company with its initial sunk costs. By modelling the postponement implementation under different conditions, we identify the situations in which postponement performs better as supply chain disruptions mitigation strategy. We derive the operational configurations, in terms of decoupling point position, and external conditions, in terms of riskiness of the environment, which make the postponement an effective mitigation strategy.

Real options approach to evaluate postponement as supply chain disruptions mitigation strategy / Carbonara, N.; Pellegrino, R.. - In: INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH. - ISSN 0020-7543. - STAMPA. - 56:15(2018), pp. 5249-5271. [10.1080/00207543.2017.1403663]

Real options approach to evaluate postponement as supply chain disruptions mitigation strategy

N. Carbonara;R. Pellegrino
2018-01-01

Abstract

The purpose of this paper is to assess the value of postponement as strategy for mitigating supply chain disruptions. To accomplish this objective, we develop a real option computational model that quantifies the value of postponement in mitigating both supply and demand disruptions by taking into account the value of managerial flexibility to decide whether exploiting or not the strategy, if and when disruptions occur, and whenever product differentiation proves valuable based on information available at that time. Numerical experiments show the importance of incorporating an option valuation method when pricing the value of postponement. This ensures managers implement postponement only when it is valuable, thus avoiding burdening the company with its initial sunk costs. By modelling the postponement implementation under different conditions, we identify the situations in which postponement performs better as supply chain disruptions mitigation strategy. We derive the operational configurations, in terms of decoupling point position, and external conditions, in terms of riskiness of the environment, which make the postponement an effective mitigation strategy.
2018
Real options approach to evaluate postponement as supply chain disruptions mitigation strategy / Carbonara, N.; Pellegrino, R.. - In: INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH. - ISSN 0020-7543. - STAMPA. - 56:15(2018), pp. 5249-5271. [10.1080/00207543.2017.1403663]
File in questo prodotto:
File Dimensione Formato  
IJPR_postprint.pdf

accesso aperto

Descrizione: Accepted manuscript
Tipologia: Documento in Post-print
Licenza: Creative commons
Dimensione 1.01 MB
Formato Adobe PDF
1.01 MB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11589/123539
Citazioni
  • Scopus 35
  • ???jsp.display-item.citation.isi??? 35
social impact