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Logistic Postponement as a Risk Management Tool: A Real Options Valuation (ROV) Approach to Evaluate the Effectiveness of a Logistic Postponement Strategy in Mitigating the Demand Variability Risk in Global Supply Chains


Logistic Postponement as a Risk Management Tool: A Real Options Valuation (ROV) Approach to Evaluate the Effectiveness of a Logistic Postponement Strategy in Mitigating the Demand Variability Risk in Global Supply Chains

Macdonald, Dylan (2023) Logistic Postponement as a Risk Management Tool: A Real Options Valuation (ROV) Approach to Evaluate the Effectiveness of a Logistic Postponement Strategy in Mitigating the Demand Variability Risk in Global Supply Chains. Masters thesis, Concordia University.

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Recent world events such as the coronavirus pandemic and the war in Ukraine have caused increases in supply chain disruptions along global supply chains. The resulting supply chain challenges necessitate an increased effort in improving supply chain risk management for companies around the world. One source of uncertainty that is increasingly difficult to deal with is demand variability. With both supply and demand becoming increasingly difficult to predict, companies need tools to manage demand variability. Our work evaluates a logistic postponement solution to demand variability where safety stock is shipped from an overseas supplier to a distribution center instead of being shipped directly to retailers. By taking advantage of risk pooling, the proposed strategy aims at reducing stockouts at retailers well also reducing the present value of total costs incurring along the supply chain. A real options valuation (ROV) approach is used in this thesis to present both a theoretical model and a computational model. The theoretical model aims to provide an approach for supply chain practitioners to compare the logistic postponement strategy to their current strategy using historical data. On the other hand, the computational model incorporates some simplifications in the theoretical model to avail it for simulation. Sensitivity analyses conducted aim to provide an analysis on the potential cost savings and stockout reductions a logistic postponement strategy can provide.

Divisions:Concordia University > John Molson School of Business > Supply Chain and Business Technology Management
Item Type:Thesis (Masters)
Authors:Macdonald, Dylan
Institution:Concordia University
Degree Name:M.S.C.M.
Program:Supply Chain Management
Date:28 June 2023
Thesis Supervisor(s):Satir, Ahmet and Shanker, Latha
Keywords:Logistic postponement ∙ Real Options Valuation ∙ Supply Chain Risk Management ∙ Demand Variability ∙ Global Procurement ∙ Stochastic Modelling ∙Simulation ∙Sensitivity Analyses
ID Code:992528
Deposited By: Dylan MacDonald
Deposited On:17 Nov 2023 14:59
Last Modified:17 Nov 2023 14:59


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