Candidate, Management Science and Engineering, Stanford
Engineering Economic Systems and Operations Research,
Stanford University (1998)
Industrial Engineering and Operations Research, U.C.
Options in Material Procurement Contracts
research examines how real options could be constructed
in material procurement contracts in the construction
industry. The optimal policy of how (if and when) to
exercise the real options can then be turned into supply
chain decision support software. Real options can provide
buyers with valuable operating flexibility to minimize
inventory cost and price volatility. It can also help
suppliers diversify their price risks and smooth out
production schedule. Therefore, this concept has a large
potential in the construction industry to increase profit
margin for many parties along the supply chain by minimizing
wastes and increasing efficiency.
identify three major problems that would have to be
the types of materials and the types of real options
to embed into the procurement contracts of these materials.
the number of dimensions in sequential decision problems
to make calculation feasible.
incentives for buyers and sellers to change the current
way of doing business.
Stanford, California 94305-4020
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