Commodity Prices change direction and supply chain impact

An article in the Wall Street Journal (Feb 1, 2012) describes price declines through the end of December 2011, with fears of European recessionary trends, but price rises though Jan 2012. Copper and corn saw price increases of 15% and 10 % following price decreases of 12 %.  How should procurement managers adjust their strategies to react to such price shifts ? Should supplier pricing be adjusted to reflect current commodity prices or should OEMs take control of raw material procurement to consolidate purchases across suppliers ? How should suppliers be incented to use the right level of financial instruments to stablize procurement costs ?

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About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged , , , , , . Bookmark the permalink.

One Response to Commodity Prices change direction and supply chain impact

  1. Shouldn’t maximizing your profit based on your core skill set be enough incentive to use financial tools? Unless you have a crystal ball, a food producer doesn’t know what corn prices will look like. They should already be buying options to hedge against price increases because knowing the market for corn is not their job. Processing the corn into HFCS is their job.
    I believe companies like ADM and Monsanto have been acquiring farms to take control of their supply chain, too.

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