How can a company use derivatives to manage logistics and supply chain risks?

Expert Solution

Company can usederivative to manage logistics and supply chain risk because-

A. It can hedgr itself through emergency buying into various commodities using derivatives when there would be a risk of delivery of various items.

B. the risk of loss on various items due to delay of delivery can also be heeged through derivatives market contracts on these commodities.

C. It can enter into risk sharing agreement with the suppliers and the logistics management provider so it can help itself deal with the risk of of wastage in delivery of materials.

D. It can also hedge its warehousing cost when dealing with the electricity charges by going long or short on the electricity companies.

E. it can also deal with the oil related management if it is used as a raw material by doing trading in oil commodities through future and options.

F.it can also help itself to enter into forward contract with freight companies in order to decrease the overall risk associated with the delivery.

jeff jeffy answered 1 year ago

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