Global Supply Chain Performance and Risk Optimization: The Value of Real Options Flexibility Demonstrated in the Global Automotive Industry

This doctoral dissertation deals with a very timely and important topic in the fields of international operations, finance and risk management, namely the evaluation of the Real Option value of operational and managerial flexibility within a global supply chain network. The author - who has worked for more than nine years on international supply chain strategy and design as an executive in world class automotive and high tech companies in the U. S. and in Europe - uses a large-scale data set from an existing global supply chain operated by a tier­ one supplier in the global automotive industry in examining and comparing the following supply chain strategies: single sourcing, dual sourcing, compliance with local-content rules, centers of excellence and Real Options with flexibility in sourcing, production and distribution logistics. The major finding of this empirical study is the identification of a Real Options strategy that results in a positive payback in less than a year and dominates all of the other supply chain strategies. The three main contributions of this work are: i) for the first time, a comprehen­ sive and real data set is utilized to quantify and demonstrate the financial performance of various supply chain design strategies, ii) a new model of real price changes, i. e.

Table of Contents:
1 Introduction.- 1.1 Motivation.- 1.2 Problem descriptions.- 1.3 Roadmap.- 2 Literature review - basic theories and key contributions.- 2.1 Foreign exchange theory.- 2.2 Foreign exchange risk management theory.- 2.3 Real Options.- 2.4 Global supply chain management.- 2.5 Recap of real option research and applications to date.- 3 Getting to Global - Building a Global supply chain Network Model.- 3.1 The GLBNET supply chain network structure.- 3.2 The process-based business case.- 3.3 The GLBNET Model description and formulation.- 3.4 Introducing Foreign Exchange uncertainty into the GLBNET Model.- 3.5 Real Options Evaluation Methodology.- 4 The cost and value of Real Options Flexibility.- 4.1 Real Options add flexibility to the GLBNET supply chain.- 4.2 Financial Performance - Flexibility makes money.- 4.3 Real Options is the most profitable supply chain strategy.- 4.4 The Face of Flexibility — Value Added and Material Spend allocations under different FX scenarios.- 5 A Real Options Action Plan.- 5.1 Are Real Options appropriate for my supply chain?.- 5.2 Real Options Action Plan.- 5.3 Focus on the engine for continuous improvement — flexibility.- 6 Areas for further research.- 6.1 Contributions of this work.- 6.2 Suggestions for further research.- 6.3 Outlook.- References.- Appendices.- GLBNET Model GAMS formulation.- Mathematical formulation of the GLBNET Model.- Example Executive Summary Report.- Example Executive Sourcing Report.- Example GLBNET Log File.

About the Author :
Dr. Rob Smith promovierte bei Prof. Dr. Arnd Huchzermeier am Lehrstuhl für Produktionsmanagement der WHU in Vallendar und ist als Executive im Bereich Supply Chain Management tätig.