Open AccessCommodity Futures: An Important Role In Inventory Management
Author(s) -
John H. Reed
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v6i1.6322
Subject(s) - futures contract , economic order quantity , commodity , order (exchange) , production (economics) , inventory control , economics , holding cost , control (management) , inventory management , carrying cost , microeconomics , perpetual inventory , business , operations research , inventory theory , operations management , financial economics , total cost , supply chain , marketing , finance , management , engineering
In a production environment costs of raw material inventories can vary dramatically thereby affecting inventory holding costs. Thus savings achieved through the implementation of the results of an EOQ model, which assumes stable inventory costs, may not be applicable where these costs vary. This paper addresses this problem by demonstrating how to integrate the commodity futures markets into an inventory control decision in order to help stabilize the price of inputs.