Research On The Procurement Model In The Spot Market

With the globalization of economy, strong technology of information and communication and the development of diversification and individuation of customer demand, supply chain has become a necessary, also effective mode for modern companies to survive, expand and prosper. Accordingly, supply chain management, as a hot practical and research topic, is being widely recognized. With the development of e-commerce, trading in the spot market has widely existed in the different kinds of industries, such as agricultural products, petroleum, chips, and compounds. The spot market has changed the traditional procurement model using the pure contract market and provides a flexible way of trading. As the supplement of the traditional procurement based on fixed-price and long-term contract, spot market trading lets the supply chain enterprises have the opportunity to make better use of the up-to-date market information, such as demand and price. It will improve the flexibility of decision, the efficiency of procurement, and the whole supply chain performance to maintain the competitive advantage of the corporations.The Thesis analyzed the best procurement strategy of retailers based on spot market and contract market. This article is not limited to the distribution of the demand and the spot market price. The retailer procurement model is based on the retailer's profit and risk taking ability. The model covers the main parameters of supply chain and takes the retailer's risk tolerance into account. Also, this article uses MATLAB and numerical analysis to analyze the key parameters. The thesis illustrate the sensitivity analysis of the key factors with numerical examples to verify the impact of the key factors on the optimal procurement quantity of contract. The conclusion shows that when both contract market and spot market exist, the retailer's ability to take risk, the expected spot market price,the variances of spot market price and the expected demand affect the best procurement strategy.A certain degree of flexibility was provided by the option to the retailers for dealing with uncertain market factors. This article analyzes how the retailers utilize the advantage of spot market and option market to get the best procurement strategy. With the objection of maximizing the retailer's profit and the constraints of demand curve, the article researched the retailer's best procurement strategy. And then a quantitative analysis tool was provided to analyze the key factors in the best procurement strategy in the spot market and the option market. The sensitivity analysis of the key factors in the procurement model further validates the effect of the key factors to the best procurement.A viable procurement strategy was provided for the retailer based on the spot market. The advantage of the spot market is the negligible lead time, but the spot market usually has a higher expected spot price and a bigger fluctuation of the spot price. The result shows that by using the spot market, expect profit of the retailer will have obvious improvement no matter in the options market or in the contract market. The results of the article can help decision-makers make the procurement strategy based on the type of selected contracts, such as rigid contracts or options contracts, and the key decision parameters.