Supply Chain Approaches for Mitigating Commodity Price Risk

George A. Zsidisin

Director, Supply Chain Risk and Resilience Research (SCR3) Institute and John. W. Barriger Professor of Supply Chain Management at University of Missouri – St. Louis

Learning Objectives

Most organizations are exposed to some level of risk from commodity price volatility, which is the measure for variation of the price of commodities such as energy, metals, refined petroleum products, and agricultural products. Firms have been utilizing financial hedging approaches with established trading markets for over a century to offset this form of price risk. However, there are also a variety of supply chain approaches firms can consider for mitigating the detrimental financial effects of commodity price volatility. The purpose of this presentation is to provide insight into sourcing and contracting strategies that supply chain professionals should consider in mitigating commodity price risk.

Key Takeaways:

  • Gain an appreciation of how commodity price volatility affects profitability

  • Understand the importance of assessing risk exposure and forecasting short and long-term commodity price movements

  • Obtain insight into supply chain approaches for mitigating the effects of commodity price volatility with direct and value-chain commodity purchases