Understanding Commodity Price Volatility Mitigation from Transaction Cost Economics: Preliminary Results

Most firms are exposed to price volatility associated with commodities, which can significantly affect the price paid for raw materials, energy and component purchases. The purpose of this paper is to examine how organizations mitigate the risk of commodity price volatility (CPV) in their organizations and supply chains. Initial findings from case studies support prior theory that as uncertainty and risk increase, organizations are more likely to create hierarchical structures to manage the effects of CPV. Likewise, when CPV does not pose a significant risk, there appears to be a greater use of approaches to offset or pass this risk to markets or other supply chain actors

Managing commodity price volatility and risk

During the past decade, commodity price volatility has become a significant challenge for many firms. Variation up or down in the price of a commodity like oil, corn or steel is its price volatility. All organizations are exposed to risk from commodity price volatility, be it from direct raw material and energy purchases or from commodities purchased by their suppliers \u2014 or both. Profitability, performance relative to budget, the ability to meet customer requirements, and the effectiveness of product-pricing decisions are all affected by commodity price volatility. The goal of this research is to investigate how firms identify, assess and manage commodity price volatility. We studied 12 firms: five from the U.S., four in Germany, and three in Italy. These companies represent industries such as automotive/transportation, electronics, aerospace, chemicals, food processing, furniture, packaging and equipment manufacturing. For each firm, a large percent of its overall purchases consists of price volatile commodities either in direct purchases or from its suppliers\u2019 purchases

Design for business innovation: Linking the value chains of logistics service and cargo insurance companies by designing a collaborative service infrastructure

Both, the logistics and insurance companies rely on software intensive systems and IT-infrastructure to run their core business operational. In recent years IT-improvements have resulted e.g. in better tracking and tracing capabilities for the whole logistics industry. Designing an interface in this case between the logistics and insurance value chain further enhances visibility and transparency on transportation. Though, the design of a large collaborative service infrastructure is a complex task. In this paper, we investigate whether design science supports this. The research follows design science guidelines creating a message hub based on sensor telematics technologies, which physically links the two value chains. The described IT-artefact enables logistics and insurance companies to improve their respective products and solutions with e.g. integrated risk management or active process control. This demonstrates how design science projects eventually facilitate real business innovation within networked enterprises