An exploration of factors influencing the choice of commodity price risk mitigation strategies. Issue 3 (June 2018) - Gaudenzi, Barbara
Abstract: Most firms are exposed to price volatility associated with commodities, which can significantly affect the price paid for raw materials, energy, packaging, shipping, and component purchases. Commodity price risk represents the financial, operational and informational effects of commodity price volatility (CPV). The purpose of this paper is to contribute to the supply chain risk management literature by providing a taxonomy of commodity price risk mitigation strategies and factors that may influence the adoption of these strategies. A qualitative study was conducted using a grounded theory approach, based on case studies of companies with home operations in Italy, Germany, and the US. The paper provides some initial evidence for theory and practice as to: 1) how firms can mitigate the risk from CPV by implementing various sourcing, contracting, and financing strategies; and 2) the influence of commodity/product factors, buying organization factors, supply chain factors, and external environment factors on strategy capability and choice. Highlights: Provides a taxonomy of commodity price risk mitigation strategies. Classifies internal and external factors that influence the choice of risk mitigation strategies. Describes evidences from a qualitative study, that was conducted using a grounded-theory approach based on case studies of companies located in different countries.