Work

Optimal procurement under backwardation and the benefits of the manifestation of demand aggregators

Year: 2025

Type: article

Abstract: Normal backwardation manifests when the futures price of a commodity is below the expected future spot price. In this paper, we show how businesses can optimally leverage backwardation in their supply chain optimization. To that end, we derive the optimal amount a business ought to purchase in the futures market to take advantage of the favorable futures price in order to minimize the overall expected procurement cost. We further use Hoeffding's inequality to predict the manifestation of demand aggregators.

Source: Operations Research Letters

DOI: 10.1016/j.orl.2025.107286

Authors: Ioannis Avramopoulos, Prodromos Makris, Emmanouel Varvarigos

Institutions: National Technical University of Athens, Institute of Communication and Computer Systems

Language: English

Topic: Supply Chain and Inventory Management

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,960

Funder: Key Digital Technologies Joint Undertaking