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Wall Street risk tools applied to automotive supply chain
By Staff -- Manufacturing Business Technology, 12/1/2004 7:00:00 AM
George Devlin, CEO of Vivecon Corp., says his company uses techniques more frequently associated with Wall Street than supply chains to enable automakers to optimize tooling, capacity, and sourcing decisions. The company's software applies hedging strategies and options theory used by financial traders to estimate risk, quantify demand uncertainty, and improve supply chain flexibility.
Devlin says automakers can lower their initial tooling investments by means of capacity expansion "options" exercised only when demand is predicted to hit predefined levels. Given early warnings of availability constraints, price fluctuations, and liability exposures on components and raw materials, automakers can structure more flexible and responsive supply contracts for these purchases, enabling them to secure availability commitments and price caps.
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