|fulltext etc.||no fulltext attached|
Purpose – Supply chain risks significantly endanger small and
medium-sized enterprise (SME-) suppliers in different currency areas
in purchasing and sales. The purpose of this paper is twofold: to
describe the concept of natural hedging in supply chains, and to
highlight the potentials of natural hedging as a risk prophylaxis
and a supplier financing approach.
Design/methodology/approach – The paper uses a brief literature review and a conceptual research design, taking the financial and physical component of natural hedging (in this case between an OEM and its SME-suppliers in the automotive industry) into consideration.
Findings – Natural hedging of currency and commodity price fluctuations can contribute to the reduction of SME-suppliers’ supply chain vulnerability, also benefitting an OEM.
Research limitations/implications – This research focuses exclusively on relationships between SME-suppliers and large OEMs in the automotive industry. Studies of other types of companies and industries, such as the capital goods industry, might reveal divergent practices.
Practical implications – With the natural hedging approach, the paper promotes an innovative concept for better managing risks in supply chains, especially in recessionary times. The concept is a source for supplier financing.
Originality/value – This research shows that a globally active focal firm – an OEM in the automotive industry, for instance – can hedge currency and commodity price risks (financial components), as well as operational supply risks (physical components), by centralizing commodity supply with its SME-suppliers. It can serve as a base for future research.
Automotive industry, Supply chain management, Risk management, Small-to medium-sized enterprises, Financial performance, Collaboration.
|kind of paper||journal article|
|date of appearance||3-2011|
|journal||Supply Chain Management: An International Journal|
|publisher||Emerald (Bingley UK)|
|volume of journal||16|
|number of issue||2|
|citation||Hofmann, E. (2011). Natural hedging as a risk prophylaxis and supplier financing instrument in automotive supply chains. Supply Chain Management: An International Journal, 16(2), 128-141, DOI:10.1108/13598541111115374.|