Bidding Competition and Supply Chain Risk in Soybean Exports

Abstract

Commodity trading at both domestic and international levels involves many sources of supply chain risk and uncertainty. Risk management techniques are utilized by industry participants; however, there are unknown risks that can arise throughout the supply chain making effective risk management a difficult task. This study aims to address supply chain risk in soybean exports. A framework is created for a competitive bidding environment in which firms participate in an international import tender. Monte Carlo simulation is used to represent stochastic variables and derive an optimal bid under various scenarios. Sensitivity analysis is then conducted to measure the impact of key input variables on the output values. An alternative specification for risk management is also implemented into the framework. This study provides insight into supply chain uncertainty and incorporates that into a competitive bidding framework for optimal bid derivation and effective risk management.