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Real options: applications to logistics and transportation

Ronald S. Tibben‐Lembke, Dale S. Rogers

International Journal of Physical Distribution & Logistics Management

ISSN: 0960-0035

Article publication date: 1 April 2006

5405

Abstract

Purpose

Changes over the last 30 years have given companies increased flexibility and control over their logistics activities. During this same period of time, financial markets have embraced stock options, which allow buyers the right but not the obligation to purchase a stock at a specified price in the future. Recent technological developments could enable the trading of formalized options around transportation and logistics services. This paper aims to propose a framework for enabling managers to extend the use of options to the future use of logistics resources.

Design/methodology/approach

Presents a conceptual model that is based on research within the field.

Findings

This paper presents a framework for using transportation options in a similar manner to stock or commodity options: a shipper would buy a transportation option from a carrier, or a carrier's agent, which would give the shipper the right but not the obligation to send a shipment in a particular freight lane at a specified future time, for a specified future cost.

Originality/value

The paper provides a new method for structuring future logistics shipments.

Keywords

Citation

Tibben‐Lembke, R.S. and Rogers, D.S. (2006), "Real options: applications to logistics and transportation", International Journal of Physical Distribution & Logistics Management, Vol. 36 No. 4, pp. 252-270. https://doi.org/10.1108/09600030610672037

Publisher

:

Emerald Group Publishing Limited

Copyright © 2006, Emerald Group Publishing Limited

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