Operational hedging against adverse circumstances

Dan Weiss*, Michael W. Maher

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

21 Scopus citations

Abstract

This paper investigates operational hedging against severe disruptions to normal operations. It offers a new method to evaluate the extent that operations policy serves as a hedge against adverse circumstances. We apply the proposed method to explore how supply chain characteristics affect the responses of airlines to the acute demand fall off after the September 11 terrorist attacks. Results indicate that operational hedging vehicles (fleet standardization, high-fleet utilization, an aircraft ownership policy rather than leasing, and international operations) are more powerful in protecting firms than using financial instruments. The study contributes in guiding managers as to how operations policy can serve as an imperative factor in mitigating exposures to low-end performance levels.

Original languageEnglish
Pages (from-to)362-373
Number of pages12
JournalJournal of Operations Management
Volume27
Issue number5
DOIs
StatePublished - Oct 2009

Funding

FundersFunder number
Henry Crown Institute

    Keywords

    • Airlines
    • Empirical research
    • Hedging
    • Operations policy
    • Operations strategy
    • Stochastic-dominance
    • Uncertainty

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