Supply Portfolio Selection and Execution with Demand Information Updates

This paper considers a problem of multi-period supply portfolio selection and execution with demand information updates. A supply portfolio specifies a buyer's decision on selecting sourcing mix from among a group of suppliers. We develop a framework for optimal supply portfolio selection and execution. Further, we demonstrate that the optimal portfolio selection follows a base-stock policy and the option execution follows a modified base-stock policy. We also develop the structural properties of the optimal policy with respect to option contracts and inventories