PROCUREMENT STRATEGIES FOR END-USERS TO MEET FUNCTIONAL CHARACTERISTICS A Thesis

Functional characteristic consistency in hard red spring (HRS) wheat is a major problem faced in the relationship between producers and end-users. Common procurement strategies designed to fix this problem include vertical integration, targeting of origins, and pre-shipment samples. End-users find these procurement strategies necessary as a means to ensure quality in their final product. The main objectives of this research are, first, to determine desirable functional characteristics for individual Asian wheat importers; second, to develop a simulation model that could be used for different importer procurement strategies; and finally, to develop an analytical model to evaluate cost-effective contracting strategies optimal for alternative approaches and situations. A stochastic optimization model, developed through Microsoft Excel and @Risk, is used to determine the probability of a functional characteristic being satisfied subject to quality targets. Joint probabilities of meeting specifications were also determined for alternative functional characteristics. Analysis revealed that, as more specific variables were incorporated into the model, the probabilities of meeting end-use characteristics increased. Specific variables came with a higher price, however, due to increased testing and identity preservation costs. End-users then face a cost/risk tradeoff between less risk with greater cost and more risk with less cost. These results validate prior findings on cost/risk tradeoff. iv ACKNOWLEDGMENTS