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Research from Prof. Schürhoff, SFI@UNIL, and Prof. de Treville, UNIL, helps Swiss industrials compete in the current trade and FX market

Posted by
Anita Belitz Krasniqi
Friday, June 3, 2016 - 17:30

Swiss industrials have benefited from the “Cost-Differential Frontier calculator” developed by Professor Norman Schürhoff, SFI@UNIL, and Professor Suzanne de Treville, UNIL.

Matching supply to demand is challenging when industrial producers don’t have a clear idea of what demand will be in the future. If the industrials produce too little, they miss sales opportunities; if they produce too much, they are stuck with unsold inventory.

Schürhoff and de Treville’s research shows that local producers, who produce based on accurate demand information because of short lead-times, can compete against more price competitive offshore suppliers with longer lead times. By using quantitative finance modelling techniques they show that when lead-time increases four fold, from 10 to 40 days for example, demand volatility doubles. Once the forecast-evolution process is determined for a firm or industry, a cost-differential frontier is plotted which quantifies the minimum discount the offshore industrial must offer to compensate for demand-volatility exposure.

It has become clear to managers across the developed world that the expected gain in profits from offshore production has simply not materialized. Onshore industrials have a unique opportunity to find the path to higher profits and see their financial value rise.

The “Cost-Differential Frontier calculator” has been widely diffused in the United States by the Department of Commerce. Swiss based firms, such as Nestlé Switzerland, Nissan Europe, and GSK have already benefited from their research.

Learn more about the benefits of the “Cost-Differential Frontier calculator” in the SFInsight

Learn more about the benefits of the “Cost-Differential Frontier calculator” in the Customer Success Stories

Check out what the US Department of Commerce has to say about inventory costs and lead time

Get the full story by reading the academic papers and

Try out the “Cost-Differential Frontier calculator”