In the context of supply chains, hedging refers to tactics used to reduce the risks of supply disruptions, price volatility, and currency fluctuations. Forward contracts, options, long-term supplier agreements, and multi-sourcing are examples of common hedging strategies. Hedging can help stabilize input costs and guarantee the availability of essential components for inventory optimization, enabling more precise planning and budgeting. A thorough grasp of supplier relationships and market dynamics is necessary for effective hedging, which is a crucial component of supply chain risk management.
