Forward buying is a strategy adopted by many supply managers

Forward buying is a strategy adopted by many supply managers to hedge on risks. How would you describe this strategy as to whether it really reduces risks and when is it not speculative buying?

Solution

Forward buying is a strategy where a purchase is made in excess quantity than demand for countering the future rise of price. I believe that forward buying is a strategy as it really reduces risks till the time purchase is made based on the proper research and forecast about sales and rise in price of goods in future that are purchased in excess in discounted price. It is not speculative buying as long as the purchase is made based on the proper forecast that is predicted by utilizing proper forecasting tools rather than making bets or guesses.