Flexible Supply Chain Design under Stochastic Catastrophic Risks

TitleFlexible Supply Chain Design under Stochastic Catastrophic Risks
Publication TypeConference Paper
Year of Publication2014
AuthorsFan, Y, Schwartz, F, Voß, S
EditorKersten, W, Blecker, T, Ringle, CM
Title of ProceedingsNext Generation Supply Chains
Conference LocationHamburg
ISBN Number978-3-8442-9879-6; 978-3-7375-0340-2
ISSN NumberISSN (print) 2365-4430, ISSN (online) 2365-5070
Keywordscatastrophe, postponement, slow transportation, Supply Chain Risk Management

Real-world experiences prove that supply chains may suffer great losses or
even complete break downs after catastrophic events. However, extra costs
after great disasters are usually not incorporated in the supply chain costs in
the existing literature. The aim of this study is to design a flexible cost efficient
supply chain, which is able to keep stable supply even if great disasters
happen. The supply chain is designed by initially determining the location of
production facilities and choosing a transportation mode for each transportation
link, and then estimating extra costs after a catastrophe occurs according to the
type of the catastrophe and the structure and transportation modes of the
supply chain. All variable costs, including supply chain catastrophe costs,
operational costs, holding costs and transportation costs are included in the
objective function of a two stage stochastic decision model. An algorithm is
used to solve the model in order to get an optimal or close to optimal structure
of the supply chain. Numerical results are presented. Based on computational
experiments we can deduce that postponement is effective to deal with supply
chain catastrophic events; slow transportation seems a viable option to leave
more time for a supply chain for the adjustment of production planning after