Selection of Optimal Redundancy Strategies for a Supply Network

TitleSelection of Optimal Redundancy Strategies for a Supply Network
Publication TypeConference Paper
Year of Publication2015
AuthorsQazi, A, Quigley, J, Dickson, A, Gaudenzi, B, Önsel, Ş
EditorKersten, W, Blecker, T, Ringle, CM
Title of ProceedingsInnovations and Strategies for Logistics and Supply Chains
Conference LocationHamburg
ISBN Number978-3-7375-7805-9
Other NumbersISSN (print) 2365-4430, ISSN (online) 2365-5070
KeywordsBayesian Belief Network, Redundancy Strategies, Risk Attitudes, Supply Network Configuration

Supply chains have become more vulnerable because of increased globalization and
interdependency between network actors and risks. It is, therefore, extremely important
to model interdependency between risks taking into account the supply network
configuration. In this paper, we have followed the existing concept of modelling
supply network as a Bayesian belief network capturing network configuration, probabilistic
interdependency between risks and losses resulting from the realization of
risks. We propose a new method for evaluating efficacy of different combinations of
redundancy strategies. For each node of the network, we incorporated a strategy of
adding redundant resource as a risk management approach that would disengage
the particular node from its parent node(s). The model was solved against the bicriteria
objective of maximizing normalized expected utility for loss exposure and
normalized utility for cost of redundancy strategies keeping into account different
risk attitudes and criteria weights. The model also helped in identifying optimal combination
of strategies for specific allocation of budget as there could be different
combinations of allocating redundant resources across the network resulting in supoptimal
values of risk measures.