Optimal Risk Mitigation Planning for Supply Chain Disruption

Abstract

In this paper, we consider the problem of finding a supply chain configuration with minimum risk and investment for risk mitigations. We have developed a simulation model considering disruption. We use this simulation model to evaluate supply chain risk. We propose three risk mitigation strategies: duplication, stabilization, and absorption. We used simulated annealing to find the optimal combinations of these mitigation plans. In a case study, we applied our model to a digital camera supply chain, and show how our model can be applied to obtain a proper supply chain configuration.