Modern supply chains are subject to a wide range of risks, such as demand uncertainty, natural disasters, and terrorist attacks. Considering supply chain design, this study investigates the logistics network design problem with facility disruptions that are caused by the above-mentioned risks. In light of recent events such as 2011 Tohoku earthquake and tsunami, how to design a robust supply chain network at risk of unexpected facility disruption has become a pressing concern.
To find solutions to this design issue, in this paper we have formulated three types of stochastic supply chain disruption risk problem to offset potential losses from network disruptions. Thereat, the distribution centers are split into two types: reliable distribution centers (RDCs) and unreliable distribution centers (UDCs). RDCs are considered to be completely resilient to disruption and are available for both primary and backup assignments, while UDCs are affected by such disruptions and can be assigned as only a primary facility. To find the optimal solutions to these problems, commercial software is applied. Through numerical experiments, comparison among the models is taken place and prospects for risk management against facility disruption are discussed.
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