Two-Stage Stochastic Program for Supply Chain Network Design under Facility Disruptions

Kanokporn Kungwalsong, Chen-Yang Cheng, Chumpol Yuangyai and Udom Janjarassuk
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Kanokporn Kungwalsong: Graduate School of Management and Innovation, King Mongkut’s University of Technology Thonburi, Bangkok 10140, Thailand
Chen-Yang Cheng: Department of Industrial Engineering and Management, Taipei University of Technology, Taipei 106, Taiwan
Chumpol Yuangyai: Department of Industrial Engineering, School of Engineering, King Mongkut’s Institute of Technology Ladkrabang, Bangkok 10520, Thailand
Udom Janjarassuk: Department of Industrial Engineering, School of Engineering, King Mongkut’s Institute of Technology Ladkrabang, Bangkok 10520, Thailand

Sustainability, 2021, vol. 13, issue 5, 1-19

Abstract: A supply chain disruption is an unanticipated event that disrupts the flow of materials in a supply chain. Any given supply chain disruption could have a significant negative impact on the entire supply chain. Supply chain network designs usually consider two stage of decision process in a business environment. The first stage deals with strategic levels, such as to determine facility locations and their capacity, while the second stage considers in a tactical level, such as production quantity, delivery routing. Each stage’s decision could affect the other stage’s result, and it could not be determined individual. However, supply chain network designs often fail to account for supply chain disruptions. In this paper, this paper proposed a two-stage stochastic programming model for a four-echelon global supply chain network design problem considering possible disruptions at facilities. A modified simulated annealing (SA) algorithm is developed to determine the strategic decision at the first stage. The comparison of traditional supply chain network decision framework shows that under disruption, the stochastic solutions outperform the traditional one. This study demonstrates the managerial viability of the proposed model in designing a supply chain network in which disruptive events are proactively accounted for.

Keywords: supply chain network design; facility disruption; two-stage stochastic program; simulated annealing (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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