Selection of Resilient Supply Portfolio

Tadeusz Sawik

Chapter Chapter 4 in Supply Chain Disruption Management, 2020, pp 77-108 from Springer

Abstract: Abstract This chapter deals with the optimal selection and protection of part suppliers and order quantity allocation in a supply chain under disruption risks. The protection decisions include the selection of suppliers to be protected against disruptions and the allocation of risk mitigation inventory of parts to be pre-positioned at the protected suppliers. The decision maker needs to decide which supplier to select for parts delivery and how to allocate orders quantity among the selected suppliers, and which of the selected suppliers to protect against disruptions and how to allocate risk mitigation inventory among the protected suppliers. The problem objective is to achieve a minimum cost of suppliers protection, risk mitigation inventory pre-positioning, parts ordering, purchasing, transportation, and shortage and to mitigate the impact of disruption risks by minimizing the potential worst-case cost. As a result a resilient supply portfolio is identified with protected suppliers capable of supplying parts in the face of disruptive events. A stochastic MIP approach is proposed to determine risk-neutral, risk-averse, or mean-risk supply portfolios, with Conditional Value-at-Risk applied to control the risk of worst-case cost. Numerical examples are presented and some computational results are reported. The major managerial insights are provided at the end of this chapter.

Date: 2020
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DOI: 10.1007/978-3-030-44814-1_4

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