Reshore or not Reshore: A Stochastic Programming Approach to Supply Chain Optimization

Tadeusz Sawik

Omega, 2023, vol. 118, issue C

Abstract: This paper presents a scenario-based stochastic mixed integer programming model for risk-neutral or risk-averse optimization of supply chain reshoring to domestic region, under the ripple effect propagated from a foreign disruption source region. The reshoring decisions with respect to tier-one suppliers of parts and tier-zero OEM (Original Equipment Manufacturer) assembly plants are considered under disruptions in supply, manufacturing, logistics and demand rippling across the entire supply chain. The proposed innovative approach integrates strategic supply chain reshoring and operational supply chain scheduling, which allows the decision maker to evaluate the operational impact of the strategic decision. Results of computational experiments, partially modeled after a supply chain reshoring problem in the smartphone industry, are provided. The findings indicate that reshoring decisions are strongly dependent on the level of government subsidy for capital expenditure and for risk-neutral reshoring, a portfolio of supply chain nodes with positive expected net savings can be considered only. In general, the reshored supply chain can better meet domestic market demand. Moreover, full reshoring of a supply chain improves its business as usual performance and even partial reshoring mitigates the impact of the ripple effect. However, for risk-averse decision-making, if reshoring is incapable of reducing worst-case cost, in particular, worst-case lost sales, no reshoring is selected.

Keywords: supply chain risk management; ripple effect; reshoring; stochastic programming; mixed integer programming (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0305048323000282
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:118:y:2023:i:c:s0305048323000282

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

DOI: 10.1016/j.omega.2023.102863

Access Statistics for this article

Omega is currently edited by B. Lev

More articles in Omega from Elsevier
Bibliographic data for series maintained by Catherine Liu ().