Multisourcing Supply Network Design: Two-Stage Chance-Constrained Model, Tractable Approximations, and Computational Results

Yongzhen Li (), Jia Shu (), Miao Song (), Jiawei Zhang () and Huan Zheng ()
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Yongzhen Li: Department of Industrial and Manufacturing Systems Engineering, The University of Hong Kong, Hong Kong, China
Jia Shu: Department of Management Science and Engineering, School of Economics and Management, Southeast University, Nanjing, Jiangsu 210096, China
Miao Song: Department of Logistics and Maritime Studies, Faculty of Business, The Hong Kong Polytechnic University, Hong Kong, China
Jiawei Zhang: Department of Information, Operations, and Management Sciences, Stern School of Business, New York University, New York, New York 10012 and New York University Shanghai, Shanghai 200122, China
Huan Zheng: Department of Management Science, Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200030, China

INFORMS Journal on Computing, 2017, vol. 29, issue 2, 287-300

Abstract: In this paper, we study a multisourcing supply network design problem, in which each retailer faces uncertain demand and can source products from more than one distribution center (DC). The decisions to be simultaneously optimized include DC locations and inventory levels, which set of DCs serves each retailer, and the amount of shipments from DCs to retailers. We propose a nonlinear mixed integer programming model with a joint chance constraint describing a certain service level. Two approaches—set-wise approximation and linear decision rule-based approximation—are constructed to robustly approximate the service level chance constraint with incomplete demand information. Both approaches yield sparse multisourcing distribution networks that effectively match uncertain demand using on-hand inventory, and hence successfully reach a high service level. We show through extensive numerical experiments that our approaches outperform other commonly adopted approximations of the chance constraint.

Keywords: multisourcing; network design; chance constraint approximation; process flexibility (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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