The Effect of Supply Disruptions on Supply Chain Design Decisions

Authors:
Lian Qi;Zuo-Jun Max Shen;Lawrence V. Snyder
Affiliations:
Department of Supply Chain Management and Marketing Sciences, Rutgers Business School, Rutgers University, Newark, New Jersey 07102;Department of Industrial Engineering and Operations Research, University of California, Berkeley, Berkeley, California 94720;Department of Industrial and Systems Engineering, Lehigh University, Bethlehem, Pennsylvania 18015
Venue:
Transportation Science
Year:
2010

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Abstract

We study an integrated supply chain design problem that determines the locations of retailers and the assignments of customers to retailers to minimize the expected costs of location, transportation, and inventory. The system is subject to random supply disruptions that may occur at either the supplier or the retailers. Analytical and numerical studies reveal the effects of these disruptions on retailer locations and customer allocations. In addition, we demonstrate numerically that the cost savings from considering supply disruptions at the supply chain design phase (rather than at the tactical or operational phase) are usually significant.