A Continuous Approximation Approach Based on Regular Hexagon Partition for the Facility Location Problem under Disruptions Risk

Abstract

Today’s business environment is complex, dynamic, and uncertain which makes a supply chain facility increasingly vulnerable to disruption from various risk accidents as one of the main threats to the whole supply chain’s operation. However, in general, most of the studies on facility location problems assume that the facilities, once built, will always run availably and reliably. In fact, although the probability is very low, supply chain disruptions often incur disastrous consequences. Therefore, it is critical to account for disruptions during designing supply chain networks. To accomplish planned outcomes and greater supply chain resiliency, this article proposes a continuous approximation approach based on regular hexagon partition to address the reliable facility location problems with consideration of facility disruptions risk. The optimization goal is to determine the best facility location that minimizes the expected total system cost on the premise that the supply chain network is not disrupted as a whole when one or some facilities are subject to probabilistic failure. Our numerical experiment discusses the performance of the proposed solution approaches which demonstrates that the benefits of considering disruptions in the supply chain design can be significant. In addition, considering the impact of disruption probability estimation error on the optimal decision, the misestimating of the disruption probability is also investigated in this paper.