A Multiperiod Supply Chain Network Optimization Model with Investments in Labor Productivity Enhancements in an Era of COVID-19 and Climate Change

Abstract

We are living in a very challenging time in history with the COVID-19 pandemic upon us plus the impacts of climate change now being notable with the frequency of various disasters increasing as well as their impacts. Nevertheless, products still must be produced, transported, and consumed in order to sustain humanity, and labor has revealed itself to be a critical resource in supply chain networks. In this paper, we construct the first multiperiod supply chain network model, which captures labor associated with the various supply chain network activities of production, transportation, storage over time, and distribution, and also includes link labor productivity enhancements that allow for investments in enhanced safety and health of the workers. We utilize a net present value (NPV) approach with the optimization model being formulated and solved as a variational inequality problem. We report the complete input and solution results for a series of numerical examples in terms of product flows, labor required, wages, as well as link labor productivity enhancements. We then further illustrate the relevance of the framework by conducting sensitivity analysis. We find that investing in link labor productivity can benefit workers also in terms of higher wages earned and the firm in terms of an increase in the optimal value of its objective function represented by the NPV, provided that consumers are aware of and responsive to such investments. This work adds to the literature on the integration and extension of concepts of operations research and economics in order to provide deeper insights into highly relevant aspects of supply chains during this time of their expanded importance.