A Stochastic Approach for Designing Supply Chain Networks under Uncertainty

Abstract

In this research, we develop a stochastic programming approach for multi-period supply chain design problems under uncertainty. The supply chain design problem involves making location and allocation decisions to support the required flows in a supply chain. It is assumed that the locations of facilities (manufacturing sites, warehouses and/or retailers) are determined at the strategic level, while selection of suppliers, production levels at manufacturing sites, inventory levels at warehouses, transportation modes and shipping quantities among the entities of the supply chain network over the planning horizon are all determined at the tactical level. Demands, processing, transportation and productions times at manufacturing sites are all considered as uncertain parameters following different distributions. To develop a robust model, an additional objective function is added into the model, which is the variance of the net present value of all cash flows.