Evaluating proactive and reactive strategies in supply chain network design with coordinated inventory control in the presence of disruptions

Abstract

ABSTRACT This study examines the supply chain network design (SCND) problem with multiple suppliers, warehouses and retailers in the presence of random disruptions using a two-stage approach. The first stage addresses the SCND problem without disruption, employing a genetic algorithm-based heuristic. This approach is integrated with the induced backorder for inventory coordination. In the second stage, simulation is used to evaluate several reactive strategies whilst introducing disruptions in the network and to adjust the inventory control parameters obtained in the first stage as part of a proactive strategy. The numerical results show that neglecting the risk of disruptions may lead to network designs with low fill rates and the proposed approach is able to make the supply chain network more resilient in the presence of disruptions. Based on the simulation results, a localized-reactive strategy is able to suppress the spread of disruptions to other supply channels.