Global Supply Chain Network Design Incorporating Disruption Risk

Abstract

Supply chain networks have expanded globally in today's business environment due to cost efficiencies, advanced technology, and market growth. This expansion makes the supply chains more vulnerable to disruption risks in different countries. A disruption in one country can cause serious global impacts. In this paper, the authors formulate a multi-criteria optimization model for supporting strategic supply chain network design decisions. The model considers disruption risk of supply chain components (i.e., facilities and transportation links) as well as profit and customer responsiveness as conflicting criteria. This consideration is important since disruption at any supply chain component may lead to the disruption of the entire supply chain network. They apply goal programming (GP) techniques to handle multiple and conflicting network design objectives. The authors present a numerical example to illustrate how to incorporate disruption risk when making strategic supply chain decisions. The results demonstrate how supply chain network designs that over emphasize profit may include inexpensive supply chain components with high disruption risk. Therefore, more attention must be paid to managing potential disruptions and designing supply chain networks that balance profit and risk. They discuss tradeoffs among multiple design solutions and identify opportunities for future research.