Supply Chain Design Under Disruptions Considering Risk Mitigation Strategies for Robustness and Resiliency

Abstract

Disruptions have become more commonplace in the globalised business environment; thus, many firms have been attempting to find risk mitigation strategies (RMS) to create robust and resilient supply chains. To this extent, this study evaluates the performance of various supply chains utilising different RMS to cope with disruptions using optimisation and simulation. In the optimisation phase, mixed integer programming is used to create a three-echelon supply chain design. Then, the initial supply chain is further configured to incorporate two RMS for robustness (i.e., redundancy and multi-sourcing). In the simulation phase, the aforementioned supply chains, with and without RMS for robustness, are exposed to random disruptions of various severity levels, and the effectiveness of four RMS for resiliency (e.g., visibility, flexibility) are tested using key performance indicators such as order fulfilment rates and profits. The results indicate that the RMS for robustness alone is better suited under mild to moderate disruptions while a combination of RMS for robustness and resiliency is essential to handle severe disruptions.