Supply chain network design under distribution centre disruption

Abstract

In the 21st century, with the rise of increasing competition and highly volatile customer demands, managing and designing supply chain networks have become critical in most industries. While designing the supply chain, disruption must be taken into consideration. However, when dealing with supply chain disruptions, most of past research works focused only on uncertainties/disruptions at supply side or demand side. In fact, disruptions should also be considered at distribution centres. This research aims at deriving a mathematical model for a three-stage logistics network consisting of a single manufacturing plant, multiple potential locations for opening distribution centres with associated risk of disruption, and multiple customer zones. A scenario-based mathematical modelling approach is used to determine the locations at which a fixed number of distribution centres should be opened. The key challenge in developing the combined total cost function which incorporated all disruption scenarios is how to develop a general expression for the probabilities of occurrence of various disruption scenarios. This is the unique contribution of this research in terms of mathematical model development. Numerical experiments were then performed to illustrate the applicability of the proposed model. Sensitivity analyses have also been conducted to examine the robustness of the solution.