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Mitigating supply chain disruptions through the assessment of trade-offs among risks, costs and investments in capabilities

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  • Vahid Nooraie, S.
  • Parast, Mahour Mellat

Abstract

One of the central questions in supply chain design is how to properly invest in supply chain capabilities in order to be more responsive to supply chain disruptions. This new perspective in supply chain design requires an understanding of the relationships among costs, supply chain risk drivers, and investments in supply chain capabilities. In this paper, we develop a multi-objective stochastic model for supply chain design under uncertainty and time-dependency. Sources of risk are modeled as a set of scenarios, and the risk of the system is determined. The objective is to examine the trade-offs among investments in improving supply chain capabilities and reducing supply chain risks, and to minimize cost of supply chain disruptions. Due to the NP-hard nature of the problem, a heuristic algorithm based on a relaxation method is designed to determine an optimal or near-optimal solution. To examine the efficiency of the heuristic algorithm, a numerical example is provided. Our findings suggest that increasing supply chain capabilities can be viewed as a mitigation strategy that enables a firm to reduce the total expected cost of a supply chain subject to disruptions.

Suggested Citation

  • Vahid Nooraie, S. & Parast, Mahour Mellat, 2016. "Mitigating supply chain disruptions through the assessment of trade-offs among risks, costs and investments in capabilities," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 8-21.
    • Handle: RePEc:eee:proeco:v:171:y:2016:i:p1:p:8-21
    DOI: 10.1016/j.ijpe.2015.10.018
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    5. Polo, Andrés & Peña, Numar & Muñoz, Dairo & Cañón, Adrián & Escobar, John Willmer, 2019. "Robust design of a closed-loop supply chain under uncertainty conditions integrating financial criteria," Omega, Elsevier, vol. 88(C), pages 110-132.
    6. Setene, Letlama & Jordaan, Daniel du P.S., 2021. "The trade-off between chain performance and fragility considering coordination strategies of agri-food chains: a South African egg chain's case study," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(3), March.
    7. Nishat Alam Choudhary & Shalabh Singh & Tobias Schoenherr & M. Ramkumar, 2023. "Risk assessment in supply chains: a state-of-the-art review of methodologies and their applications," Annals of Operations Research, Springer, vol. 322(2), pages 565-607, March.
    8. Nitya Singh & Paul Hong, 2023. "CSR, Risk Management Practices, and Performance Outcomes: An Empirical Investigation of Firms in Different Industries," JRFM, MDPI, vol. 16(2), pages 1-20, January.
    9. Gholami-Zanjani, Seyed Mohammad & Klibi, Walid & Jabalameli, Mohammad Saeed & Pishvaee, Mir Saman, 2021. "The design of resilient food supply chain networks prone to epidemic disruptions," International Journal of Production Economics, Elsevier, vol. 233(C).
    10. Tse, Ying Kei & Zhang, Minhao & Zeng, Wenjuan & Ma, Jie, 2021. "Perception of supply chain quality risk: Understanding the moderation role of supply market thinness," Journal of Business Research, Elsevier, vol. 122(C), pages 822-834.
    11. Zhi Li & Guanghao Jin & Shen Duan, 2018. "Evolutionary Game Dynamics for Financial Risk Decision-Making in Global Supply Chain," Complexity, Hindawi, vol. 2018, pages 1-10, October.
    12. Amulya Gurtu & Jestin Johny, 2021. "Supply Chain Risk Management: Literature Review," Risks, MDPI, vol. 9(1), pages 1-16, January.
    13. Sardesai, Saskia & Klingebiel, Katja, 2023. "Maintaining viability by rapid supply chain adaptation using a process capability index," Omega, Elsevier, vol. 115(C).
    14. Kauppi, Katri & Longoni, Annachiara & Caniato, Federico & Kuula, Markku, 2016. "Managing country disruption risks and improving operational performance: risk management along integrated supply chains," International Journal of Production Economics, Elsevier, vol. 182(C), pages 484-495.
    15. Rogulin, Rodion S., 2021. "Assessment of the Implementation of New Digital Technologies in Connection with the Level of Efficiency of Supply Chains in the Context of COVID-19," Economic Consultant, Roman I. Ostapenko, vol. 35(3), pages 5-17.
    16. Aldrighetti, Riccardo & Battini, Daria & Ivanov, Dmitry & Zennaro, Ilenia, 2021. "Costs of resilience and disruptions in supply chain network design models: A review and future research directions," International Journal of Production Economics, Elsevier, vol. 235(C).

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