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Selection of a dynamic supply portfolio under delay and disruption risks

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  • Tadeusz Sawik

Abstract

The problem of a multi-period supplier selection and order quantity allocation in the presence of supply chain disruption and delay risks is considered. Given a set of customer orders for finished products, the decision-maker needs to decide from which supplier and when to deliver product-specific parts required for each customer order to meet customer requested due date at a low cost or a high service level and to mitigate the impact of supply chain risks. For the selection of risk-neutral or risk-averse dynamic supply portfolio, a scenario-based stochastic mixed integer programming approach is developed. In the scenario analysis, the low probability and high impact supply disruptions are combined with the high probability and low impact supply delays. The risk-neutral portfolio is optimised by minimising expected cost or maximising expected service level. The risk-averse portfolio is optimised by calculating cost- or service-at-risk and minimising conditional cost-at risk or maximising conditional service at risk. The proposed dynamic portfolio approach leads to a time-indexed stochastic MIP formulation with a strong LP relaxation, which has proven to be computationally very efficient. The findings indicate that neglecting potential delay risks in supplier selection may lead to greater supply fluctuations and manufacturing delays.

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  • Tadeusz Sawik, 2018. "Selection of a dynamic supply portfolio under delay and disruption risks," International Journal of Production Research, Taylor & Francis Journals, vol. 56(1-2), pages 760-782, January.
    • Handle: RePEc:taf:tprsxx:v:56:y:2018:i:1-2:p:760-782
    DOI: 10.1080/00207543.2017.1401238
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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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