Strategic Design of a Robust Supply Chain

The strategic design of a robust supply chain has as goal the configuration of the supply chain structure so that the performance of the supply chain remains of a consistently high quality for all possible future scenarios. We model this goal with an objective function that trades off the central tendency of the supply chain profit with the dispersion of the profit as measured by the standard deviation for any value of the weights assigned to the two components. However, the standard deviation, used as the dispersion penalty for profit maximization, has a square root expression which makes standard maximization algorithms non applicable. The focus in this article is on the development of the strategic and tactical models. The application of the methodology to an industrial case will be reported. The optimization algorithm and detailed numerical experiments will be described in future research.