Planning for Disruptions in Supply Chain Networks

Recent events have highlighted the need for planners to consider the risk of disruptions when designing supply chain networks. Supply chain disruptions have a number of causes and may take a number of forms. Once a disruption occurs, there is very little recourse regarding supply chain infrastructure because these strategic decisions cannot be changed quickly. Therefore, it is critical to account for disruptions during the design of supply chain networks so that they perform well even after a disruption. Indeed, these systems can often be made substantially more reliable with only small additional investments in infrastructure. Planners have a range of options available to them in designing resilient supply chain networks, and their choice of approaches will depend on the financial resources available, the decision maker’s risk preference, the type of network under consideration, and other factors. In this tutorial, we present a broad range of models for designing supply chains resilient to disruptions. We first categorize these models by the status of the existing network: A network may be designed from scratch, or an existing network may be modified to prevent disruptions at some facilities. We next divide each category based on the underlying optimization model (facility location or network design) and the risk measure (expected cost or worst-case cost).