Design of Robust Global Sourcing Networks

A global sourcing network consists of a set of suppliers located globally to satisfy the demands of an international factory network. The design of a global sourcing network consists of two interrelated decisions: supplier selection and order allocation. The supplier selection is a strategic decision that involves an one time capital investment in developing the selected suppliers. The order allocation is of tactical nature, in which the decisions regarding the allocation of suppliers to the factories are made. For optimal design, both the above decisions are contingent on each other and hence made in tandem at the beginning of the planning horizon. Uncertainties in the form of deviations and disruptions may be realized before the implementation of order allocation, which can render the original design inefficient and sometimes infeasible. The supplier selection decision is irreversible and hence cannot be altered based on realized uncertainties, but the order allocation can be changed. This operational flexibility is assumed for a global firm to be resilient, so that it can shift production among factories and switch orders from suppliers seamlessly. In this work, we develop a robust optimization based methodology to design a robust global sourcing network, which functions at acceptable levels under a wide range of pre-identified uncertain scenarios.