A Robust Supply Chain Network Design Considering Capacity, Supply and Delivery Distance Limits under Uncertain Demand

This paper presents a robust supply chain network design considering capacity, supply and delivery distance limits under uncertain demand. It aims to form a systematic solution including facility location and capacity design, supply plan, production plan and delivery plan. The uncertainty of demand is described by means of scenario approach. Following a multiple criteria evaluation, the optimal objective is the weighted sum of total cost, variance of total cost and penalty cost of inventory shortage. The supply limits include two parts. One is that the minimum supply quantity from an arbitrary supplier to its customers is regulated. The other is that the demand from a downstream node may be satisfied by at least two upstream suppliers. The delivery distance limit is that the distribution center’s distribution radius is set up to be proportional to its capacity. The main conclusions are drawn through numerical sample test as follows: i) the proposed method ensures a robust supply chain network with an ability of risk mitigation, ii) the distribution radius limit may be beneficial for intensive logistics organization without increasing the cost of supply chain, and iii) the trade-off between minimal inventory shortage and total supply chain cost should be reached by adjusting penalty weight.