Two-period vs. multi-period model for supply chain disruption management

Abstract

A novel two-period modelling approach is developed for supply chain disruption mitigation and recovery and compared with a multi-period approach. For the two-period model, planning horizon is divided into two aggregate periods: before disruption and after disruption. The corresponding mitigation and recovery decisions are: (1) primary supply and demand portfolios and production before a disruption, and (2) recovery supply, transshipment and demand portfolios and production after the disruption. In the multi-period model, a multi-period planning horizon is applied to account for a detailed timing of supplies and production. The primary and recovery portfolios are determined simultaneously and for both approaches the integrated decision-making, stochastic mixed integer programming models are developed. While the simplified two-period setting may overestimate (for best-case capacity constraints) or underestimate (for worst-case capacity constraints) the available production capacity, it can be easily applied in practice for a fast, rough-cut evaluation of disruption mitigation and recovery policy. The findings indicate that for both two- and multi-period setting, the developed multi-portfolio approach leads to computationally efficient mixed integer programming models with an embedded network flow structure resulting in a very strong linear programming relaxation.

Keywords:

• supply chain risk management
• disruption management
• disruption and recovery
• portfolio approach
• stochastic programming
• mixed integer linear programming

Acknowledgments

The author is grateful to three anonymous reviewers for providing many constructive comments which helped to improve this paper.

Disclosure statement

No potential conflict of interest was reported by the author.

ORCID

Tadeusz Sawik http://orcid.org/0000-0002-6054-550X

Additional information

Funding

This work was supported by AGH research grant # 11.11.200.324.