Supply Chain Resilience: Multi-Tier Supply Portfolio

A multi-portfolio approach and scenario-based stochastic MIP (mixed integer programming) model is developed for selection of resilient supply portfolio in a multi-tier supply chain under disruption risks. The resilience of the supply chain is achieved by selection of primary supply portfolio and by pre-positioning of RMI (Risk Mitigation Inventory) of parts at different tiers that will hedge against all potential disruption scenarios. Simultaneously for each disruption scenario, recovery and transshipment portfolios are determined and decisions on usage of the pre-positioned RMI are made. The objective of the risk-neutral decision-making is to minimize expected cost or maximize expected service level, while for the risk-averse decision-making, minimization of CVaR of cost or maximization of CVaR of service level are the two alternative objectives. Some properties of optimal solutions, derived from the proposed model, provide additional decision-making insights. The findings also indicate that the developed portfolio approach with an embedded network flow structure leads to computationally efficient MIP model with a very strong LP relaxation. The major decision-making insights are summarized at the end of this chapter.