Facility Reliability Issues in Network Problems: Planning for Mitigation

Project Description
A current common practice when designing supply chain networks is to consider reduced level of inventory, Just-in-Time deliveries, and minimal redundancy in the network. Clearly, these practices reduce operational costs to a minimum. However, the side effect of these cost-reduction actions is the increase in exposure of the supply chain to disruptions which can have severe economic repercussions. A small failure in operations (e.g. a supplier delay in the shipment of an item) can stop the whole supply chain. Additionally, terrorist attacks, contagious diseases that may cause worldwide pandemics in a relatively short period of time, and political instabilities have the potential to close-down facilities and bring down a whole supply chain or even countries’ economies, and cause severe short term inbalance of supply-demand. Within this context, this research line aims to shed some light on the role of facility location in mitigating the effect of facility failure in supply chains networks and consequently, on the long run cost of operating those supply chains. In order to perform the analysis, Operations Research techniques are utilized. Specifically, combinatorial optimisation techniques are used extensively; in addition there are opportunities for using game theoretical techniques in particular scenarios. The basic approach utilised generalises the classical p-median and p-center problems on a network to explicitly include the failure probabilities, and analyse structural and algorithmic aspects of the resulting model. The objective is to study two variants of both problems. In one, the customers have full information on the status of facilities - operational or non-operational. In the other, no such information is available and the customers must travel to a facility to obtain the information.

Participating Organizations