Evaluating upstream supply chain disruptions with partial availability

Abstract

Globalization, outsourcing, and the emphasis on lean supply chains continue to shape the supply chain industry. These trends have increased the prevalence and severity of disruptions to upstream supply. Disruptions to upstream supply can delay and potentially halt the flow of necessary materials and/or services to purchasing firms, often resulting in severe operational and financial losses. This has created a growing need for effective risk assessment techniques to evaluate the impact of disruptions and inform risk mitigation policies. As a result, many methodologies have been developed to assess risk by estimating the likelihood and impact of disruptions. Given the inherent difficulty in estimating the likelihood of disruptions, this thesis focuses on assessing the risk of supply shortfall independent of the causes and likelihoods of such disruptions. This thesis presents an optimization-based framework to assess the risk of both complete and partial supply disruptions and comments on inventory and procurement mitigation strategies. The framework is used to compare two allocation policies (fair allocation and preferential product allocation) for the distribution of scarce inventory in times of disruption. The framework is then applied to data from a food products manufacturer to determine the impacts of a disruption in the supply of two components feeding dozens of products.