Correlation between strategic and operational risk mitigation strategies in supply networks

• Published in: International journal of production economics Vol. 201; pp. 225 - 248
• Main Authors: Rezapour, Shabnam, Srinivasan, Ramakrishnan, Tew, Jeffrey, Allen, Janet K., Mistree, Farrokh
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.07.2018
• Subjects: Disruption; Flexibility; Reliability; Resilience; Robust design; Supply network; Variation; Supply network; Disruption; Variation; Reliability; Flexibility; Robust design; Resilience
• ISSN: 0925-5273; 1873-7579
• DOI: 10.1016/j.ijpe.2018.04.014

A supply network's performance is affected by two types of risk: 1) risk of disruptions that distort the supply network's topology by inactivating certain production facilities or transportation lanes; and 2) risk of variations in a facility's performance that reduce the efficiency of the supply network's flow planning for fulfilling demands. In this paper, we demonstrate that strategic and operational risk mitigation strategies, which neutralize the impacts of disruptions and variations, respectively, are correlated. We consider “Robustness” and “Resilience” at a strategic level to mitigate disruptions and “Reliability” at an operational level to mitigate variations. A mixed integer stochastic mathematical model is developed to simultaneously a) design a robust and resilient topology for supply networks; and b) plan a reliable flow throughout its topology. We solve the model using an example of a profit-based supply network that is constructed by relying on the assumptions that were primarily used in prior studies. A sensitivity analysis of the results from the model indicates that i) the correlation between robustness and resilience is negative; ii) the correlation between robustness and reliability is positive; and iii) the correlation between resilience and reliability is negative.