Title: Optimal ordering policies in a multi-sourcing supply chain with supply and demand disruptions-a CVaR approach

Authors: Syed Mithun Ali; Koichi Nakade

Addresses: Department of Industrial and Production Engineering, Bangladesh University of Engineering and Technology, Dhaka-1000, Bangladesh ' Department of Architecture, Civil Engineering and Industrial Management Engineering, Nagoya Institute of Technology, Nagoya, 466-8555 Japan

Abstract: In this study, we propose a conditional value at risk (CVaR) model for supply chain disruptions planning of a multi-agent, multi-product supply chain subject to supply and demand disruptions. Our focus is on building and comparing ordering policies under CVaR and expected cost criteria. The proposed formulation is illustrated through some numerical instances. The results present that the CVaR model shows a considerable difference in response policies compared to the expected cost model. Ordering quantities in response to supply and demand disruption are lower in the CVaR model than the expected cost model. In many instances, it is also seen that ordering quantities in response to disruptions tend to become lower when a decision maker becomes more risk-averse. It is expected that the proposed CVaR model would outperform to optimise the supply chain of an organisation, in particular, for the purpose of reducing the risk of high cost.

Keywords: conditional value at risk; CVaR; supply chain disruptions management; supply disruptions; demand disruptions; supply chain risks.

DOI: 10.1504/IJLSM.2017.086354

International Journal of Logistics Systems and Management, 2017 Vol.28 No.2, pp.180 - 199

Received: 04 Mar 2016
Accepted: 17 Jun 2016

Published online: 04 Sep 2017 *

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