Increasing Supply Chain Robustness through Process Flexibility and Inventory

By David Simchi-Levi, He Wang, Yehua Dennis Wei. Production and operations management, 2018

232 citations recorded by the source corpus.

We study a hybrid strategy that uses both process flexibility and finished goods inventory for supply chain risk mitigation. The interplay between process flexibility and inventory is modeled as a two‐stage robust optimization problem. In the first stage, the firm allocates inventory before disruption happens; in the second stage, after a disruption happens, the firm determines production quantities at each plant to minimize demand loss. Our robust optimization model can be solved efficiently using constraint generation, and under some stylized assumptions, can be solved in closed form. For a canonical family of flexibility designs known as the K‐chains, we provide an analytical expression for the optimal inventory solution, which allows us to study the effectiveness of different degrees of flexibilities. Moreover, we find that firms should allocate more inventory to high variability products when its level of flexibility is low, but as flexibility increases, the inventory allocation pattern “flips” and firms should allocate more inventory to low variability products. These observations are further verified through a numerical case study of an automobile supply chain. Finally, we extend our robust optimization model to the time‐to‐survive metric, a metric that computes the longest time a supply chain can guarantee a predetermined service level under disruption.

Subfields: Management Information Systems, Management Science and Operations Research, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/cae79cb8252c484985e54b93efba64d76e57cf79

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In Management Information Systems

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Citations in the corpus

Can supply chain risk management practices mitigate the disruption impacts on supply chains’ resilience and robustness? Evidence from an empirical survey in a COVID-19 outbreak era (2020, background): “The main difference between the concepts lies in the fact that robustness relates to firm’s ability to maintain its planned performance following a disruption (or a series of disruptions) impacts (Nair and Vidal, 2011; Simchi-Levi et al., 2018), whereas resilience concerns the ability to recover the”
Low-Certainty-Need (LCN) supply chains: a new perspective in managing disruption risks and resilience (2018, unknown): “Simchi-Levi et al. (2018) provide evidence that process flexibility and inventory should be considered as important drivers of SC robustness.”
Dancing the Supply Chain: Toward Transformative Supply Chain Management (2021, background): “Therefore, time to recover and time to survive have been introduced as metrics of supply chain resilience (Simchi-Levi et al., 2018).”
Viable supply chain model: integrating agility, resilience and sustainability perspectives—lessons from and thinking beyond the COVID-19 pandemic (2020, background): “…et al. 2019) • Robustness The ability to withstand a disruption (or a series of disruptions) to maintain the planned performance (Nair and Vidal 2011; Simchi-Levi et al. 2018) • Resilience The ability to withstand a disruption (or a series of disruptions) and recover the performance (Spiegler et…”