Strategies for Customer Service Level Protection under Multi-Echelon Supply Chain Disruption Risk
32 Pages Posted: 17 Jul 2009 Last revised: 9 Feb 2011
Date Written: February 6, 2011
We model a multi-echelon system where disruptions can occur at any stage and evaluate multiple strategies for protecting customer service if a disruption should occur. The strategies considered take advantage of the network itself and include satisfying demand from an alternate location in the network, procuring material from an alternate plant or supplier, and holding strategic inventory reserves throughout the network. Unmet demand is modeled using a mix of backordering and lost sales. We conduct numerical analysis and provide recommendations on selecting strategic mitigation methods to diminish the impact of disruptions on customer service. We demonstrate that the greatest service level improvements can be made by providing both proactive inventory placement to cover short disruptions or the start of long disruptions, and reactive back-up methods to help the supply chain recover after long or permanent disruptions.
Keywords: supply chain disruptions, multi-echelon inventory management, risk mitigation, partial lost sales
JEL Classification: D81, C6
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Inventory Systems with Stochastic Demand and Supply: Properties and Approximations
By Amanda J. Schmitt, Lawrence V. Snyder, ...
Infinite-Horizon Models for Inventory Control under Yield Uncertainty and Disruptions
A Quantitative Analysis of Disruption Risk in a Multi-Echelon Supply Chain
By Amanda J. Schmitt and Mahender Singh
Disruptions in One-Warehouse Multiple-Retailer Systems
By Zumbul Atan and Lawrence V. Snyder
Centralization versus Decentralization: Risk Pooling, Risk Diversification, and Supply Chain Disruptions
By Amanda J. Schmitt, Siyuan Sun, ...
A Single-Period Analysis of a Two-Echelon Inventory System with Dependent Supply Uncertainty
By Susan H. Xu, Behdad Masih-tehrani, ...
OR/MS Models for Supply Chain Disruptions: A Review
By Lawrence V. Snyder, Zumbul Atan, ...
Sharing Capacity Cost in Shared Services Centre
By Tomas Buus
Failure Risk and Quality Cost Management in Single versus Multiple Sourcing Decision
By Andrew Yim