Reliable Flexibility Design of Supply Chains Via Extended Probabilistic Expanders

Production and Operations Management, Forthcoming

35 Pages Posted: 17 Jan 2019

See all articles by Hao Shen

Hao Shen

Renmin University of China - School of Business

Yong Liang

Tsinghua University - Department of Management Science and Engineering

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)

Chung-Piaw Teo

NUS Business School - Department of Decision Sciences

Date Written: August 5, 2018

Abstract

It is well-known that adding a little flexibility to the right place is an effective strategy to improve the performance of operations in the face of demand uncertainties, to ensure high level of capacity utilization. However, given that system disruptions are ubiquitous, the legacy flexibility designs may perform poorly under disruptions to supply or capacity installations. In this paper, we focus on the design of reliable and sparse flexibility structures that consistently meet a reasonable performance criterion under disruptions to both demand and supply. Specifically, we propose a class of structures termed as extended probabilistic expanders, based on the conjecture that the expansion property, rather than the global connectivity, is critical to good performance of the structures. We prove that for a system with n retailers, essentially only O(n) supply routes between suppliers and retailers are necessary to ensure good performance under disruption. In addition, we present an efficient randomized algorithm to construct extended probabilistic expanders, and demonstrate that the construction yields very good structure with the least number of edges asymptotically. We also investigate an extension to systems with structural constraints. Numerical results demonstrate that our design has not only a wide range of applications, but also better performance than a variety of known structures.

Keywords: flexibility design, supply chain disruptions, extended probabilistic expanders, unbalanced supply chains

Suggested Citation

Shen, Hao and Liang, Yong and Shen, Zuo-Jun Max and Teo, Chung-Piaw, Reliable Flexibility Design of Supply Chains Via Extended Probabilistic Expanders (August 5, 2018). Production and Operations Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3315547

Hao Shen (Contact Author)

Renmin University of China - School of Business ( email )

Beijing
China

Yong Liang

Tsinghua University - Department of Management Science and Engineering

China

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR) ( email )

IEOR Department
4135 Etcheverry Hall
Berkeley, CA 94720
United States

Chung-Piaw Teo

NUS Business School - Department of Decision Sciences ( email )

15 Kent Ridge Drive
Mochtar Riady Building, BIZ 1 8-69
119245
Singapore

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