Elsevier

Omega

Volume 46, July 2014, Pages 104-116
Omega

An interdependent layered network model for a resilient supply chain

https://doi.org/10.1016/j.omega.2013.08.002Get rights and content

Highlights

  • We present a framework for supply chain restoration with consideration of infrastructure.

  • We study interdependencies between the supply chain network and infrastructures.

  • The significant reduction in the restoration cost demonstrates that taking infrastructures into account is not trivial in supply chain restoration.

  • A problem solving process is proposed for cooperation between the infrastructures and the supply chains disrupted by an extreme event.

Abstract

This paper addresses the problem of designing supply chains that are resilient to natural or human-induced extreme events. It focuses on the development of efficient restoration strategies that aid the supply chain in recovering from a disruption, thereby limiting the impact on its customers. The proposed restoration model takes into account possible disruptions to infrastructures, e.g., transportation and communications, by explicitly formulating their logical relationships with supply chains. A problem solving process is proposed that provides for cooperation between the managers of the infrastructures and the managers of the supply chains disrupted by an extreme event. Both the model and the problem solving process are exercised with a realistic industry problem.

Introduction

This paper addresses the design of a resilient supply chain by proposing efficient restoration strategies to cope with supply chain disruptions. A supply chain comprises different entities that are connected by the physical flow of materials or products. Disruptions could occur at any section of the network, in any of the processes, for a wide variety of reasons such as transportation delays, power outages, or natural or man-made disasters. A resilient supply chain is a system that has the ability to recover quickly from disruptions and ensure customers are minimally affected.

Craighead and colleagues [1] studied the severity of the disruption and related it to three supply chain design characteristics: density, complexity, and node criticality; and to the two supply chain mitigation capabilities: recovery and warning. They pointed out that, as recovery capacity increases within a supply chain, the quicker the supply chain returns to the normal level and the less severe the disruption will likely be. They conclude that “an unplanned event that disrupts a supply chain with the capability to respond quickly and effectively is less likely to be severe than the same supply chain disruption affecting a supply chain with little or no capability to recover”. It can be illustrated by the respective responses of Nokia and Ericsson to the loss of a supply of radio-frequency chips (RFCs) in early 2000 [2], [3]. Although facing the same situation, two companies responded differently and thus ended up with two endings: one survived from the disruption while the other ultimately exited from the business.

Infrastructure is defined as the set of interdependent networks and systems comprising identifiable industries, institutions (including people and procedures), and distribution capabilities that provide a reliable flow of products and services essential to the defense and economic security of a country, the smooth functioning of government at all levels, and society as a whole [4]. We approach the question of efficient restoration strategies raised by a resilient supply chain from the perspective of infrastructure systems and their logical relationship with the supply chain. Since the functioning of society depends heavily on energy, transportation, telecommunication, financial, and other infrastructures, infrastructure systems play an important role in operations of a supply chain. Ignoring these fundamental systems will make the study of supply chain management unrealistic and impractical, especially for supply chain restoration.

In the example of 3J's Trucking Company (3J's) [5], we can see that in order to restore its destroyed distribution system, its logistical scheduling system had to work effectively. However, the disruption to the telecommunication service caused 3J's to be unaware of road information and thus unable to devise alternate routes. Telecommunication restoration is critical to 3J's. It would bring back timely and accurate transportation information, which leads to efficient logistical schedules. Ignoring telecommunication restoration, as well as its influence, would eventually cost the company both more money and time in the restoration of its distribution system. In the example of the Northeast Blackout of 2003 [6], the loss of the power supply caused the loss of production capacity of the factories in the affected area. Those factories could not restore their production until the power grid was stabilized. They were dependent on restoration of the power grid. If this dependency was taken into account—in other words, power restoration information was considered by supply chain managers during their restoration planning—they would have made better decisions concerning supply, inventory, and distribution. For example, they could have scheduled supply to arrive just as power in a region was restored and avoid paying for storing materials before manufacturing can be started, or lacking supply in the first few days of restoration of power.

Consideration of infrastructure systems in supply chain restoration will raise the following questions: How can we represent relationships between infrastructure systems and the supply chain? How can supply chain managers utilize information from infrastructure managers to make efficient restoration plans? And how can their plans benefit infrastructure managers? Our approach in addressing those questions seeks to achieve two goals: (1) develop a mathematical representation of logical dependencies between the supply chain and infrastructure systems, and (2) provide the best restoration strategy to help the supply chain managers and infrastructure managers cooperate to mitigate the impact of a disruption.

Section snippets

Literature review

Supply chain design involves determining the supply chain configuration and the distribution of resources over the resulting supply chain network. Basically, it is a two-stage network design problem. First, managers decide on locations where facilities will be established and on the capacity to be assigned to each facility. Second, they assign current demand to the available facilities and identify lanes along which products will be transported. How do they design a supply chain network to make

Interdependent layered network model

Generally, the graphical representation of a supply chain consists of a single-layer network. Nodes could be production facilities, warehouses, or demand zones. Arcs in the network represent connectivity between different nodes. Flows on the individual arcs represent the movement of materials or products between nodes connected by arcs. One limitation of the single-layer network structure is the inability to represent relationships between supply chains and other support infrastructure networks

Proposed problem-solving process

We investigate a scenario where an extreme event disrupts the power supply, telecommunications, and transportation in a region. Production facilities and warehouses in this area are affected by this event. To address the loss of production and distribution capabilities, managers of the supply chain have the following options: (i) adjust the production at the other plants to cover the loss, (ii) procure products from sources external to the supply chain (sub-contract or out-source), and (iii)

Computational results

In order to demonstrate our research on supply chain restoration, we designed a supply chain, based on the following rules, that includes plants, distribution centers, and demand zones all over the United States, as well as an illustrative national power grid (Fig. 4) and an illustrative national telecommunication network (Fig. 5).

  • Location of plant: There are ten plants which together make 400 products, including items to meet urgent needs of victims during a disaster such as bottled water,

Conclusions

We present a framework for supply chain restoration which takes into consideration disruptions to the services provided by infrastructure systems; identifies and models the interdependencies between the supply chain network and infrastructures, and uses the model to develop supply chain restoration plans that can improve the company's resilience to disasters. Our goal is an efficient restoration strategy that provides supply chain managers with the ability to work with infrastructure managers.

Acknowledgments

This work was supported by the National Science Foundation under Grant CMS 0139306, Impact of the World Trade Center Attack on Critical Infrastructure Interdependencies; Grant DMII 0228402, Disruptions in Interdependent Infrastructures: A Network Flows Approach; and Grant CMS 0301661, Decision Technologies for Managing Critical Infrastructure Interdependencies. The work of W.A. Wallace was supported by the US Department of Homeland Security under Award Number: 2008-ST-061-ND-0001. The views and

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