The Reliable Facility Location Problem Under Random Disruptions

The classical location models implicitly assume that the facilities, once built, will always operate as planned. However, some of the facilities may become unavailable from time to time due to disruptions caused by natural disasters, key-supplier bankruptcy, terrorist attacks, or labor strikes. Therefore, supply chain disruptions have gained considerable attention by researchers and practitioners in the past few decades. The catastrophic accidents highlighted the urgent need for effective solutions to manage supply chain disruptions in spite of their low probability of occurrence. Therefore, it is critical to take account of disruptions when designing supply chain networks so that they perform well as a whole even after a disruption. Taking into account the random disruption risk, this paper proposes a mixed integer programming model for the reliable facility location problem. This model try to minimize the sum of initial facility construction costs and expected transportation costs in both the regular and the failure scenarios, and present a Lagrange relaxation algorithm to solve it. This paper also analyzes the algorithm’s solving performance by a numerical experiment.