Selection and protection of suppliers in a supply chain with disruption risks

Abstract

The selection and protection of part suppliers and order quantity allocation under disruption risks are considered. The decision maker needs to select and protect suppliers against disruptions and to allocate order quantity among the selected suppliers and the inventory among the protected suppliers to minimise total cost of supplier protection, inventory holding, ordering, purchasing and shortage of parts and to mitigate the impact of disruption risks. A portfolio approach and bi-objective stochastic mixed integer programming with conditional value-at-risk are applied to control the risk of worst-case cost. Numerical examples are presented and some computational results are reported.