Strategies for customer service level protection under multi‐echelon supply chain disruption risk

Strategies for customer service level protection under multi‐echelon supply chain disruption risk

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Article ID: iaor20118668
Volume: 45
Issue: 8
Start Page Number: 1266
End Page Number: 1283
Publication Date: Sep 2011
Journal: Transportation Research Part B
Authors:
Keywords: backorders, multi-echelon system, Disruption
Abstract:

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 or transportation from an alternate source or route, 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.

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