Investigation of Solutions for Safety Stock and Backup Supplier Selection for Supply Chain Disruption Risk Management
Date Issued
2015
Date
2015
Author(s)
Liu, Pei-Wen
Abstract
With improvement in technology and transportation, supply chain becomes more international and, unfortunately, more vulnerable. Hence, issues about supply chain risk management are more and more important nowadays. When company’s supply chain is very vulnerable to its environment, company’s decision maker should consider applying mitigation strategies to survive in this environment. In our research, this study applies two proactive mitigation strategies to prevent our supply chain system from serious disruption risk. This study analyzes the characteristics of safety stock and backup supplier and applies these two mitigation strategies together to achieve the lowest cost of adopting mitigation approaches. Our model considers stochastic demands with continuous-review system under two-echelon supply chain in which a retailer replenishes its inventory basically from a vulnerable primary supplier who may have a big chance to encounter disruptions. Under this circumstance, this study find out the optimal solution of proactively adopting two mitigation strategies together so as to achieve our objective function, the lowest working inventory cost. This study understands the optimal adopting proportions of backup supplier and additional safety stock that can let us achieve our lowest cost. These studies also do sensitivity analyses and scenario analyses to understand what decision maker should do when under different situations. The results of numerical analysis prove that our model is valid and can really help decision maker to make proper decisions while does not have to worry about drastic changes on total cost.
Subjects
Supply chain disruption risk
Mitigation strategy
Safety stock
Backup supplier
Stochastic inventory management
Type
thesis
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