Research On Order Strategies With The Risks Consideration Of Supply Disruption

With the era of economic globalization, modern enterprises adopt a new mode of supply chain management. Procurement is the source of the supply chain, which plays a vital role for the whole supply chain and for the survival and development of the enterprise. Operation of the supply chain will be affected by various factors, while the existence of various forms of risk. Supply disruption is one of the kinds of the risk. Once supply disrupts, it will result in excessive downtime of production resources, upstream and downstream supply chain repercussions, and eventually a loss in the market value of the firm. Supplier selection and order allocation are two important aspects in purchasing decision-making, so, in the presence of the risk of supply disruption, how to develop a simple, scientific, effective order policy becomes an urgent problem to be solved.In this paper, we study a two-echelon supply chain, which constitute of a purchasing company and its alternative suppliers, while we analyze a single period, single product problem. From the perspective of the procurement company, we take a comprehensive consideration of the product quality, delivery lead time, supplier capacities, product prices, supplier costs and supplier reliabilities to research on order strategies with the risks consideration. There are two main parts in this study as following.In the case which the procurement need of the enterprise is determined, we first study an order strategy without regard to supply disruption, then modeling it and a numerical simulation is carried out. On this basis, we take into account the existence of the risk of supply disruption, quantifying it using expected loss costs as a result of the decision tree, then established a pure integer linear programming model and carried out a numerical simulation using Lingo8.0.we also compared the results which take the risk into consideration and which not, the results of the analysis verified the feasibility of the problem. Then, we conducted a sensitivity analysis which considered different risk levels and unit penalty cost.Then, this paper take into account the presence of uncertain demand,we incorporate both the uncertainty of demand and supplier into the optimization model to make our study more in-depth. In this paper, we assume that the procurement need of the enterprise subjects to the normal distribution, market condition which the enterprise in is divided into three different scenarios and we introduced the disruption loss functions of the different scenarios. An integer nonlinear programming model is established and we carried out a numerical simulation. Moreover, in order to explore the impact of different market conditions and supplier reliabilities on the company’s options, we conducted a sensitivity analysis which considered different risk levels and probabilities of different scenarios.