| This study evaluated strategies for disruption management in a supply chain by incorporating two types of risk: supply risk and environmental risk. Four main disruption management strategies were examined: pre-positioning inventory, backup suppliers, supplier protection, and supplier flexible capacity. Utilizing the concept of a decision tree, a two-stage mixed-integer programming model was developed as a general model for a supply chain with no disruption management strategy. Then, the model was extended to incorporate each of the four supply risk and environmental risk mitigation strategies, and the impact of each of these strategies on the expected supply chain cost and risk was evaluated. The study showed how implementation of each strategy can help firms mitigate supply chain disruptions. The findings suggest that all four strategies reduce costs and risks, compared to the general model with no disruption management strategy. An analysis of reliability, risks, and costs was conducted on each strategy to provide insights on supplier selection, demand allocation, and capability development in a supply chain that is threatened by supplier and regional disruptions. Finally, it was shown that regionalizing a supply chain is an effective way to mitigate the negative impacts of environmental risks and regional disruptions on the supply chain. |
