Robust actions for improving supply chain resilience and viability
Abstract
It is vital for supply chains (SCs) to survive the dramatic and long-term impacts from severe disruptive events, such as COVID-19 pandemic. SC viability, an extension of SC resilience, is increasingly attracting attention from both academics and practitioners. To improve SC viability, the government can perform a series of costly interventions on SCs. Due to data scarcity on unpredictable disruptive events, especially under the pandemic, the information related to SC partners may not be accurately obtained. In this paper, we investigate a novel SC resilience and viability improving problem under severe disruptive events, in which only the probability intervals of SC partners’ states are known. The problem consists of the selection of appropriate intervention actions, respecting a limited capital budget. The objective is to minimize the worst-case disruption risk of the manufacturer. Specifically, Causal Bayesian Network (CBN) is applied to quantify the SC ripple effects; Do-calculus technique is used to measure the benefits of government intervention actions; and robust optimization is employed to minimize the disruption risk under the worst-case condition. For the problem, a new robust optimization model that combines the CBN and the Do-calculus is constructed. Based on analyses of problem features, an efficient problem-specific branch-and-bound (PS-BAB) algorithm is proposed to solve the problem exactly. Experimental results show the efficiency of our methodology and managerial insights are drawn.