Modeling supply chain disruption risk management

Supply chain disruptions, from man-made and natural disasters, represent the most pressing concerns in companies. An earthquake in Japan and a massive flood in Thailand in 2011 have shown that supply chain disruptions are influenced not only by the risk events but also by the supply chain vulnerability and risk mitigation strategies practiced at the locations and countries. Japan's risk preparation allows them to predict the damages and manage the recovery plan; in contrast, Thailand's lack of political stability has caused unpredictable consequences, which have significant implications for global supply chains. This paper illustrates how to incorporate supply chain disruption risk into a supply chain network decision-making process. First, we identify and assess factors that influence supply chain disruption risk using a multi-criteria rating method. Next, we develop a multi-objective goal programming model to support global supply chain network design decisions considering the disruption risk as one of the criteria. The model aims to simultaneously achieve profit, customer satisfaction, and disruption risks goals. A numerical example is used to demonstrate the proposed supply chain disruption risk management framework and to provide managerial implications.