A supply chain disruption risk mitigation model to manage COVID-19 pandemic risk

This study develops a mathematical model to mitigate disruptions in a three-stage (i.e., supplier, manufacturer, retailer) supply chain network subject to a natural disaster like COVID-19 pandemic. This optimization model aims to manage supply chain disruptions for a pandemic situation where disruptions can occur to both the supplier and the retailer. This study proposes an inventory policy using the renewal reward theory for maximizing profit for the manufacturer under study. Tested using two heuristics algorithms, namely the genetic algorithm (GA) and pattern search (PS), the proposed inventory-based disruption risk mitigation model provides the manufacturer with an optimum decision to maximize profits in a production cycle. A sensitivity analysis was offered to ensure the applicability of the model in practical settings. Results reveal that the PS algorithm performed better for such model than a heuristic method like GA. The ordering quantity and reordering point were also lower in PS than GA. Overall, it was evident that PS is more suited for this problem. Supply chain managers need to employ appropriate inventory policies to deal with several uncertain conditions, for example, uncertainties arising due to the COVID-19 pandemic. This model can help managers establish and redesign an inventory policy to maximize the profit by considering probable disruptions in the supply chain network.

Automated summary

This study develops a mathematical model to mitigate disruptions in a three-stage supply chain network subject to natural disasters like COVID-19 pandemic. By providing appropriate inventory policies, manufacturers can maximize profits while considering potential disruptions.