A recovery model for a two-echelon serial supply chain with consideration of transportation disruption

Supply chains are becoming increasingly competitive and complex in order to effectively meet customer demands. These characteristics make supply chains vulnerable to various risks, including disruptions. In this study, a recovery model is explored for a two-stage production and inventory system with the possibility of transportation disruption. This model is capable of determining the optimal ordering and production quantities during the recovery window, and ensuring that the total relevant costs are minimized, while seeking to recover the original schedule. An efficient heuristic was developed to solve the model. The results showed that the optimal recovery schedule is highly dependent on the relationship between the backorder cost and the lost sales cost parameters. In addition, the heuristic was able to give quality solutions for the model, with very small deviations of the heuristic solutions from the optimal value. Such tools are useful in assisting managers towards effective decision making, particularly in determining the optimal recovery strategy for the longevity and sustainability of their firms undergoing disruptions. (c) 2012 Elsevier Ltd. All rights reserved.