1228. Network Flexibility Design Under Endogenous Supply and Demand Uncertainty
Invited abstract in session WC-54: Stochastic models in Supply Chain Management, stream Stochastic modelling.
Wednesday, 12:30-14:00Room: Liberty 1.08
Authors (first author is the speaker)
| 1. | Soroush Fatemi-Anaraki
|
| TUM School of Management, Technical University of Munich | |
| 2. | Martin Grunow
|
| TUM School of Management, Technical University of Munich | |
| 3. | Stefan Weltge
|
| Technical University of Munich |
Abstract
In real-world supply networks, capacity and demand are subject to uncertainty. An effective hedging mechanism is to enable plants to produce multiple products, making them flexible. While adding flexibility can compensate for uncertainty, assigning fewer products to a plant allows for the use of specialized equipment and workforce, leading to higher efficiency due to the specialization effect. Motivated by this, we study supply networks in which capacity depends on the flexibility design, i.e., it is an endogenous random variable, whereas demand is induced by the market and independent of the flexibility design.
For general endogenous capacity uncertainty, it is unclear whether adding any flexibility to a dedicated (inflexible) design improves the expected sales. We study conditions under which having flexibility beyond the dedicated design is sensible. Additionally, we examine the performance of the long-chain—a connected design wherein each plant (product) is incident to two products (plants)—in the presence of the specialization effect. To this end, we develop analytical results and model the problem as a two-stage stochastic program to perform numerical experiments on the impact of the specialization effect on the expected sales.
Keywords
- Supply Chain Management
- Stochastic Models
- Network Design
Status: accepted
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