Critical Needs Supply Chains Under Capacity and Demand Disruptions

The special issue of Transportation Research A on the theme of Network Vulnerability in Large Scale Transport Networks, edited by Michael A.P. Taylor, is now published.

Our paper, "A bi-criteria indicator to assess supply chain network performance for critical needs under capacity and demand disruptions," Patrick Qiang and Anna Nagurney, appears in this issue, which is volume 46 (5), June 2012.

This paper was also highlighted in a newsletter of  the OR Society (thanks). Patrick is a faculty member at the Graduate School of Professional Studies at Penn State University Malvern and I am at the Isenberg School at UMass Amherst.

In this paper, we developed a supply chain network model for critical needs products, which captures disruptions in capacities associated with the various supply chain activities of production, transportation, and storage, as well as those associated with the demands for the product at the various demand points. Critical needs products may be defined as those products and supplies that are essential to human health and life. Examples include food, water, medicines, and vaccines. The demand for critical needs is always present and, hence, the disruption to the production, storage, transportation/distribution, and ultimate delivery of such products can result not only in discomfort and human suffering but also in loss of life. Such supplies are essential in times of disasters and emergencies.

The objective is to minimize the total network costs, which are  generalized costs that may include the monetary, risk, time, and social costs. Two different cases of disruption scenarios are considered. In the first case, we assume that the impacts of the disruptions are mild and that the demands can be met.  In the second case, the demands cannot all be satisfied. For these two cases, we propose two individual performance indicators.
 
We showed that the governing optimality conditions can be formulated as a variational inequality problem with nice features for numerical solution.

In addition, we proposed two distinct supply chain network performance indicators for critical needs products. The first indicator considers disruptions in the link capacities but assumes that the demands for the product can be met. The second indicator captures the unsatisfied demand. We then constructed a bi-criteria supply chain network performance indicator and used it for the evaluation of distinct supply chain networks. The bi-criteria indicator allows for the comparison of the robustness of different supply chain networks under a spectrum of real-world scenarios. We illustrated the new concepts in the paper with numerical supply chain network examples in which the supply chains were subject to a spectrum of disruptions involving capacity reductions as well as demand changes.

Given that the number of disasters has been growing globally, we expect that the methodological tools introduced in this paper will be applicable in practice in disaster planning and emergency preparedness.

Thanks also to Wiley for publicizing our first critical needs supply chain network paper, which focused on design, in its Asia blog on What's New in Operations Research.

Before Disasters Strike -- Assessing Supply Chain Performance Under Disruptions

As documented in numerous studies, as well as books, including our Fragile Networks book, the number of disasters is growing as well as the number of people affected by disasters.

Having the appropriate supply chains in place that are resilient to disruptive scenarios will not only save lives but make the disaster recovery process less painful and costly.

Along with my collaborators, notably, Dr. Qiang of the Graduate School of Professional Studies at Penn State University Malvern, and my doctoral students, Min Yu and Amir H. Masoumi, we have been developing quantitative tools and metrics for supply chains in humanitarian operations and healthcare.

In particular, we have been focusing on a broad class of products known as critical need products.

Critical needs products and supplies are those that are essential to human health and life. Examples include food, water, medicines, and vaccines. The demand for critical needs products is always present.

Our first paper on the topic, Supply Chain Network Design for Critical Needs with Outsourcing, Anna Nagurney, Min Yu, and Qiang Qiang, was published in the Papers in Regional Science 90: (2011) pp 123-142.

Critical needs supply chains also play a pivotal role during and post disasters during which severe disruptions can be expected to have occurred. Indeed, the past few decades have visibly demonstrated that disasters, whether natural or man-made, may severely damage infrastructure networks, such as transportation and logistical networks, may cause great loss to human life, and also may result in tremendous damage to a nation's economy.

Hence, critical needs supply chains are essential in both healthcare and humanitarian logistics operations. Given their importance also in terms of emergency preparedness and planning, special attention to them is needed, since their functions are so important to the well-being and the very survival of our societies.

Specifically, in the case of disruptions to critical needs supply chains, there are two primary parameters that may be seriously affected:

1. the capacities of the various supply chain network activities (production, storage, transportation, etc.) and

2. the demands for the products may not be satisfiable.


Indeed, as shown by numerous recent disasters, disruptions may tremendously reduce supply chain capacities as well as impact the demands for critical needs products.

Hence, it is essential for organizations to have performance metrics which enable them to assess what are the costs associated with supply chain disruptions under different scenarios. Moreover, will the demands be met and, if not, what can one expect to be the unmet demand?

To provide appropriate metrics and tools to organizations ranging from humanitarian ones to governmental ones as well as international bodies, as well as corporations, we have constructed a bi-criteria supply chain performance indicator that captures the probabilities of capacity disruptions under different scenarios as well as demand being unsatisfied.

The indicator is developed, discussed, and applied in our paper, A Bi-Criteria Indicator to Assess Supply Chain Network Performance for Critical Needs Under Capacity and Demand Disruptions, Qiang Qiang and Anna Nagurney, to appear in Transportation Research A: Special Issue on Network Vulnerability in Large-Scale Transport Networks.

Since the goals of supply chains for critical needs are quite different from those of commercial supply chains, they should be evaluated by distinct sets of metrics. As pointed out by Beamon and Balcik (2008), the goals for humanitarian relief chains, for example, include cost reduction, capital reduction, and service improvement (see also Altay and Green (2006)). Tomasini and van Wassenhove (2004), similarly, argued that: A successful humanitarian operation mitigates the urgent needs of a population with a sustainable reduction of their vulnerability in the shortest amount of time and with the least amount of resources.

We hope that our paper has contributed to this growing research and application domain in a rigorous way.

Our earlier work on supply chain disruptions in commercial supply chains included the paper, Modeling of Supply Chain Risk Under Disruptions with Performance Measurement and Robustness Analysis, Qiang Qiang, Anna Nagurney, and June Dong, in Managing Supply Chain Risk and Vulnerability: Tools and Methods for Supply Chain Decision Makers, T. Wu and J. Blackhurst, Editors, Springer, Berlin, Germany (2009), pp 91-111.