Monday, December 19, 2011

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.