Risk Averse Decision Models for Resilient Supplier Selection

Abstract

Decision models provided by this study aim to help managers to find remedies to devastating supply chain disruptions that could be caused by a mismatch between volatile customer demand and unreliable supply. We considered the newsvendor problem where the firm has more than one suppliers who are not necessarily reliable. We have provided a range of decision models with risk neutral and risk averse objective functions. The model uses scenarios to represent uncertain events (specifying customer demand and supplier reliability). Linear Programming formulations are provided which can be easily solved using commercially available software. A sample numerical study is also carried out to provide valuable managerial insights for optimal sourcing behaviors of risk averse and risk neutral firms. In the numerical study, expected profit, CVaR and Mean Excess Regret models are selected for evaluation. (English) [ABSTRACT FROM AUTHOR]