The Battle to Decrease the Impact of the Structural Complexity in Supply Chains: An Algorithmic Approach

Abstract

Companies, aimed at improving profits, seek to capture a larger market share. Therefore, they expand their networks to reach new markets. But soon find out that their supply chain becomes less efficient returning less benefits than expected due to hidden costs. This is because managers did not take into account the structural complexity of their networks. Structural complexity in supply chains is related to the negative effect of the proliferation of products, distribution channels and markets. In this work, an alternative formulation of the traditional p-median problem that includes a complexity parameter in the model’s formulation is used. Four strategic approaches to battle the impact of the structural complexity are analyzed in this work to support the managers’ decision making. A case study based on different cities located in France is used to carry out some experiments showing improvements for the proposed strategies.