Geopolitical disruptions in global supply chains: The role of strategic alliances

Abstract

Recent geopolitical disruptions, such as tariff surges, trade sanctions, and regulatory fragmentation, have introduced significant uncertainty into global supply chain network design. In this paper, we investigate how firms can leverage strategic alliances as a risk mitigation mechanism in response to two prominent forms of trade restrictions: (i) direct tariff impositions and (ii) quota-based trade barriers. We propose a two-stage robust optimization framework that models strategic alliances as an exogenous parameter, capturing their influence on trade costs and operational flexibility. The framework integrates long-term decisions, such as facility location and capacity planning, with short-term allocation decisions under uncertainty. To reflect realistic service-level obligations often present in global contracts, we also introduce a demand commitment constraint, requiring that a minimum fraction of customer demand be fulfilled across markets. We develop two tractable models: (i) a mixed-integer linear programming (MILP) reformulation for tariff-driven disruptions, and (ii) a two-stage robust model tailored to quota constraints, which are more complex. Using both hypothetical and real-world data, our results demonstrate that strategic alliance structures significantly improve worst-case profitability, particularly in high-uncertainty environments. Remarkably, even a single strategic alliance between a pair of countries can lead to approximately a 50% improvement in worst-case profitability. These findings highlight the value of incorporating strategic alliances into global supply chain network design.