Risk Management for e-Commerce Supply Chain Network Using Robust Optimization Approach: A Case Study

Abstract

Supply chain (SC) encompasses all events involved in the transformation of goods from the raw material stage to the final stage, i.e., when the goods and services reach the end client. A supply chain comprises of flow of materials, information, funds, and services from suppliers, factories, distribution centers to the end clients. Decisions regarding facility locations, supply chain planning, and logistics should be made cautiously in order to establish robust supply chain. This work is an effort to provide the firms with the models so as to help the managers to take strategic level decisions under uncertainty. A close loop supply chain (CLSC) network design that consists of forward and reverse flow is carried out. The robust optimization (RO) based modeling with both direct shipping of the products and shipping through distribution center under demand uncertainty is proposed and analyzed. The results are presented for supply chain planning strategies for an e-supply chain of case company (furniture manufacturing firm). The objective function value for robust model increases for an increase in uncertainty level. This increase in the objective function value for robust model is because of meeting the customers demand in worst case. for the case company, it was observed that for uncertain parameters (demand = 0.8), opening of total 9 MF and 4 DC can accommodate the worst case of network design. The computational results indicate that robust model is better than the deterministic one for uncertain parameters.