In this article, the design and retrofit problem of a supply chain (SC) consisting of several production plants, warehouses and markets, and the associated distribution systems, is considered. The first problem formulation modifies and extends other previously presented models, in order to include several essential characteristics for realistically representing the consequences of design decisions on the SC performance. Then, in order to take into account the effects of the uncertainty in the production scenario, a two-stage stochastic model is constructed. The problem objective, i.e., SC performance, is assessed by taking into account not only the profit over the time horizon, but also the resulting demand satisfaction. This approach can be used to obtain different kinds of solutions, that may be valuable at different levels. On one hand, the SC configurations obtained by means of deterministic mathematical programming can be compared with those determined by different stochastic scenarios representing different approaches to face uncertainty. Additionally, this approach enables to consider and manage the financial risk associated to the different design options, resulting in a set of Pareto optimal solutions that can be used for decision-making. © 2004 Elsevier Ltd. All rights reserved.
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