Supply chain flexibility and operations optimisation under demand uncertainty: a case in disaster relief

Abstract

After a disaster happens, emergency response operations are critical to save humans’ lives and properties. The limited resources and time requirements call for coordinated supply chain operations. This paper studies supply chain operations for rescue kits in disaster reliefs, motivated by a real-world application. The objective is to minimise the total tardiness and peak tardiness of product delivery over the multi-period planning horizon. One major challenge is the lack of reliable prediction of customer demand in disasters. In order to cope with demand uncertainty while maintaining the tractability of the optimisation model, we decompose the demand into two components: a relatively stable base demand predicted by historical data and unpredictable demand surges. For the base demand, an optimisation model is developed to optimise the production and distribution operations, as well as the inventory replenishment policy for manufacturers and distribution centres, so as to minimise the total tardiness. For the demand surges, we propose to deploy supply chain flexibility to cope with the uncertainty. An empirical study shows the effectiveness of increasing supply chain flexibility and suggests some managerial insights on configuring such flexibility in emergency operations.