Stochastic versus Deterministic Approach to Coordinated Supply Chain Scheduling

Abstract EN

The purpose of this paper is to consider coordinated selection of supply portfolio and scheduling of production and distribution in supply chains under regional and local disruption risks.

Unlike many papers that assume the all-or-nothing supply disruption pattern, in this paper, only the regional disruptions belong to the all-or-nothing disruption category, while for the local disruptions all disruption levels can be considered.

Two biobjective decision-making models, stochastic, based on the wait-and-see approach, and deterministic, based on the expected value approach, are proposed and compared to optimize the trade-off between expected cost and expected service.

The main findings indicate that the stochastic programming wait-and-see approach with its ability to handle uncertainty by probabilistic scenarios of disruption events and the much simpler expected value problem, in which the random parameters are replaced by their expected values, lead to similar expected performance of a supply chain under multilevel disruptions.

However, the stochastic approach, which accounts for all potential disruption scenarios, leads to a more diversified supply portfolio that will hedge against a variety of scenarios.