Distribution and Inventory Planning in a Supply Chain Under Transportation Route Disruptions and Uncertain Demands

Distribution and Inventory Planning in a Supply Chain Under Transportation Route Disruptions and Uncertain Demands

Himanshu Shrivastava (IITB-Monash Research Academy, IIT Bombay, Mumbai, India), Andreas T. Ernst (Monash University, Melbourne, Australia) and Mohan Krishnamoorthy (The University of Queensland, Brisbane, Australia & Monash University, Melbourne, Australia)
DOI: 10.4018/IJISSCM.2019070103

Abstract

This article considers transportation disruptions and its detrimental impact on the quality of the enroute shipment. The authors consider a supply chain system of a short life cycle product that has a capacitated supplier, a retailer and multiple routes of transportation under different disruption risks, uncertain cost of transportation, and uncertain demands. The authors investigate a hybrid problem in which the firm needs to develop a suitable distribution strategy under disruption risks along with an optimal checking policy when faced with the supply of varying quantities of damaged items. The authors formulate a non-linear mathematical model in which the overall objective is to maximise the expected profit and to help the firm in decision making under uncertain environments. Lastly, a statistical study is carried out to perform uncertainty analysis.
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1. Introduction

In today’s highly competitive market, customers rapidly change their preferences. These changes along with the various current technological advancements have compelled firms to be more effective and efficient in the management of their supply chains. Moreover, to remain competitive, organisations may need to undertake various levels of planning. Simchi-Levi et al. (2004) have identified three planning levels on the basis of the time horizon: strategic, tactical and operational. Distribution planning is one of the important aspects of supply chain management which typically falls under the tactical planning level (Ahumada & Villalobos, 2009). Distribution planning not only influences operational decisions but also, these decisions directly affect customer responsiveness and supply chain profitability (Azad et al., 2014, Baghalian et al., 2013). Distribution decisions are mid-term decisions that have a long-lasting impact. While planning for such decisions, disruptions ought to be taken into account because disruptions are unavoidable in most business scenarios (Baghalian et al., 2013).

A major example of supply chain disruption is the disruption caused by Typhoon Halong in South-West Japan in 2014. It is considered to be one of the most disastrous supply chain disruptions, requiring 41 weeks to recover from, with an overall revenue impact of 10+ billion USD (Gao et al., 2016). In most developing countries, roads are poorly constructed and can be responsible for spoilage and spillage of products; for example, crops in India are transported all over the country through trucks. Improper infrastructure and poor road conditions from the producer’s location to the wholesale market can cause the entire shipment to be delayed or spoiled (Negi & Anand, 2015; Artiuch & Kornstein, 2012). According to Artiuch & Kornstein (2012) “fruits such as bananas and mangoes are particularly susceptible in the hot summer months and it is common for at least five per cent of shipment to spoil even without a delay”. These difficulties are further compounded by interstate regulations in which truck drivers have to stop and wait at each state border to seek permission to continue driving.

Authors such as Baghalian et al. (2013), Ray and Jenamani (2016) and Snyder et al. (2006) have provided ample examples of supply chain disruption, which show that it is one of the most compelling issues that organisations face in the context of extreme competitiveness in the current global business environment. In this scenario, the managing and mitigating of disruption has emerged as an important research issue lately (Fan & Stevenson, 2018; Gupta et al., 2014; Liang et al., 2018; Ray & Jenamani, 2016; Sharma et al., 2018; Shrivastava et al., 2017; Snyder et al., 2015). Managing disruption within the supply chain calls for resilience in order to cope with unexpected and, sometimes, unpleasant events (Aqlan & Lam, 2016; Liao et al., 2014; Raghunath & Devi, 2018).

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