Survivability‐aware design and optimization of distributed supply chain networks in the post COVID ‐19 era

Abstract Pandemic-induced lockdowns, restrictions on commercial activities, and natural disasters can disrupt a supply chain for prolonged time periods. These disruptions signi_cantly impact the consumer demands, which in turn a_ect the capacity and pro_tability of a supply chain network. Economic survivability is the ability to maintain a net positive economic worth, or at least keeping it above a certain threshold, in the presence of sudden and prolonged disruptions that drastically reduce the product demands, prices, resource availability or others. We address the economic survivability of geographically distributed interconnected networks under demand disruptions. We formulate and incorporate the necessary conditions for ensuring economic survivability in supply chain design. The overall problem is formulated as a mixed-integer nonlinear program (MINLP). Increasing the economic survivability in general also increases the return-on-investment (ROI) and profitability. However, for multi-regional, distributed and interdependent supply chains, a more balanced distribution of investment portfolio is important to improve the local survivability of each region, but it comes at the expense of overall or global profitability. We also observe that the economic survivability is negatively impacted by over-designing a supply chain to meet excess demands (typically from spot markets). Decision-makers should balance the trade-offs between survivability and excess demand satisfaction by thoroughly assessing the probability of positive and negative demand uctuations.