Super facilities versus chaining in mitigating disruptions impacts

• We address demand allocation problems in case of facility disruptions.
• We examine the use of flexibility as a strategy to mitigate disruptions.
• Based on analytical reasoning we compare single chain and super facility configurations.
• We propose an algorithm for determining the optimal capacity of the super facility.
• We propose an algorithm for determining the optimal configuration to adopt.

Dealing disruptions has increasingly attracted researchers’ attention in the last decades due to recent events: weather deregulation, natural disasters, financial crisis, etc. Researchers often dealt with the strategic aspect of the problem while making facility location decisions to build a robust supply chain. In this paper we address the flexibility aspect. We consider the problem of allocating demand arising from a set of products to a set of dedicated facilities. The facilities are subject to disruption and the demand is then lost. To mitigate disruption impacts, we consider the use of a super facility that can hold the demand of products when the dedicated facilities are under failure. In systems with identical products and facilities, we propose an algorithm that can be used to determine the optimal capacity of the super facility so as to minimize the sum of capacity investment, demand allocation and lost sales cost. Finally we compare the performance of the super facility configuration to that of the single chain configuration. The single chain refers to a facility configuration where each facility is configured to fulfill only two products and each product can be assigned to only two facilities and the whole system forms a closed chain.