Reliability evaluation and adjustment of supply chain network design with demand fluctuations

This study focuses on supply chain network design problems by considering economies of scale and demand fluctuations. A reliability evaluation method is developed to evaluate the performance of plants under demand fluctuations. In addition, two mathematical programming models are developed to determine the optimal adjustment decisions regarding production reallocation among plants under different fluctuating demands. The judgments to adjust or to do-nothing are investigated by comparing the results if the adjustment is made or not made. Results show that making adjustments benefits the manufacturers by reducing total production cost and avoiding revenue loss, which outweighs the extra costs, especially for high value-added products. Results also suggest that the manufacturer should ignore a short period abnormal state, since the benefits to respond to it might not compensate the high allocation costs. The results of this study provide a reference for the manufacturer in their decision making process of network planning with demand fluctuations, when they have to cope with benefits and costs during abnormal states.