Design and Planning of Closed Loop Supply Chains: A Risk Averse Multi-Stage Stochastic Approach

LUIS J. ZEBALLOS; CARLOS A. MÉNDEZ; ANA P. BARBOSA POVOA

INDUSTRIAL & ENGINEERING CHEMICAL RESEARCH

AMER CHEMICAL SOC

Lugar: Washington; Año: 2016 vol. 55 p. 6236 - 6249

0888-5885

This paper presents a comprehensive risk averse multi-stage model for dealing with the design and planning problem of a closed-loop supply chain (CLSC) considering adjustments in the supply chain structure during the planning horizon as well as uncertainty in supply and customer demands. The stochastic approach addresses a problem of a generic multi-period multi-product CLSC with a general network structure of ten type of entities, risk averse objectives associated with both, costs and revenues, a flexible network structure, transport capacity, salvage grade of returned products, CO2 emissions of the transport system as well as minimum and maximum storage and processing capacity limits for network entities. A key aspect of the proposed work is to cope with a multi-objective function where the maximization of the expected profit is combined with the fundamental idea of risk management incorporated through the explicit trade-off between risk associated with costs and revenues. To the author´s knowledge, the join consideration of risk management with the aspects related to the opening/closing of entities during the planning horizon in a multi-stage stochastic context has not yet been considered. With the objective of achieving more reliable solutions, five objective functions that include risk averse criteria are considered. A sensitivity analysis of the approach performance considering changes on the parameters associated with the risk metrics is conducted. Variations on the relevance of the risk quantification are carried out in order to show the trade-off between solution quality and handling of uncertainty.