The Decisions on Backup Supply in the Presence of Supply Disruptions

As supply chains are becoming more dependent upon suppliers, the importance of using backup supply is receiving increasing attention. The objective of this paper is to develop a set of models to facilitate manufacturers/buyers' decision as to when to use a backup supply if the main supply source is interrupted. The authors take a number of cost factors such as production, purchasing and inventory holding during the disruption cycle into consideration. The impacts of the duration and the magnitude of the main supplier's breakdown are explicitly studied, and the effect of demand change during disruption is also examined. Numerical illustrations are given to show the applications of the decision-making models developed in the paper.