IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v175y2016icp81-95.html
   My bibliography  Save this article

Transparency of risk for global and complex network decisions in the automotive industry

Author

Listed:
  • Häntsch, Marius
  • Huchzermeier, Arnd

Abstract

This paper presents a multi-period, multi-objective optimization model that enables robust production network and location planning during times of increased market uncertainty and risk exposure in environmental factors. The planning model focuses primarily on integrating the quantitative and qualitative risk factors associated with strategic production network planning. Integration was realized by linking a robust programming model with aspects of multi-target optimization using an EPSILON-constraint approach. This allows quantitative risks such as fluctuations in demand, exchange rates, and transportation costs to be factored into a common mixed-integer optimization model as discrete scenarios, with qualitative risks, e.g., security risks, accounted for as part of a points-based evaluation approach. The developed model minimizes the firm’s expected downside risk exposure while meeting a pre-selected threshold level for environmental risks. The trade-off between risk and profit is depicted and interpreted using a Pareto analysis. The developed model makes it possible to characterize a variety of risks that are very difficult to manage when carrying out strategic planning of production networks in practice.

Suggested Citation

  • Häntsch, Marius & Huchzermeier, Arnd, 2016. "Transparency of risk for global and complex network decisions in the automotive industry," International Journal of Production Economics, Elsevier, vol. 175(C), pages 81-95.
    • Handle: RePEc:eee:proeco:v:175:y:2016:i:c:p:81-95
    DOI: 10.1016/j.ijpe.2016.02.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527316000463
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2016.02.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Tang, Christopher S. & Davarzani, Hoda & Sarkis, Joseph, 2015. "Quantitative models for managing supply chain risks: A reviewAuthor-Name: Fahimnia, Behnam," European Journal of Operational Research, Elsevier, vol. 247(1), pages 1-15.
    2. Gutierrez, Genaro J. & Kouvelis, Panagiotis & Kurawarwala, Abbas A., 1996. "A robustness approach to uncapacitated network design problems," European Journal of Operational Research, Elsevier, vol. 94(2), pages 362-376, October.
    3. Elena Ianchovichina, 2007. "Are duty drawbacks on exports worth the hassle?," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 881-913, August.
    4. Jadidi, O. & Zolfaghari, S. & Cavalieri, S., 2014. "A new normalized goal programming model for multi-objective problems: A case of supplier selection and order allocation," International Journal of Production Economics, Elsevier, vol. 148(C), pages 158-165.
    5. William C. Jordan & Stephen C. Graves, 1995. "Principles on the Benefits of Manufacturing Process Flexibility," Management Science, INFORMS, vol. 41(4), pages 577-594, April.
    6. Kauder, S. & Meyr, H., 2009. "Strategic network planning for an international automotive manufacturer," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 36058, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    7. Azaron, A. & Brown, K.N. & Tarim, S.A. & Modarres, M., 2008. "A multi-objective stochastic programming approach for supply chain design considering risk," International Journal of Production Economics, Elsevier, vol. 116(1), pages 129-138, November.
    8. Goh, Mark & Lim, Joseph Y.S. & Meng, Fanwen, 2007. "A stochastic model for risk management in global supply chain networks," European Journal of Operational Research, Elsevier, vol. 182(1), pages 164-173, October.
    9. Meixell, Mary J. & Gargeya, Vidyaranya B., 2005. "Global supply chain design: A literature review and critique," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 41(6), pages 531-550, November.
    10. Mirzapour Al-e-hashem, S.M.J. & Malekly, H. & Aryanezhad, M.B., 2011. "A multi-objective robust optimization model for multi-product multi-site aggregate production planning in a supply chain under uncertainty," International Journal of Production Economics, Elsevier, vol. 134(1), pages 28-42, November.
    11. Liu, Songsong & Papageorgiou, Lazaros G., 2013. "Multiobjective optimisation of production, distribution and capacity planning of global supply chains in the process industry," Omega, Elsevier, vol. 41(2), pages 369-382.
    12. Marc Goetschalcks & Bernhard Fleischmann, 2008. "Strategic Network Design," Springer Books, in: Hartmut Stadtler & Christoph Kilger (ed.), Supply Chain Management and Advanced Planning, edition 4, chapter 6, pages 117-132, Springer.
    13. Georgiadis, Michael C. & Tsiakis, Panagiotis & Longinidis, Pantelis & Sofioglou, Maria K., 2011. "Optimal design of supply chain networks under uncertain transient demand variations," Omega, Elsevier, vol. 39(3), pages 254-272, June.
    14. Erenguc, S. Selcuk & Simpson, N. C. & Vakharia, Asoo J., 1999. "Integrated production/distribution planning in supply chains: An invited review," European Journal of Operational Research, Elsevier, vol. 115(2), pages 219-236, June.
    15. Marius Häntsch & Arnd Huchzermeier, 2013. "Identifying, analyzing, and assessing risk in the strategic planning of a production network: the practical view of a German car manufacturer," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(2), pages 125-158, July.
    16. Han, Jee-Hoon & Ahn, Yu-Chan & Lee, In-Beum, 2012. "A multi-objective optimization model for sustainable electricity generation and CO2 mitigation (EGCM) infrastructure design considering economic profit and financial risk," Applied Energy, Elsevier, vol. 95(C), pages 186-195.
    17. Arnd Huchzermeier & Morris A. Cohen, 1996. "Valuing Operational Flexibility Under Exchange Rate Risk," Operations Research, INFORMS, vol. 44(1), pages 100-113, February.
    18. Han, Jee-Hoon & Lee, In-Beum, 2011. "Development of a scalable infrastructure model for planning electricity generation and CO2 mitigation strategies under mandated reduction of GHG emission," Applied Energy, Elsevier, vol. 88(12), pages 5056-5068.
    19. Ghodsypour, S. H. & O'Brien, C., 2001. "The total cost of logistics in supplier selection, under conditions of multiple sourcing, multiple criteria and capacity constraint," International Journal of Production Economics, Elsevier, vol. 73(1), pages 15-27, August.
    20. Saman Hassanzadeh Amin & Guoqing Zhang, 2014. "Closed-loop supply chain network configuration by a multi-objective mathematical model," International Journal of Business Performance and Supply Chain Modelling, Inderscience Enterprises Ltd, vol. 6(1), pages 1-15.
    21. John M. Mulvey & Robert J. Vanderbei & Stavros A. Zenios, 1995. "Robust Optimization of Large-Scale Systems," Operations Research, INFORMS, vol. 43(2), pages 264-281, April.
    22. Mitra, Amitava & Fortenberry, Jessie C., 1986. "The location-allocation problem using multi-objectives," Engineering Costs and Production Economics, Elsevier, vol. 10(2), pages 113-120, June.
    23. Kouvelis, Panagiotis & Kurawarwala, Abbas A. & Gutierrez, Genaro J., 1992. "Algorithms for robust single and multiple period layout planning for manufacturing systems," European Journal of Operational Research, Elsevier, vol. 63(2), pages 287-303, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kozjek, Dominik & Vrabič, Rok & Eržen, Gregor & Butala, Peter, 2018. "Identifying the business and social networks in the domain of production by merging the data from heterogeneous internet sources," International Journal of Production Economics, Elsevier, vol. 200(C), pages 181-191.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jabbarzadeh, Armin & Fahimnia, Behnam & Sheu, Jiuh-Biing, 2017. "An enhanced robustness approach for managing supply and demand uncertainties," International Journal of Production Economics, Elsevier, vol. 183(PC), pages 620-631.
    2. Häntsch, Marius & Huchzermeier, Arnd, 2016. "Correct accounting for duty drawbacks with outward and inward processing in global production networks," Omega, Elsevier, vol. 58(C), pages 111-127.
    3. Mohammaddust, Faeghe & Rezapour, Shabnam & Farahani, Reza Zanjirani & Mofidfar, Mohammad & Hill, Alex, 2017. "Developing lean and responsive supply chains: A robust model for alternative risk mitigation strategies in supply chain designs," International Journal of Production Economics, Elsevier, vol. 183(PC), pages 632-653.
    4. Govindan, Kannan & Fattahi, Mohammad, 2017. "Investigating risk and robustness measures for supply chain network design under demand uncertainty: A case study of glass supply chain," International Journal of Production Economics, Elsevier, vol. 183(PC), pages 680-699.
    5. Baghalian, Atefeh & Rezapour, Shabnam & Farahani, Reza Zanjirani, 2013. "Robust supply chain network design with service level against disruptions and demand uncertainties: A real-life case," European Journal of Operational Research, Elsevier, vol. 227(1), pages 199-215.
    6. Farahani, Reza Zanjirani & Rezapour, Shabnam & Drezner, Tammy & Fallah, Samira, 2014. "Competitive supply chain network design: An overview of classifications, models, solution techniques and applications," Omega, Elsevier, vol. 45(C), pages 92-118.
    7. Shiva Zokaee & Armin Jabbarzadeh & Behnam Fahimnia & Seyed Jafar Sadjadi, 2017. "Robust supply chain network design: an optimization model with real world application," Annals of Operations Research, Springer, vol. 257(1), pages 15-44, October.
    8. Yang, Yuxiang & Goodarzi, Shadi & Jabbarzadeh, Armin & Fahimnia, Behnam, 2022. "In-house production and outsourcing under different emissions reduction regulations: An equilibrium decision model for global supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
    9. Al-Husain, Raed & Khorramshahgol, Reza, 2020. "Incorporating analytical hierarchy process and goal programming to design responsive and efficient supply chains," Operations Research Perspectives, Elsevier, vol. 7(C).
    10. Emenike, Scholastica N. & Falcone, Gioia, 2020. "A review on energy supply chain resilience through optimization," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    11. Sahling, Florian & Kayser, Ariane, 2016. "Strategic supply network planning with vendor selection under consideration of risk and demand uncertainty," Omega, Elsevier, vol. 59(PB), pages 201-214.
    12. Javid Jouzdani & Mohammad Fathian & Ahmad Makui & Mehdi Heydari, 2020. "Robust design and planning for a multi-mode multi-product supply network: a dairy industry case study," Operational Research, Springer, vol. 20(3), pages 1811-1840, September.
    13. Brandenburg, Marcus, 2017. "A hybrid approach to configure eco-efficient supply chains under consideration of performance and risk aspects," Omega, Elsevier, vol. 70(C), pages 58-76.
    14. Moritz Julius Ziegler & Kilian Seifried & Philipp Kuske & Moritz Fleischmann, 2019. "TRUMPF Uses a Mixed Integer Model as Decision Support for Strategic Production Network Design," Interfaces, INFORMS, vol. 49(3), pages 213-226, May.
    15. Masoud Esmaeilikia & Behnam Fahimnia & Joeseph Sarkis & Kannan Govindan & Arun Kumar & John Mo, 2016. "Tactical supply chain planning models with inherent flexibility: definition and review," Annals of Operations Research, Springer, vol. 244(2), pages 407-427, September.
    16. Peng, Peng & Snyder, Lawrence V. & Lim, Andrew & Liu, Zuli, 2011. "Reliable logistics networks design with facility disruptions," Transportation Research Part B: Methodological, Elsevier, vol. 45(8), pages 1190-1211, September.
    17. Nurjanni, Kartina Puji & Carvalho, Maria S. & Costa, Lino, 2017. "Green supply chain design: A mathematical modeling approach based on a multi-objective optimization model," International Journal of Production Economics, Elsevier, vol. 183(PB), pages 421-432.
    18. Behzadi, Golnar & O’Sullivan, Michael Justin & Olsen, Tava Lennon & Zhang, Abraham, 2018. "Agribusiness supply chain risk management: A review of quantitative decision models," Omega, Elsevier, vol. 79(C), pages 21-42.
    19. Wang, Mengyue & Huang, Hongxuan, 2019. "The design of a flexible capital-constrained global supply chain by integrating operational and financial strategies," Omega, Elsevier, vol. 88(C), pages 40-62.
    20. Melo, M.T. & Nickel, S. & Saldanha-da-Gama, F., 2009. "Facility location and supply chain management - A review," European Journal of Operational Research, Elsevier, vol. 196(2), pages 401-412, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:175:y:2016:i:c:p:81-95. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.