Effects and mitigation of natural hazards in retail networks

The number of natural hazards has been increasing over the last 10 years. Understanding the impact of natural hazards on retail networks is crucial to make effective planning against disruptions. We used daily sales and inventory data from a country-wide retail network and natural emergencies historic data to quantify the consequences triggered by these events in product and financial flows. We analyze sales and inventory flow through points of sale and distribution centers. We propose the Resilience Investment Model (RIM) to invest in resilience against the effects of natural hazards. This model takes into account the operational details of the organization. RIM is a two-stage multi-period inventory flow stochastic program. The resilience investments consist in acquiring additional inventory to buffer against disruptions and the use of real options contracts with suppliers to execute when a declared emergency happens. We use a set of risk profiles over the future costs to align the investment with the financials and preferences of the organization. This research shows how the risk profiles of the decision maker shape the location and distribution of backup stock in a retail network. We show that risk averse profiles reduce worst-case cost by 15% while increasing average cost by 2%. We recommend the use of risk profiles with cost targets to quantify the Value at Risk of the network due to natural hazards.

Department dc:contributor.department

Massachusetts Institute of Technology. Supply Chain Management Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2018

Author dc:creator

• García Castillo, Jorge, M.Eng. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• Jarrod Goentzel.

• Supply Chain Management Program.

Statement dc:rights

• MIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/117797

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/117797