Strategic insights into recovery from supply chain disruption: A multi-period production planning model

Supply chain disruption has become an interesting topic for many researchers recently. Although disruption has been previously modelled, unexpected disruptions are unavoidable. Thus, a reactive strategy is still needed. This article proposes an efficient production recovery strategy for the three-stage supply chain network consisting of manufacturers, distribution centres, and retailers when facing production disruptions. The manufacturers produce multiple products with different production priorities. All manufacturing plants are fully coordinated and able to produce all types of products. Multi-production periods are considered. The model describes the optimal production and distribution allocation before and after disruption (recovery period). The recovery model revises the production and distribution allocation based on the remaining available capacity in the respective production period. The recovery model determines what unfulfilled demand will be assigned either as backorders in the next production period or considered as lost sales. Our results show that the proposed recovery model produces a lower total cost than the non-recovery strategy. Further, the simulation confirms that the longer the disruption duration is, the higher the cost-saving efficiency is. In addition, the demand to capacity tightness ratio is the most impactful parameter to decide on backorder or lost sales strategy.