Robust facility location decisions for resilient sustainable supply chain performance in the face of disruptions

• Pages: 357-385
• Published date: 07 September 2020
• DOI: https://doi.org/10.1108/IJLM-12-2019-0333
• Date: 07 September 2020
• Subject Matter: Management science & operations,Logistics
• Author: Balan Sundarakani,Vijay Pereira,Alessio Ishizaka

Robust facility location decisions

for resilient sustainable supply

chain performance in the face

of disruptions

Balan Sundarakani

Faculty of Business and Management, University of Wollongong in Dubai,

Dubai, United Arab Emirates, and

Vijay Pereira and Alessio Ishizaka

NEOMA Business School, Reims Campus, Reims, France

Abstract

Purpose –Facilitylocation and re-locationdecisions are criticalmanagerial decisions in modernsupply chains.

Such decisions are difficult in this environment as managers encounter uncertainty and risks. The study

investigates establishing or moving distribution facilities in the global supply chain by considering costs,

fulfilment,trade uncertainties, risks underenvironmental trade-offs anddisruptive technologies.

Design/methodology/approach –This paper combines the possibilities and probabilistic scenarios for a

supply chain network by proposing the novel Robust Optimisation and Mixed Integer Linear Programming

(ROMILP) method developed under the potential uncertainty of demand while considering the costs associated

with a four-tier supply chain network. ROMILP has been solved in a real-time logistics environment by

applying a case study approach.

Findings –The solution is obtained using an exact solution approach and provides optimality in all tested

market scenarios along the proposed global logistics corridor. A sensitivity analysis examines potential facility

location scenarios in a global supply chain context.

Research limitations/implications –Logistics managers can apply the ROMILP model to test the

cost-benefit trade-offs against their facility location and relocation decisions while operating under

uncertainty. Futureresearch is proposed to extend the literature by applying data from the OBOR logistics

corridor.

Originality/value –This study is the first to examine sustainable dimensions along the global logistics

corridor and investigate the global container traffic perspective. The study also adds value to the Middle East

logistics corridor regarding facility location decisions.

Keywords Robust optimisation, Facility relocation, Global supply chain network, COVID-19 disruptions,

Digital twin, Disruptive technologies

Paper type Research paper

Robust facility

location

decisions

357

This paper forms part of a special section “Decision Making in Logistics Management in the Era of

Disruptive Technologies”, guest edited by Vijay Pereira, Gopalakrishnan Narayanamurthy, Alessio

Ishizaka and Noura Yassine.

The authors would like to acknowledge the comments provided by three anonymous (double blind)

reviewers, whose comments enhanced the quality of this paper. The authors would like to thank the

University of Wollongong in Dubai for partially supporting the research through a university research

grant and Ms Golnar Behzadi for supporting the data collection process. The authors would also like to

thank an anonymous proof reader for proofreading the article, which improved the readability of the

paper.

Corrigendum: It has come to the attention of the publisher that the Sundarakani, B., Pereira, V. and

Ishizaka, A. (2020), “Robust facility location decisions for resilient sustainable supply chain performance

in the face of disruptions”, published in The International Journal of Logistics Management, Vol. ahead-

of-print No. ahead-of-print, previously listed incorrect affiliations for the authors Vijay Pereira and

Alessio Ishizaka. These have now been updated and appear in the online article. The authors sincerely

apologise for this.

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0957-4093.htm

Received 5 December 2019

Revised 11 August 2020

Accepted 16 August 2020

The International Journal of

Logistics Management

Vol. 32 No. 2, 2021

pp. 357-385

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-12-2019-0333

1. Introduction

Globalisation has impacted the size, scale and location of production and storage facilities in

supply chain networks in numerous ways. There has been a wave of new assembly and

supplier plant locations in countries such as China, India, Thailand, Vietnam, Brazil, Mexico,

Turkey and some Eastern European countries due to their cheaper and more accessible raw

materials supply, lower labour costs and accessibility to the extended consumer market

(Marchet et al.,2017). At the same time, developed economies such as Japan, the UK and the

USA have improved their logistics infrastructure with much slower rates of market growth

compared to that of emerging markets. This wave of location decisions has often created

conflicting trade-offs in cost benefit analysis for firms such as apparel, automobile, electronic

goods, branded consumer goods and other fashion goods manufacturers. If firms have

considered only the “lower manufacturing cost”as the prime reason for outsourcing and

offshoring decisions, then the resulting supply chain structure could have led to a different

network configuration and associated firm financial performance. In reality, however, in

addition to low manufacturing costs, other new dimensions such as accessibility to the

emerging market, growing logistics infrastructure, enhancement in affiliated technologies,

improved supply chain networks, a focus on environmental concerns and sustainability in

business offerings are considered to be some of the new norms of modern industry location

decisions.In earlier research,Simchi-Levi et al. (2004,p. 79) defined that, “the strategiclevel firm

locationdecisions in a supply chain networkwere aimed to have longitudinaleffect on the firm

performance which were aligned towards tactical decisions such as, location, capacities of

warehouses and manufacturing plants and the flow of material through the multimodal

logisticsnetwork”. Theseconventional objectivesleave many questionsunanswered, especially

considering location decisions are driven by probable and possible situational factors

that reinforce such decisions in modern global logistics situations (Sarkis et al.,2020). This

motivatesresearchers to understand and examinethese reinstating forces and thuscontribute

to the theory andpractice of the logistics industryas discussed in the remainderof this paper.

1.1 Research significance

Recent uncertainty associated with COVID-19 has resulted in supply chains impacting the

logistics network profoundly (Ivanov, 2020;Sarkis et al.,2020). It may challenge the

conventional supply chain channel communication and degree of change in boundary

conditions and remains a mystery due to the fact that there is a need for new e-commerce

technologies,which are nascentin their adoption thereof.Apart from the mostrecent COVID-19

challenges, other comparable supply chain risks and uncertainties have similar detrimental

effectson logistics networksand thus challenge the traditionalassumptionsassociated with the

supply chain and logistics network designand impose decision variables and constraints that

are connected to disruptive incidents(Sarkis et al. 2020).

Logistics aspects such as borderless trade environments, growing infrastructural needs, the

surging demand of cost-effective solutions and existing or emerging environmental and regulatory

pressures call for manufacturers and logistics service providers to redesign their supply chain

network. Therefore, the global supply chain landscape is constantly changing to keep abreast of

such emerging constraints and pressures. According to Melo et al. (2009), uncertainty is one of the

most challenging problems when managing today’s supply chain. However, the literature on

uncertainty in location decisions in a supply chain management context reveals little (Jayaraman

et al., 2015). Although there are existing supply chain uncertainty and risk studies, the recent

COVID-19 outbreak has created an unprecedented and extraordinary situation in the global

logistics and supply chain network and therefore the need to progress supply chain resilience

research and practices has become both significant and timely (Ivanov, 2020).

In order to respond effectively to any uncertainty, firms often need to proactively design their

supply chain management network system by putting in place a well-established logistics

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