Managing lead times and backlogging in a resilient distribution network under demand uncertainty

In this work, we propose a novel multi-period location-inventory problem that assumes demand uncertainty, periodic review, backlogging, and lead times. The problem stems from the need to strategically manage distribution centers (DCs) to enhance the resilience of the supply chain, while providing a high service level to customers. A trade-off is sought between distribution resilience and stock-out risks on the one hand, and financial resources on the other hand. A progressive phase-in of the DCs is considered. The problem is cast as a two-stage decision-making process under uncertainty. A mixed-integer linear programming model is formulated. Two resilience indicators are adopted to access the results of a series of computational tests. Based on the experiments, it was found that the financial resources required to establish DCs throughout the planning horizon directly affect the long-term resilience of the supply chain. Nevertheless, the model proposed in this study can ensure that the supply chain resilience remains at a satisfactory level within the given financial resources.