Reimagining managerial practices

Influence of natural disasters on circular supply chains

Supply chain risks imposed by natural disasters can be reduced by discovering an optimal combination of governmental and manufacturing strategies. These strategies should promote the adaptation, resilience, and resistance of enterprises to rare but damaging events, contributing to a decrease in risk and vulnerability. This. research focuses on modeling, measuring, and managing natural disaster risks and their impact on circular supply chains. Specifically, the research aims to address the following questions:

1) How can optimal decisions of an enterprise influence the event’s magnitude, impact, and frequency (e.g., construction of dikes against flood events)?
2) How to avoid the circulation of risks in a circular supply chain in case of major disruptions?

Addressing both questions would be of great value for global supply chain sustainability practices including the benefit of the implementation of a circular economy in agriculture, helping to prevent collapses in the production and supply of food in case of natural disasters or other major events.

By developing novel tools for optimization under uncertainty, the research aims to explicitly account for the interdependence of natural disasters in time (e.g., cascading effects in a multi-period perspective), space (e.g., multi-region perspective) and type (i.e., multi-hazard perspective) to reduce supply chain vulnerability in case of major disruptions:

  • Multi-period approach: Because of the uncertainty about the time and place of the occurrence of catastrophic events and the risk of too-low safety stock at this point, it is necessary to consider catastrophe risk management problems in a multi-period environment.
  • Multi-regional approach: As hazards typically spread over wider areas, risk assessment must take into account interrelations between regions. Neglecting such interdependencies can lead to a severe underestimation of potential losses, especially for extreme events in a circular economy context.
  • Multi-hazard approach: The interdependency between different types of natural hazards may lead to a situation in which one catastrophic event occurs in the same period as a result of another event with some probability (e.g., tsunami as a result of an earthquake). This probability should be accounted for via the use of data on catastrophic events to attain optimal managerial contingency practices.

The expected output of this research includes enterprise loss and capital distributions, as well as a methodological framework to introduce decision-dependent uncertainties into multi-stage optimization problems and the framework for modeling circular risks in circular supply chains.