Financial Risk Management for Designing Multi-echelon Supply Chain Networks Under Demand Uncertainty

This paper presents a methodology to include financial risk management for the design of multiproduct, multi-echelon supply chain networks under uncertainty. The method is in the framework of two-stage stochastic programming. Definitions of financial risk and downside risk are adapted. Using these definitions, financial risk management constraints are introduced and a new two-stage stochastic programming model is established. Case studies illustrate the applicability of such financial risk management. Trade-offs between expected cost and risk are also analyzed.