Robust Scenario Formulations for Strategic Supply Chain Optimization under Uncertainty

Strategic supply chain optimization (SCO) problems are often modeled as two-stage optimization problems, in which the first-stage variables represent decisions on the development of the supply chain and the second-stage variables represent decisions on the operations of the supply chain. When uncertainty is explicitly considered, the problem becomes an intractable infinite-dimensional optimization problem, which is usually solved approximately using a scenario or a robust approach. This article proposes a novel synergy of the scenario and robust approaches for strategic SCO under uncertainty. Two formulations are developed, namely, naive robust scenario formulation and affinely adjustable robust scenario formulation. It is shown that both formulations can be reformulated into tractable deterministic optimization problems if the uncertainty is bounded by the infinity norm and the uncertain equality constraints can be reformulated into deterministic constraints without any assumption about the uncertainty r...