Optimization of protections against supply chain risks due to intentional acts

We develop a network interdiction based model LRVD to quantitatively solve a supply chain risk management problem. Specifically, we consider the supply chain system as a directed graph and define different functional components in the system as nodes and arcs, and developed a tri-level program to identify the optimal arcs to protect, given that the system is vulnerable to intentional attacks from competitors and dissatisfied labors. We propose a MIP formulation LRVD to solve the problem. A numerical example is demonstrated illustrating that the proposed model is able to provide the optimal protective strategies for decision makers.