Issue: 2017/Vol.27/No.1, Pages 21-41
ROBUST BI-LEVEL OPTIMIZATION FOR AN OPPORTUNISTIC SUPPLY CHAIN NETWORK DESIGN PROBLEM IN AN UNCERTAIN AND RISKY ENVIRONMENT
Cite as: H. Golpîra. Robust bi-level optimization for an opportunistic supply chain network design problem in an uncertain and risky environment. Operations Research and Decisions 2017: 27(1), 21-41. DOI 10.5277/ord170102
This paper introduces the problem of designing a single-product supply chain network in an agile manufacturing setting under a vendor managed inventory (VMI) strategy to seize a new market opportunity. The problem addresses the level of risk aversion of the retailer when dealing with the uncertainty of market related information through a conditional value at risk (CVaR) approach. This approach leads to a bilevel programming problem. The Karush–Kuhn–Tucker (KKT) conditions are employed to transform the model into a single-level, mixed-integer linear programming problem by considering some relaxations. Since realizations of imprecisely known parameters are the only information available, a data-driven approach is employed as a suitable, more practical, methodology of avoiding distributional assumptions. Finally, the effectiveness of the proposed model is demonstrated through a numerical example.
Keywords: supply chain management, production-distribution planning, conditional value at risk, bilevel programming, robust optimization, KKT conditions
Received: 25 August 2016 Accepted: 12 March 2017