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Article history: This paper investigates a decentralized production-distribution supply chain consisting of one manufac-
Received 20 November 2016 turer and one distributor where the demand is jointly influenced by pricing and advertising policies. The
Received in revised form 16 May 2017 control of decision variables is partitioned amongst the members. The manufacturer decides about
Accepted 20 June 2017
wholesale price, production interval, expenditure of global advertising, and participation rate in the dis-
Available online 22 June 2017
tributor’s local advertising expenditure while the decisions on selling price, local advertising expenditure,
and allocation of demands to depots are made by the distributor. We propose a Stackelberg game frame-
Keywords:
work and develop two nonlinear bi-level programming models by switching the leader and follower roles
Bi-level programming
Supply chain coordination
between the manufacturer and the distributor. Four hierarchical solution algorithms are proposed by
Production-distribution supply chain combining genetic algorithm and particle swarm optimization to tackle the bi-level programming mod-
Stackelberg game els. Finally, computational experiments are carried out to analyze and compare the efficiency and effec-
Genetic algorithms tiveness of the proposed solution procedures.
Particle swarm optimization Ó 2017 Elsevier Ltd. All rights reserved.
firms do not tend to cooperate and seek to optimize their own subject to gðx; yÞ 6 0
objectives rather than those of the entire system.
where x 2 X # R is the set of leader’s decision variables and
n
Bi-level programming is an appropriate technique for modeling
y 2 Y # Rm is the set of follower’s decision variables. Similarly, the
decentralized management problems with two non-cooperative
functions F : Rnm ! R and f : Rnm ! R are objective functions
decision makers in a hierarchical structure. From a historical point
of leader and follower, while G : Rnm ! Rp and g : Rnm ! Rq
of view, bi-level programming as a special case of multi-level opti-
are upper and lower level constraints, respectively.
mization is closely related to the economic problem of Stackelberg
The relaxed feasible region (or constraint region) of BLPP is:
(Von Stackelberg, 1952) in the field of game theory.
The decision maker at the upper level of the hierarchy is known S ¼ fðx; yÞ : x 2 X; y 2 Y; Gðx; yÞ 6 0 and gðx; yÞ 6 0g
as leader, while the lower level decision maker is termed as fol-
lower. Each decision maker controls a set of decision variables sub- For a fixed x 2 X, the lower-level feasible set is defined by:
ject to a set of constraints and aims to optimize his own objective SðxÞ ¼ fy 2 Y : gðx; yÞ 6 0g
function. The actions taken by the leader affect the reactions that
While the lower-level reaction set (or rational reaction set) is:
~Þ; y
RðxÞ ¼ fy 2 Y : y 2 arg minðf ðx; y ~ 2 SðxÞÞg
⇑ Corresponding author.
E-mail address: m_zandieh@sbu.ac.ir (M. Zandieh). Every y 2 RðxÞ is a rational response.
http://dx.doi.org/10.1016/j.cie.2017.06.030
0360-8352/Ó 2017 Elsevier Ltd. All rights reserved.
528 O. Amirtaheri et al. / Computers & Industrial Engineering 110 (2017) 527–537
Finally, the induced region (or inducible region) is defined as: topics intensely investigated in the literatures during the recent
years (Aust & Buscher, 2014). This concept represents a financial
IR ¼ fðx; yÞ : ðx; yÞ 2 S; y 2 RðxÞg
agreement between the manufacturer and the distributor to share
This set is formed by the feasible points of the BLPP, corresponds to advertising expenditure based on which the manufacturer under-
the feasible set of the leader. It is usually non-convex and can even takes part of local advertising expenditure (participation rate)
be disconnected or empty in presence of upper-level constraints. incurred by the distributor (Koh, 2013).
The BLPP is equivalent to optimizing the leader’s objective F over In the proposed BLPP, the control of decision variables is
the inducible region IR. A feasible point ðx ; y Þ 2 IR is a global opti- partitioned amongst the manufacturer and the distributor. The
mum of BLPP (or Stackelberg equilibrium) if Fðx ; y Þ 6 Fðx; yÞ for all manufacturer decides about wholesale price, production
ðx; yÞ 2 IR. (replenishment) interval, global advertising expenditure, and par-
Bi-level programming techniques have been widely applied to ticipation rate in the distributor’s local advertising expenditure.
handle realistic decentralized decision problems. Gao and et al. The distributor, however, makes decisions on selling price, local
(2011) develop two nonlinear bi-level programming models for advertising expenditure in each market, and allocation of markets’
pricing problem in a vendor-buyer supply chain. Sadigh, demands to depots in a way that total transportation cost is mini-
Mozafari, and Karimi (2012) address a multi-product mized. In fact, neither the manufacturer nor the distributor has
manufacturer-retailer supply chain in which the demand of each direct control over the decision-making process of the other, but
product is jointly influenced by price and advertising expenditure. their decisions affect the other member’s subsequent reactions.
They apply bi-level programming approach and present several With the assumption of perfect information to be available about
solution procedures to find optimal policies in terms of pricing, the follower, in both models, the leader could anticipate the reac-
advertising and inventory management. Mokhlesian and Zegordi tion of the follower and acts in a way that is optimal for him.
(2014) develop a nonlinear bi-level programming model for a The first contribution of this paper is to model a decentralized
multi-product two-echelon supply chain consisting of one manu- production-distribution supply chain problem by using of bi-level
facturer and multiple retailers. Zhang, Lu, and Gao (2015) establish programming, which allows us to take into account how decisions
a bi-level pricing and replenishment strategy optimization model made at the distribution segment of the supply chain can affect
in high-tech industry where the buyer and the vendor are respec- and be affected by decisions made at the manufacturing segment.
tively designated as the leader and the follower. Ma, Wang, and Bi-level programming models are non-convex and strongly NP-
Zhu (2014) consider joint pricing and lot sizing problem in a hard, even in their simplest case in which all the functions involved
two-echelon supply chain system with one manufacturer and are linear (Ben-Ayed & Blair, 1990; Hansen, Jaumard, & Savard,
one retailer. They establish two nonlinear bi-level programming 1992). Thus, it is quite difficult to deal with nonlinear version of
models by switching the leader and the follower roles between these models. Traditional approaches for solving BLPP can be
the manufacturer and the retailer. roughly divided into the following categories (Dempe, 2002): (1)
Although production-distribution supply chain problems have vertex enumeration methods, (2) decent algorithm, (3) methods
been topics of wide interest in SCM research, little attention has based on Karush-Kuhn-Tucker conditions, and (4) penalty func-
been given to analyzing the problems by means of bi-level pro- tions, etc. The properties such as continuity, convexity and differ-
gramming approach. Ryu, Dua, and Pistikopoulos (2004) present a entiability are necessary when proposing these methods. Hence,
bi-level programming model to a production and distribution plan- they have limitations on solving BLPP. meta-heuristic algorithms
ning problem where the follower’s problem can be modeled by lin- including stochastic optimization techniques are recognized as
ear programs. A similar production and distribution problem with useful tools for solving BLPP which do not necessarily satisfy the
probabilistic parameters is formulated as a bi-level linear multi- classical optimization assumptions. This has motivated researchers
objective programming problem by Roghanian (Roghanian, to apply meta-heuristic methods to tackle BLPP (Gao & et al., 2011;
Sadjadi, & Aryanezhad, 2007). Calvete, Galé, and Oliveros (2011) Khilwani & et al., 2008; Koh, 2007; Marinakis & Marinaki, 2008;
study a hierarchical production-distribution planning in which Mokhlesian & Zegordi, 2014; Rajesh & et al., 2003; Sadigh et al.,
the distributor controls the design of the routes and the manufac- 2012; Sahin & Ciric, 1998).
turer controls the production process. In another paper (Calvete, Genetic Algorithm (GA) and Particle Swarm Optimization (PSO)
Galé, & Iranzo, 2014), they address a mixed integer bi-level opti- are the generic computational techniques espoused from the pro-
mization model for the planning of a decentralized distribution net- gression of biological life in the natural humanity (Khilwani &
work consisting of manufacturing plants, depots and customers. et al., 2008). The second contribution of this study is to develop
This paper addresses a decentralized production-distribution four hierarchical algorithms by combining GA and PSO to tackle
supply chain consisting of one manufacturer and one distributor the proposed bi-level programming models. In addition to these
and develop two nonlinear bi-level programming models, one bi- algorithms, an exhaustive grid search is adopted for validation
level model considers the manufacturer as the leader purposes.
(Manufacturer-Stackelberg), who has priority in deciding, and the The rest of this paper is organized as follows. In Section 2, two
other takes the distributor as the leader (Distributor-Stackelberg). bi-level programming models (Manufacturer-Stackelberg &
Both the manufacturer and distributor aim to maximize their prof- Distributor-Stackelberg) are developed by formulating the manu-
its, but their decisions are related to each other in a hierarchical facturer and the distributor problems. Section 3 proposes four hier-
way. The distributor owns several depots to supply customers in archical procedures for solving the Stackelberg models. Section 4 is
different markets. The markets are also different in terms of size, devoted to experimental results and finally Section 5 discusses the
geographic location, price elasticity of demand, and response to concluding remarks.
advertisement.
In order to boost the markets’ demands, the distributor under-
takes a given expenditure to conduct local advertising in each mar- 2. Bi-level programming models for production-distribution
ket. On the other hand, the manufacturer may in turn, set a budget supply chain
for global advertising within the target markets. We assume that
the manufacturer participates in a cooperative advertising pro- In this section, we describe general characteristics of the
gram and undertakes a portion of distributor’s local advertising production-distribution supply chain and formulate the bi-level
expenditure. Cooperative advertising is seen to be among those programming models.
O. Amirtaheri et al. / Computers & Industrial Engineering 110 (2017) 527–537 529
pffiffiffi pffiffiffiffiffi
Consider a two-echelon supply chain including one manufac- hk ðA; ak Þ ¼ n1k : A þ n2k : ak ; k ¼ 1; 2; . . . ; K ð3Þ
turer and one distributor. The manufacturer wholesales the pro-
duct to his exclusive distributor at a wholesale unit price (w). where n1k and n2k are positive constants reflecting the effects of glo-
The distributor, in turn, sells the goods to customers in different
bal and local advertising expenditures on k-th market’s demand,
markets at unit retail price (p), where p ¼ w:ð1 þ rÞ and r is markup
respectively. This approach has been followed by Zhang, Xie, and
percentage. It is assumed that there are K different markets in
Chen (2013) in the literature. Combining Eq. (1) to Eq. (3), the
terms of size, price elasticity of demand and response to global
demand function of k-th market would be the following:
and local advertising efforts.
A local advertising expenditure is incurred by the distributor in pffiffiffi pffiffiffiffiffi
each market (ak ; k ¼ 1; 2; . . . ; K) to stimulate the demand in short- Dk ðp; A; ak Þ ¼ zk :ð1 ak :pÞ1=v k :ðn1k : A þ n2k : ak Þ; k ¼ 1; 2; . . . ; K
term. Comparatively, the manufacturer undertakes an expenditure ð4Þ
to conduct global advertising (A) so as to motivate the demand in
Therefore, total demand induced by pricing and advertising
long-term. The manufacturer also compensates a portion of local P
policies is D0 ¼ Kk¼1 Dk . The distributor owns several depots with
advertising expenditure (h), incurred by the distributor. Bearing
in mind the prevalent assumption in the literature (Xie & Neyret, known capacities (bj ; j ¼ 1; 2; . . . ; J where J is the number of depots)
2009; Yue & et al., 2006), it can be assumed that the demand func- and serves the markets geographically dispersed with the demand
tion of each market to have the following form: of Dk (k ¼ 1; 2; . . . ; K). Furthermore, the distributor decides which
markets are assigned to each depot, while minimizing transporta-
Dk ðp; A; ak Þ ¼ zk :g k ðpÞ:hk ðA; ak Þ; k ¼ 1; 2; . . . ; K ð1Þ tion costs. It is assumed that the demand of each market is sup-
plied by the depots in a unit-by-unit order. Therefore, we take cjk
where zk is the base demand while g k ðpÞ and hk ðA; ak Þ denote the
as unit transportation cost from j-th depot to k-th market. In order
effects of retail price and advertising expenditures on k-th market’s to meet the demands assigned to each depot, sufficient supply of
demand, respectively. Unlike a common assumption in many stud- product has to be available at that depot. The manufacturer sup-
ies, where demand is a linear function of retail price (Swami & Shah, plies the product equal to the total demand (D0 ) within lots of
2011; Xie & Wei, 2009), in this research a nonlinear function is con- Q 0 units and delivers each lot to the depots based on their demand
sidered to model the effect of retail price on demand. Inspired by shares. Denoting the production (replenishment) interval as
SeyedEsfahani, Biazaran, and Gharakhani (2011), we have: T ð0 < T 6 1Þ; the manufacturer delivers Q 0 ¼ D0 :T units to the
g k ðpÞ ¼ ð1 ak :pÞ1=v k ; k ¼ 1; 2; . . . :; K ð2Þ depots in each interval. The demand share of j-th depot is calcu-
lated as Q j ¼ dj =D0 where dj is the total demand of j-th depot.
where ak is a positive constant and v k is the shape function of Assuming two depots, the inventory levels for the manufacturer
demand curve for k-th market. By adjusting the parameter v k , we as well as the distributor’s depots are shown in Fig. 1.
incorporate specific demand curve for each market into the pro- It is assumed that product is delivered to the distributor at the
posed models (v k < 1, v k ¼ 1, and v k > 1 yields convex, linear, manufacturer’s premises. Therefore, the transportation cost from
and concave demand functions, respectively). It is obvious that the manufacturer to the depots is incurred by the distributor. In
the condition p 6 mink¼1;2;...;K f1=ak g should be verified to avoid neg- each replenishment cycle, the manufacturer delivers Q j units,
ative demand. simultaneously within a lot, to j-th depot. As the capacity of trans-
We use the function proposed by Xie and Wei (2009) to model portation vehicle is directly affected by the lot size, we can assume
the effects of advertising expenditures on demand: that transportation cost from the manufacturer to each depot is a
Fig. 1. Inventory levels for the manufacturer and the distributor’s depots.
530 O. Amirtaheri et al. / Computers & Industrial Engineering 110 (2017) 527–537
Here we assume that the manufacturer holds the manipulative k-th market ($1=2 )
n2k Effectiveness coefficient of local advertising expenditure on demand of
power and acts as leader. This model can be expressed as follows:
k-th market ($1=2 )
X
K
1=v
pffiffiffi pffiffiffiffiffi Decision variables (Manufacturer)
max pM ¼ ðw f Þ: zk :ð1 ak :w:ð1 þ rÞÞ k :ðn1k : A þ n2k : ak Þ 1=T:uM
w;A;T;h w Wholesale price ($/Unit)
k¼1
A Global advertising expenditure ($)
X
K pffiffiffi pffiffiffiffiffi
zk :ð1 ak :w:ð1 þ rÞÞ1=v k :ðn1k : A þ n2k : ak Þ
T Production (replenishment) interval
T=2:qM :f : h Participation rate in local advertising expenditure
k¼1
Decision variables (Distributor)
X
K
A h: ak ð5aÞ r Markup percentage
k¼1 ak Local advertising expenditure in k-th market ($)
xjk Units of product sent from j-th depot to k-th market (Unit)
yij Indicator variable equals to 1 if i-th level of transportation
St:ðr; ak ; xjk ; yji Þ 2 argmaxpD cost is used by j-th depot and 0 otherwise
X
K pffiffiffi pffiffiffiffiffi
¼ r:w: zk :ð1 ak :w:ð1 þ rÞÞ1=v k : n1k : A þ n2k : ak
Auxiliary variables
Dk Demand of k-th market (Unit)
k¼1 D0 Total demand (Unit)
pM Profit of the manufacturer ($)
pD Profit of the distributor ($)
X
J X
J X
K X
K
1=T: uDj w:T=2 xjk :qDj ð1 hÞ: ak
j¼1 j¼1 k¼1 k¼1 X
K
xjk 6 bj ; j ¼ 1; 2; . . . ; J ð5dÞ
XJ X
I X
J X
K k¼1
1=T: si :yij cjk :xjk ð5bÞ
j¼1 i¼1 j¼1 k¼1 X
J pffiffiffi pffiffiffiffiffi
xjk ¼ zk :ð1 ak :w:ð1 þ rÞÞ1=v k :ðn1k : A þ n2k : ak Þ; k ¼ 1; 2; . . . ; K
!
X
K
1=v k
pffiffiffi pffiffiffiffiffi X
J j¼1
zk :ð1 ak :w:ð1 þ rÞÞ :ðnk : A þ nk : ak Þ 6 min
1 2
bj ; G ð5eÞ
k¼1 j¼1
ð5cÞ X
K
qi :yij 6 xjk :T < qiþ1 :yij þ M:ð1 yij Þ;
k¼1
i ¼ 1; 2; . . . ; I; j ¼ 1; 2; . . . ; J; q1 ¼ 0; qIþ1 ¼ M ð5fÞ
X
I
yij ¼ 1; j ¼ 1; 2; . . . ; J ð5gÞ
i¼1
i ¼ 1; 2; . . . ; I; j ¼ 1; 2; . . . ; J; k ¼ 1; 2; . . . ; K
Expressions (5a) and (5b) are the upper-level and the lower-level
Fig. 2. Transportation cost levels. objective functions which reflect the profits of the manufacturer
O. Amirtaheri et al. / Computers & Industrial Engineering 110 (2017) 527–537 531
and the distributor, respectively. The manufacturer’s profit is on GA and PSO to tackle MS and DS problems. These methodologies
obtained by subtracting setup cost, inventory holding cost, global solve the Stackelberg models directly by simulating the sequential
advertising expenditure and participation in local advertising decision making procedure of BLPP. The proposed algorithms are
expenditure from his revenues. Similarly, the distributor’s profit is composed of two levels, upper-level algorithm (ULA) which is
equal to his revenues minus the sum of ordering cost, inventory designed to solve the leader’s problem based on the follower’s
holding cost, local advertising expenditure, total transportation cost response and lower-level algorithm (LLA) which is embedded in
from the manufacturer to the depots, and total transportation cost ULA to solve the lower-level problem and obtain the optimal
from the depots to the markets. Both objective functions seek to response of the follower for each given set of values of leader’s
optimize profit. decision variables.
Constraint (5c) guarantees that total generated demand by pric- The ULA starts with generating initial solution for the leader’s
ing and advertising policies is completely met by the distributor problem (x). The solution is then received by the LLA and reaction
and the manufacturer. For this purpose, it shall exceed neither total of the follower (y ) is obtained and returned to the ULA. The initial
capacity of the distributor’s depots nor the production capacity of solution for the leader’s problem (x; y ) are evaluated based on the
the manufacturer. Constraints (5d) imply that the capacities of the follower’s response and the first iteration is completed. This proce-
depots are not exceeded. Constraints (5e) ensure that the demand dure is repeated in each iteration until solution (x ; y ) is obtained
of each market is entirely met by the depots. Constraints (5f) and for the upper-level problem. It is important to clarify that the solu-
(5g) establish links between the sets of variables yij , xjk and T to tion returned by LLA is not always optimal for follower. Therefore,
avoid incoherent solutions. Constraints (5h) and (5i) are for decla- the solution obtained by ULA for bi-level models could be near fea-
ration of variables. sible. Fig. 3 depicts the general steps of the proposed hierarchical
algorithms.
2.2. Distributor-Stackelberg (DS) model We construct four hierarchical algorithms, named as GG, PG, GP
and PP, by combining GA and PSO as the ULA and the LLA (see
By exchanging the objective functions (profit functions) of the Table 2).
members in MS model, we arrive at DS model. In DS model, the dis- In Section 3.1, we adopt two GAs, one for the manufacturer
tributor and the manufacturer are considered as the leader and the problem (as ULA in MS model and as LLA in DS model) and another
follower, respectively. Similar to the previous section, DS model for the distributor problem (as LLA in MS model and as ULA in DS
can be formulated as a bi-level program: model). Similarly, two PSO algorithms are developed for the man-
ufacturer and the distributor problems in Section 3.2.
X
K pffiffiffi pffiffiffiffiffi
max pD ¼ r:w: zk :ð1 ak :w:ð1 þ rÞÞ1=v k :ðn1k : A þ n2k : ak Þ
j
r;ak ;xjk ;yi k¼1
3.1. Genetic algorithms
X
J X
J X
K X
K
1=T: uDj w:T=2 xjk :qDj ð1 hÞ: ak GA is a stochastic global search technique that solves problems
j¼1 j¼1 k¼1 k¼1 by imitating processes observed during natural evolution. Based on
the survival and reproduction of the fittest, GA gradually exploits
X
J X
I X
J X
K
1=T: si :yij cjk :xjk ð6aÞ new and better solutions without any presumptions, such as con-
j¼1 i¼1 j¼1 k¼1
X
K pffiffiffi pffiffiffiffiffi
1=T:uM T=2:qM :f : zk :ð1 ak :w:ð1 þ rÞÞ1=v k :ðn1k : A þ n2k : ak Þ
k¼1
X
K
A h: ak ð6bÞ
k¼1
ULA LLA
3. Solution procedures
GA PSO
GA GG GP
In consideration of the characteristics of sequential decision
PSO PG PP
making in BLPP, we propose four hierarchical algorithms based
532 O. Amirtaheri et al. / Computers & Industrial Engineering 110 (2017) 527–537
tinuity and convexity. The procedure of GA is a simulation of bio- (Distributor in MS model and Manufacturer in DS model). Simi-
logical evolution behavior. It finds the approximate optimal solu- larly, the fitness function in ULA is the profit function of the leader
tion through the processes of encoding, initialization, fitness (Manufacturer in MS model and Distributor in DS model).
evaluation, selection, crossover, mutation and reproduction. The
processes of the GAs developed for the manufacturer and the dis-
tributor problems are separately presented as follows. 3.1.4. Selection
In both of the GAs, developed for the manufacturer and for the
distributor problems, we apply two selection operators. A roulette
3.1.1. Encoding
wheel (Goldberg, 1989) operator with selection pressure is pro-
Any solution of the manufacturer and the distributor problems
posed to choose parent chromosomes for crossover process, while
can be coded as a chromosome (see Fig. 4). The distributor problem
random selection operator is used for mutation process.
involves four sets of decision variables out of which xjk and yij can
Selection pressure refers to the degree of utility provided by a
be computed based on r and ak . good solution. This parameter affects the convergence of GA. If it
is underestimated, it will take a long time for the algorithm to con-
3.1.2. Initialization verge. However, if it is set at a too high value, premature conver-
This process randomly generates nPop initial feasible solutions. gence will happen and the algorithm will be trapped in local
We assume that population size is proportional to problem size optima (Sivanandam & Deepa, 2007). Denoting the selection pres-
which is defined by the number of depots (J) and the number of sure parameter by b (b P 0), the probability of selection for solu-
markets (K). Hence, we set nPop ¼ 10:ðJ þ KÞ. In order to avoid gen- tion i in roulette wheel operator can be determined as:
erating infeasible solutions, two main constraints of both MS and
DS models are considered based on expressions (2), (5c) and (6c): X
nPop
b b
PrðiÞ ¼ FitðiÞ = FitðiÞ ; i ¼ 1; 2; . . . ; nPop ð9Þ
w:ð1 þ rÞ 6 mink¼1;2;...;K f1=ak g ð7Þ i¼1
!
X
K
1=v k
pffiffiffi pffiffiffiffiffi X
J
where nPop is population size and FitðiÞ is fitness value of the i-th
zk :ð1 ak :w:ð1 þ rÞÞ ðn1k : A þ nk : ak Þ 6 min
2
bj ; G solution. From Eq. (9), it is obvious that:
k¼1 j¼1
8
ð8Þ > b¼0
< 1=nPop; if
By analyzing the relationship between the variables with respect to PrðiÞ ¼ 1; if b ¼ 1 and solution i is the best
>
:
the constraints (7) and (8), we propose allowable limits for the deci- 0; if b ¼ 1 and solution i is not the best
sion variables of the manufacturer and the distributor when they ð10Þ
act as leader and as follower (see Table 3). These limits ensure that
the constraints (7) and (8) are fully satisfied when generating ran-
dom solutions in both GAs, developed for the manufacture and
3.1.5. Crossover
the distributor problems.
In each iteration, N c ¼ P c :nPop solutions are selected by roulette
wheel operator, where Pc is crossover rate. We apply arithmetic
3.1.3. Fitness evaluation
crossover operator (Köksoy & Yalcinoz, 2008) to produce off-
In order to evaluate the fitness of the generated solutions, the
springs. Considering X ¼ ðx1 ; x2 ; . . . ; xn Þ and Y ¼ ðy1 ; y2 ; . . . ; yn Þ as
upper-level GA (ULA) heads into the lower-level GA (LLA) and
parent chromosomes, the offsprings are generated as follows:
obtains the optimal values of the follower’s decision variables.
The fitness function in LLA is the profit function of the follower xnew ¼ k:xi þ ð1 kÞ:yi ; i ¼ 1; 2; . . . ; n ð11Þ
i
ynew
i ¼ ð1 kÞ:xi þ k:yi ; i ¼ 1; 2; . . . ; n ð12Þ
Table 3
Allowable limits for the decision variables.
0<T61 0<T61
06h61 06h61
Distributor
Position: Follower Position: Leader
mink¼1;2;...;K f1=ak g mink¼1;2;...;K f1=ak g
rL 6 r 6 w 1 06r6 f :ð1þdM Þ
1
06 ak 6 a
U 0 6 ak 6 a
U
where W is the inertia weight, c1 and c2 are cognitive and social dures. To the best of our knowledge, it is the first time that a decen-
learning factors, while r1 and r 2 denote two random numbers uni- tralized production-distribution supply chain with distinctive
formly distributed in the interval ½0; 1. features such as nonlinear demand function and cooperative
In the proposed PSO algorithms, we use constriction coefficient advertising is studied and bi-level programming models are pro-
(v) which has been introduced by Clerc and Kennedy (2002) to posed to deal with those hierarchical decision making problems.
guarantee the algorithm convergence and to avoid particles careen So, there are not related studies on the same problem and therefore
toward infinity: no data for comparison exist. Hence, we present the results of tests
conducted on real-world data derived from automotive spare parts
2
v¼ qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi ; / ¼ /1 þ /2 ð15Þ supply chain in Iran.
/ 2 þ /2 4/ In order to evaluate the ability of the proposed hierarchical
algorithms to find optimal (near optimal) solutions for MS and
where /1 and /2 are positive numbers, often set to 2.05. By using DS models, we generate different test problems, arranged in four
the constriction coefficient, the PSO parameters can be defined as: classes (Test Problem 1 to Test Problem 4). For each class, five
W ¼ v; c1 ¼ /1 :v; c2 ¼ /2 :v ð16Þ problem samples are defined based on the number of depots
(J ¼ 2, 3, 4, 5, 6) and the number of markets (K ¼ 3, 5, 7, 10, 15).
Inertia weight (W) is an important parameter which significantly Furthermore, the parameters of the manufacturer problem and
affects the convergence and exploration-exploitation trade-off in the distributor problem in each class are randomly selected from
PSO algorithm. We use a damping factor (W damp ) to decrease W uniform distributions, defined by the experts in Iranian automotive
from iteration to iteration (W ¼ W:W damp ; 0 < W damp < 1), so as to spare parts supply chain. Table 5 lists the domains of the parame-
have more exploration at the beginning and higher exploitation at ters corresponding to the manufacturer, the distributor and the
the end of PSO algorithm execution. Here, we set W damp ¼ 0:99, markets. Other parameters such as G, bj , si and qi are directly
which has shown good results in most of the PSO implementations. dependent on the total induced demand. Therefore, they are sepa-
Apart from updating rules, the processes of encoding, initializa- rately generated for each problem sample.
tion, fitness evaluation and reproduction in both developed PSO In order to validate the results of the proposed hierarchical
algorithms for the manufacturer and for the distributor problems algorithms (GG, GP, PG, and PP), we adopt an exhaustive grid
are similar to those of the GAs, described in previous section. The search within the domains of the decision variables to find near
outline of the PSO algorithms, proposed as ULA and LLA, are pre- optimal solutions for small-size problem instances (J ¼ 2, 3 and
sented in Fig. 6. K ¼ 3, 5).
Exhaustive grid search method creates a grid by partitioning the
4. Computational experiments ranges of decision variables into jointed intervals and evaluates the
fitness function for all possible combinations. The intervals corre-
In this section, computational experiments are conducted in sponding to the best combination are more divided into subinter-
order to compare the performance of the proposed solution proce- vals and the process is repeated until the length of the last
O. Amirtaheri et al. / Computers & Industrial Engineering 110 (2017) 527–537 535
Table 5
Domains of problem parameters.
subinterval is less than a predefined tolerance. Grid search is com- above finding. Similar to MS model, PG (PSO-GA) shows better per-
putationally expensive and does not guarantee to find global formance for DS model in comparison with other algorithms.
optima; however, it provides a very good lower bound for the ben- As far as the computational time is concerned, PP (PSO-PSO) is
efit functions. This method has been employed by other research- the most efficient algorithm in both Stackelberg models. However,
ers to validate the results of meta-heuristic algorithms (Sadigh PG (PSO-GA) requires a quite reasonable amount of time such that
et al., 2012). in the largest instances of MS and DS models, it takes an average of
For optimization of the follower’s problem, we use nonlinear 193 s and 202 s, respectively, which are lower than the mean time
solver of MATLAB optimization tool box in each iteration of the needed by GG (GA-GA) and GP (GA-PSO).
grid search. Moreover, Table 8 presents a comparison between the profits of
Experiments are performed on Problem Test 1 to Problem Test 4 the manufacturer, the distributor and the system, obtained in MS
instances for both MS and DS models. Each experiment is repeated and DS models. The following conclusions can be made based on
5 times and the average result is reported. The performance of the the results:
algorithms is measured in terms of the upper-level (leader) objec-
tive function value and the computing time involved. The results (a) The system profits (total profit gained by the members) in
are summarized in Tables 6 and 7. All the algorithms are imple- MS and DS models are almost equal.
mented in MATLAB 8.1.0 (R2013a) and tested on an AMD (b) Each member (manufacturer or distributor) obtains more
2.00 GHz processor with 2.5 GB of main memory. profit when playing the leader role in the Stackelberg game
Experimental results in Table 6 indicate that the PG (PSO-GA) models.
exceeds the other proposed hierarchical algorithms (GG, GP, and
PP) as well as the grid search algorithm in finding optimal (near The above findings are compatible with the real world prob-
optimal) solution for MS model. It reveals that PSO gives better lems. In a competitive environment, leaders who have priority in
performance than GA for the manufacturer problem. It also implies decision-making usually obtain more share of profit from total
that PSO outperforms GA for the distributor problem. Considering profit exist in the system. As shown in Table 8, total profit gained
the conflict between the profit functions of the manufacturer and by the members is almost equal in both Stackelberg Scenarios.
the distributor, we find that poor performance of LLA can lead to Decision about assigning the leader role to manufacturer or dis-
higher profit for the leader. As the manufacturer’s profit in PG tributor is directly dependent on the aspect of facing with the
(PSO-GA) is higher than his profit in PP (PSO-PSO), we reach the problem. As bi-level programming optimizes the objective function
conclusion that PSO is more efficient than GA for the distributor of the leader (not the follower), the member whose profit is to be
problem. The results for DS model, shown in Table 7, confirm the maximized, will take the leader role.
Table 6
Test results for MS model.
Table 7
Test results for DS model.
Table 8
Benefit comparison in MS and DS models.
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