New and efficient algorithms for transfer prices and inventory holding policies in two-enterprise supply chains

Hoai Thi () and Duc Tran

Journal of Global Optimization, 2014, vol. 60, issue 1, 5-24

Abstract: We consider a multi-period problem of fair transfer prices and inventory holding policies in two enterprise supply chains. This problem was formulated as a mixed integer non-linear program by Gjerdrum et al. (Eur J Oper Res 143:582–599, 2002 ). Existing global optimization methods to solve this problem are computationally expensive. We propose a continuous approach based on difference of convex functions (DC) programming and DC Algorithms (DCA) for solving this combinatorial optimization problem. The problem is first reformulated as a DC program via an exact penalty technique. Afterward, DCA, an efficient local approach in non-convex programming framework, is investigated to solve the resulting problem. For globally solving this problem, we investigate a combined DCA-Branch and Bound algorithm. DCA is applied to get lower bounds while upper bounds are computed from a relaxation problem. The numerical results on several test problems show that the proposed algorithms are efficient: DCA provides a good integer solution in a short CPU time although it works on a continuous domain, and the combined DCA-Branch and Bound finds an $$\epsilon $$ ϵ -optimal solution for large-scale problems in a reasonable time. Copyright Springer Science+Business Media New York 2014

Keywords: Supply chain; Mixed integer non-linear programming; Nash bargaining; DC programming; DCA; Branch and bound (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10898-013-0081-y

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