A dynamic pricing model for postponement supply chain: the bi-level programming approach

Baozhuang Niu

International Journal of Logistics Economics and Globalisation, 2008, vol. 1, issue 3/4, 383-395

Abstract: Postponement is viewed as a vital element in any agile strategy and attractive in principle. However, its application is to a lesser extent because of lacking efficient pricing model. Therefore, we propose a dynamic pricing model based on bi-level programming approach: firstly, we establish a two-stage distributed control model for postponement supply chain as the basis of the pricing model. Then, according to the pricing mechanism, we find that there is Stackelberg game feature in the process. Aimed at the feature, we propose a dynamic bi-level programming model, taking the centered warehousing & manufacturing point as the leader, and hence, the model is calculated and verified using the investigation data. We take chaos coverage hunting algorithm to solve the model. Research shows: the pricing model is helpful to obtain the maximum profit of the whole supply chain; we obtain steady equilibrium prices, which verify the efficiency of the decision-making model. The pricing model is proved to be useful to give reasonable prices of goods traded on postponement supply chain.

Keywords: bi-level programming; chaos optimisation; distributed control system; dynamic pricing; postponement supply chains; supply chain management; SCM; pricing models; agile strategy; maximum profit. (search for similar items in EconPapers)
Date: 2008
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