Robust bi-level optimization for an opportunistic supply chain network design problem in an uncertain and risky environment
HÃªris GolpÃ®ra ()
Operations Research and Decisions, 2017, vol. 1, 21-41
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 bi-level 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; Bi-level programming; robust optimization; KKT conditions. (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:wut:journl:v:1:y:2017:p:21-41:id:1267
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