A hybrid algorithm for solving a bilevel production-distribution planning problem

Abstract

This paper addresses a hierarchical production-distribution system with two levels of decision making. At the top of the hierarchy, a distribution company faces a multi-depot vehicle routing problem, i.e. it decides on the allocation of retailers to depots and on the routes of vehicles from each depot. At the bottom of the hierarchy, a manufacturing company, after receiving the order from the distribution company, decides which manufacturing plants will produce the required items. We present a hybrid algorithm to solve this problem. This algorithm uses the genetic algorithm structure to control the allocation of retailers to depots. It determines the routes to serve retailers by using an ant colony optimization algorithm and addresses the production issue by solving a linear programming problem. The efficiency of the algorithm is shown by applying it to a realistic instance.