Collaborative network planning using auction parallel to pool-based energy market with shifting bids

Abstract

In this paper producers and distributors in supply chain need to agree on orders quantities and schedules. Instead of classical integrated production-distribution planning model we propose a reformulation in form of centralized auction, oriented on maximization of individual benefits. Production costs and inventory costs are handled as parts of competitive offers/bids. We reformulate the inventory costs, so they can be interpreted as costs of reduction or increase in ordered quantities. Ordered distribution quantities are balanced in each period with offered production. We point to the similarity of the proposed model to the centralized double energy market for demands with shifting capabilities. This allows us to use pricing model based on uplifts minimization, originally developed for pool-based auction. As a result we obtain prices complemented with minimum uplifts that support competitive producers and distributors to follow schedules efficient for entire supply chain. This novel coordination mechanism is formulated as a set of two clearing and pricing mixed integer linear programming problems (MILP). Simple example illustrates the approach.