Enhanced joint pricing and lot-sizing decisions in a serial supply-chain

In this research, we consider a serial supply chain with multiple stages in a centralized control scenario. Within this supply chain, the first stage faces a supplier selection decision for a particular product that experiences a price-sensitive demand. The demand is represented as a logit function, which parameters account for the range and price sensitivity factors. Suppliers are capacitated and offer their individual fixed unit price with a corresponding quality level for the product. The buying stage needs to decide which suppliers to choose and how to allocate orders, determining the optimal inventory policy for all stages and the retail price to offer to end customers, while maximizing the total profit of the supply chain. In this context, we formulate the problem as a mixed integer nonlinear programming model and propose a heuristic approach to overcome the complexity of the model. Computational experiments are carried out to examine the performance of the proposed heuristic.