Bilevel Programming for Manufacturers Operating in an Omnichannel Retailing Environment

Gupta, Vishal Kumar ; Dakare, Shrinath ; Fernandes, Kiran Jude ; Thakur, Lakshman S. ; Tiwari, Manoj Kumar (2023) Bilevel Programming for Manufacturers Operating in an Omnichannel Retailing Environment IEEE Transactions on Engineering Management, 70 (11). pp. 3958-3975. ISSN 0018-9391

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Official URL: https://doi.org/10.1109/TEM.2021.3090653

Related URL: http://dx.doi.org/10.1109/TEM.2021.3090653

Abstract

In this article, we present a joint production, pricing, and inventory control problem that can help manufacturers manage revenue in an omnichannel environment. This article puts forward a multiperiod Stackelberg game between a manufacturer and a retailer, assuming the former to be the leader. The leader–follower game is formulated as a mixed-integer nonlinear bilevel optimization problem wherein both players seek to maximize their respective profits. The article envisions an omnichannel retailing environment where online, offline, direct, and drop-shipping channels coexist. It then investigates how enabling showrooming and webrooming on the drop-shipping channel account can affect the supply-chain profitabilities. The analyses suggest that when the customers are aided with showrooming and webrooming services and are allowed to place drop-shipping orders from retailers’ stores, additional profit can be generated in the supply chain. To solve the proposed bilevel optimization problem, we investigate single-level reduction using Karush–Kuhn–Tucker conditions and hierarchical optimization technique based on the simulated annealing and randomized decomposition solver. To assess the efficacy of the solution techniques, a comparative analysis is carried out. Thereafter, with the aid of numerical experiments and sensitivity analyses, this article draws the key managerial insights for manufacturers.

Item Type:Article
Source:Copyright of this article belongs to IEEE Transactions on Engineering Management.
Keywords:Optimization; Programming; Production; Pricing; Games; Supply chains; Production planning.
ID Code:139849
Deposited On:30 Aug 2025 15:05
Last Modified:30 Aug 2025 15:05

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