An iterative approach for a bi-level competitive supply chain network design problem under foresight competition and variable coverage

Abstract

This paper develops a bi-level program for a chain-to-chain competition under foresight competition and variable coverage. Customers patronize those retailers who are within their radius of influence. The demand of customers who are not in the catchment area of any retailer, are lost. An iterative global search method is proposed that incorporates the possible reaction of the follower in the leader’s problem as new constraints (i.e. cuts) in each iteration. Several numerical experiments are conducted whose results demonstrate ignoring the foresight competition would lead to loss of market share and profitability of the new entrant’s supply chain.