Optimization of logistics service supply chain based on Bi-Level programming and the hierarchical wind driven algorithm for solution

Abstract

As competition in logistics industry grows and customers' individual requirements become more and more various, to gain the competitive edge and to guarantee their stable and sustainable development, logistics service suppliers have to do their best to optimize their service and improve customer satisfaction. Under such environment, integrated logistics service providers, as the core of the service supply chain, should try to optimize the logistics service supply chain through selecting best suitable functional logistics service providers. Cost should not be the only factor to be considered, or customers' satisfaction will be decreased; On the other hand, integrated service providers can't just seek high service quality, which will increase their cost. Therefore, in order to get sustainable development, they should not only emphasize on their operation cost to improve the efficiency of their service, but also on their quality of the logistics service. It is of vital importance for integrated logistics service providers to optimize the service supply chain considering both cost and quality of the logistics service they provide. From the perspective of decreasing cost and improving service quality of the logistics service system, a bi-level programming model is introduced to optimize the logistics service supply chain. Low cost and high quality are both objectives of logistics service supply chain. In the optimization of the service supply chain, on one hand, integrated logistics service providers should consider the overall cost of the service they provide, trying to select functional logistics service providers with lower prices; on the other hand, they should also take service quality in account, trying to provide logistics service with high quality. Therefore, a bi-level programming model is built here to optimize the logistics service supply chain, in which the objective of the upper level programming is to minimize the overall cost, while the lower level programming aims to maximize the service quality. The bi-level programming model with principal and subordinate hierarchical structure is able to realize the interaction between upper and lower levels, and an optimum solution which juggles both cost and quality is finally obtained through multiple iterations. The upper level programming aims to minimize the outsourcing cost of integrated logistics service providers, while lower level programming's objective is to maximize the service quality of the logistics service supply chain. Cost is decreased and service is improved continuously through multiple interactions of upper and lower levels of the programming, thus obtaining an optimum solution finally. Meanwhile, a hierarchical wind driven optimization method is put forward to solve the bi-level programming. The framework of the hierarchical algorithm is composed of two WDO algorithms, whose interactive iterations are invoked to figure out the optimal solution of the BLPP. An example is also given to verify the efficiency and practicability of our model and algorithm as well. It is shown from our running result that functional logistics service provider 1, 3 and 6 are selected, and their corresponding amount distributed to them are 657.2 tons, 560.22 tons and 781.96 tons respectively. We can also see that the functional logistics service provider 2 and 4, who own the highest quality level and the second highest quality level are not chosen into this service supply chain due to their high cost. Therefore, the bi-level programming model proposed in this research can balance cost for logistics and service quality at the same time, and an optimal scheme is finally obtained which minimizes the cost and maximizes the logistics service quality. Results show that in optimizing the logistics service supply chain, the bi-level programming model combined with the HWDO algorithm proposed in this research is able to offer a good model expression, as well as an approach for resolution.