Bi-Level Model: New Approach to Dynamic Vehicle Allocation in Supply Chain

Abstract

There are different decision levels with distinct decision makers in a decentralized Supply Chain, for example, shippers and carriers. Nevertheless, most studies are conducted considering only one decision-making level. The carrier is the decision-making agent in Dynamic Vehicle Allocation (DVA) problem and allocates vehicles to maximize its profit, usually delaying shipping. It is necessary to respect the partnership principle. This paper presents the DVA problem using bi-level programming. The shipper's objective is to minimize shipping delays, while the carrier's objective is to maximize profits. The exact algorithm is used to solve the Bi-level DVA problem. The results show potential applications in logistics, decreasing both transportation delays and costs when synchronizing carrier's and shippers' decisions.