A heuristic algorithm for a supply chain's production-distribution planning

In this paper we consider the problem of planning the production and distribution in a supply chain. The situation consists in a set of distribution centers seeking to serve to a set of retailers; these distribution centers are supplied by a set of plants trying to minimize the operation and transportation costs. The problem is formulated as a bilevel mathematical problem where the upper level consists of deciding the amount of product sent from the distribution centers to the retailers trying to minimize the transportation costs and also by considering the costs of acquiring the products that come from the plants. Meanwhile the lower level consists in minimizing the plants operations cost meeting the demand grouped in the distribution centers. We propose a heuristic algorithm based on Scatter Search that considers the Stackelberg s equilibrium; numerical tests show that our proposed algorithm improves the existing best known results in the literature.