Developing a new stochastic competitive model regarding inventory and price

Abstract

Within the competition in today's business environment, the design of supply chains becomes more complex than before. This paper deals with the retailer's location problem when customers choose their vendors, and inventory costs have been considered for retailers. In a competitive location problem, price and location of facilities affect demands of customers; consequently, simultaneous optimization of the location and inventory system is needed. To prepare a realistic model, demand and lead time have been assumed as stochastic parameters, and queuing theory has been used to develop a comprehensive mathematical model. Due to complexity of the problem, a branch and bound algorithm has been developed, and its performance has been validated in several numerical examples, which indicated effectiveness of the algorithm. Also, a real case has been prepared to demonstrate performance of the model for real world.