Storage pricing, replenishment, and delivery schedules in a supply hub in industrial park: A bilevel programming approach

A supply hub in industrial park (SHIP) is a third-party business entity that leases storage space and logistics services among manufacturers located in the same industrial park. Manufacturers may hire warehouses outside the park if the SHIPs storage price is exorbitant. This paper discusses how SHIPs and manufacturers interact to optimise their decisions on storage pricing, replenishment, and delivery. A dynamic storage pricing strategy depending on the duration of storage usage is adopted. A bilevel model is proposed to study this problem between the SHIP and manufacturers. After deriving the optimal conditions of manufacturers rational reactions, an enumerative algorithm is developed to cope with the bilevel model. A series of numerical experiments and sensitivity analyses are conducted to compare the dynamic and constant storage pricing strategies, to examine the influences of major cost parameters, and to evaluate the effects of the SHIP on manufacturers performance. The results show that the SHIP could achieve profit improvement through adopting dynamic storage pricing, especially when the public warehouses delivery charge is high. The SHIPs profit increases significantly with the rising delivery charge of public warehouse and the decrease of the holding cost rate at the SHIP. The SHIP plays a role in mitigating demand risks, and brings further benefits to all manufacturers especially when their demand patterns are seasonally complementary.