Dynamic supply chain network design with capacity planning and multi-period pricing

• Supply chain network design with capacity planning and dynamic pricing is introduced.
• A mixed-integer linear programming model is developed for the problem.
• SA is combined with developed linear relaxation-based heuristics as a solution approach.
• The efficiency of the solution approach is shown by computational results.
• Some managerial insights are driven from several numerical experiments.

This paper addresses a new problem in designing and planning a multi-echelon and multi-product supply chain network over a multi-period horizon in which customer zones have price-sensitive demands. Based on price-demand relationships, a generic method is presented to obtain price levels for products and then, a mixed-integer linear programming model is developed. Due to the problem intractability, a simulated annealing algorithm that uses some developed linear relaxation-based heuristics for capacity planning and pricing is presented. Numerical results demonstrate the significance of the model as well as the efficiency of the solution algorithm and linear relaxation-based heuristics.