Production planning problem with sequence dependent setups as a bilevel programming problem

Each of n products is to be processed on two machines in order to satisfy known demands in each of T periods. Only one product can be processed on each machine at any given time. Each switch from one item to another requires sequence dependent setup time. The objective is to minimize the total setup time and the sum of the costs of production, storage and setup. We consider the problem as a bilevel mixed 0-1 integer programming problem. The objective of the leader is to assign the products to the machines in order to minimize the total sequence dependent setup time, while the objective of the follower is to minimize the production, storage and setup cost of the machine. We develop a heuristics based on tabu search for solving the problem. At the end, some computational results are presented.