Analysis of a Dominant Retailer Dual-Channel Supply Chain under Customers’ Channel Preference: The α-Branch and Bound Solution Algorithm Journal Article

Writer: Pakdel Mehrabani، Reza ؛ Seifi، Abbas ؛

Iranian Journal Of Management Studies Autumn 2019, Volume12 - Number 4 ، الف/ISC (‎34 page(s) - From 559 to 592 )

Keywords: Dual-channel supply chain Channel completion Dominant Retailer α-Branch and Bound Retail supply chain

Abstract:

This paper investigates the Stackelberg equilibrium for pricing and ordering decisions in a dominant retailer dual-channel supply chain. In a dual-channel sales network, the products are sold through both a traditional, physical retailer and a direct Internet channel. It is assumed that the retailer is the leader and the powerful member of the supply chain has the market power and acts as a leader and proposes his/her inventory policies and dollar-markup and the manufacturer, as a follower, will decide on the wholesale price and the price of Internet channel as well as the inventory quantity of online store based on the retailer’s decisions. The situation is formulated as a bi-level programming problem, and it is converted to a single level model using Karush-Kuhn-Tucker (KKT) conditions. The single level problem is solved using the α-Branch and Bound (α-BB) algorithm. We investigate the significance of customers’ channel preference on adopting an online channel by the manufacturer. We show that an online channel is not always detrimental to a retailer, but in a Pareto-zone, a range or zone of customers’ channel preference, both supply chain members benefit from newly added sales channel.

Machine summary:

It is assumed that the retailer is the leader and the powerful member of the supply chain has the market power and acts as a leader and proposes his/her inventory policies and dollar-markup and the manufacturer, as a follower, will decide on the wholesale price and the price of Internet channel as well as the inventory quantity of online store based on the retailer’s decisions. This paper examines a dual-channel supply chain, a physical retailer with a manufacturer-owned online store. Literature Review Recently, a vast majority of the literature has considered the interaction and competition between the retailer and the manufacturer and their effect on operational decisions in a dual-channel supply chain. They include sales prices, the delivery lead- time and product differentiation as three factors that impact the demand function and identify the optimal policy to maximize the total profit of the supply chain. (2012) consider three different power structures (which are manufacturer Stackelberg, Retailer Stackelberg and Vertical Nash) and investigate the impact of product substitutability and pricing strategies in a dual exclusive channel system. (View the image of this page) Modeling of dominant retailer single channel supply chain In the single channel setting, the manufacturer distributes the products through just a physical retailer. Demand function modeling In a dual channel supply chain, the product is sold through both a traditional physical retailer and an online store. The manufacturer profit function in the lower level problem of dual retailer-Stackelberg model is joint concave of variables pd , zd and w.

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