Pricing and service decision of dual-channel operations in an O2O closed-loop supply chain

2017 ◽  
Vol 117 (8) ◽  
pp. 1567-1588 ◽  
Author(s):  
Lingcheng Kong ◽  
Zhiyang Liu ◽  
Yafei Pan ◽  
Jiaping Xie ◽  
Guang Yang
Keyword(s):  
Supply Chain ◽  
Closed Loop ◽  
Wholesale Price ◽  
Revenue Sharing ◽  
Service Level ◽  
Return Rate ◽  
Transfer Payment ◽  
Channel Conflict ◽  
Content Type ◽  
Dual Channel

Purpose The online direct selling mode has been widely accepted by enterprises in the O2O era. However, the dual-channel (online/offline, forward/backward) operations of the closed-loop supply chain (CLSC) changed the relationship between manufacturers and retailers, thus resulting in channel conflict. The purpose of this paper is to take a dual-channel operations of CLSC as the research target, where a manufacturer sells a single product through a direct e-channel as well as a conventional retail channel; the retailer are responsible for collecting used products in the reverse supply chain and the manufacturer are responsible for remanufacturing. Design/methodology/approach The authors build a benchmark model of dual-channel price and service competition and take the return rate, which is considered to be related to the service level of the retailer, as the function of the service level to extend the model in the reverse SC. The authors then analyze the optimal pricing and service decision under centralization and decentralization, respectively. Finally, with the revenue-sharing factor, wholesale price and recycling price transfer payment coefficient as contract parameters, the paper also designs a revenue-sharing contract led by the manufacturer and explores in what situation the contract could realize the Pareto optimization of all players. Findings In the baseline model, the results show that optimal price and service level correlate positively in centralization; however, the relation relies on consumers’ price sensitivity in decentralization. In the extension model, the relationship between price and service level also relies on the relative value of increased service cost and remanufacturing saved cost. When the return rate correlates with the service level, a recycling transfer payment can elevate the service level and thus raise the return rate. Through analyzing the parameters in revenue-sharing contract, a point can be reached where lowering the wholesale price and raising the transfer payment coefficient will promote retailers to share revenue. Practical implications Many enterprises establish the dual-channel distribution system both online and offline, which need to understand how to resolve their channel conflict. The conflict is especially strong in CLSC with remanufacturing. The result helps the node enterprises realize the coordination of the dual-channel CLSC. Originality/value It takes into account the fact that there are two complementary relationships, such as online selling and offline delivery; used product recycling and remanufacturing. The authors optimize the strategy of product pricing and service level in order to solve channel conflict and double marginalization in the closed-loop dual-channel distribution network.

scholarly journals Supply chain contracting coordination for fresh products with fresh-keeping effort

2017 ◽  
Vol 117 (3) ◽  
pp. 538-559 ◽  
Author(s):  
Qi Zheng ◽  
Petros Ieromonachou ◽  
Tijun Fan ◽  
Li Zhou
Keyword(s):  
Supply Chain ◽  
Cost Sharing ◽  
Wholesale Price ◽  
Revenue Sharing ◽  
Optimal Decision ◽  
Decision Variable ◽  
Coordination Problem ◽  
Content Type ◽  
Revenue Sharing Contract ◽  
Decentralized Decision Making

Purpose Fresh product loss rates in supply chain operations are particularly high due to the nature of perishable products. The purpose of this paper is to maximize profit through the contract between retailer and supplier. The optimized prices for the retailer and the supplier, taking the fresh-keeping effort into consideration, are derived. Design/methodology/approach To address this issue, the authors consider a two-echelon supply chain consisting of a retailer and a supplier (i.e. wholesaler) for two scenarios: centralized and decentralized decision making. The authors start from investigating the optimal decision in the centralized supply chain and then comparing the results with those of the decentralized decision. Meanwhile, a fresh-keeping cost-sharing contract and a fresh-keeping cost- and revenue-sharing contract are designed. Numerical examples are provided, and managerial insights are discussed at the end. Findings The results show that the centralized decision is more profitable than the decentralized decision; a fresh product supply chain (FPSC) can only be coordinated through a fresh-keeping cost- and revenue-sharing contract; the optimal retail price, wholesale price and fresh-keeping effort can all be achieved; and the profit of a FPSC is positively related to consumers’ sensitivity to freshness and negatively correlated with their sensitivity to price. Research limitations/implications This research is based on the assumption that demand is relatively stable. It has not addressed when demand is stochastic. Practical implications The findings would be useful for managers in fresh food sector in terms of how to deal with suppliers in order to maximize total profit while also provide freshest food to the customers. Originality/value Few studies have considered fresh-keeping effort as a decision variable in the modelling of supply chain. In this paper, a mathematical model for the fresh-keeping effort and for price decisions in a supply chain is developed. In particular, fresh-keeping cost-sharing contract and revenue-sharing contract are examined simultaneously in the study of the supply chain coordination problem.

scholarly journals An Efficient Approach for Coordination of Dual-Channel Closed-Loop Supply Chain Management

2018 ◽  
Vol 10 (10) ◽  
pp. 3433 ◽  
Author(s):  
Muhammad Arshad ◽  
Qazi Khalid ◽  
Jaime Lloret ◽  
Antonio Leon
Keyword(s):  
Supply Chain ◽  
Closed Loop ◽  
Wholesale Price ◽  
Third Party ◽  
Equilibrium Strategy ◽  
Recycling Rate ◽  
Closed Loop Supply Chain ◽  
Dual Channel ◽  
Fairness Concern ◽  
The Impact

In this paper, a closed-loop supply chain composed of dual-channel retailers and manufacturers, a dynamic game model under the direct recovery, and an entrusted third-party recycling mode of the manufacturer is constructed. The impact of horizontal fairness concern behavior is introduced on the pricing strategies and utility of decision makers under different recycling models. The equilibrium strategy at fair neutrality is used as a reference to compare offline retails sales. Research shows that in the closed-loop supply chain of dual-channel sales, whether in the case of fair neutrality or horizontal fairness concerns, the manufacturer’s direct recycling model is superior to the entrusted third-party recycling, and the third-party recycling model is transferred by the manufacturer. In the direct recycling model, the horizontal fairness concern of offline retailers makes two retailers in the positive supply chain compete to lower the retail price in order to increase market share. Manufacturers will lower the wholesale price to encourage competition, and the price will be the horizontal fairness concern coefficient, which is negatively correlated. In the reverse supply chain, manufacturers increase the recycling rate of used products. This pricing strategy increases the utility of manufacturers and the entire supply chain system compared to fair neutral conditions, while two retailers receive diminished returns. Manufacturers, as channel managers to encourage retailers to compete for price cuts, can be coordinated through a three-way revenue sharing contract to achieve Pareto optimality.

Impact of wholesale price discrimination by the manufacturer on the profit of supply chain members

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rofin TM ◽  
Biswajit Mahanty
Keyword(s):  
Supply Chain ◽  
Price Discrimination ◽  
Wholesale Price ◽  
Price Strategy ◽  
Content Type ◽  
Dual Channel ◽  
Channel Preference ◽  
Online Channel ◽  
Dual Channel Supply Chain ◽  
The Impact

PurposeThe purpose of this paper is to investigate the impact of wholesale price discrimination by a manufacturer in a retailer–e-tailer dual-channel supply chain for different product categories based on their online channel preference.Design/methodology/approachThis paper considers a dual-channel supply chain comprising of a retailer and an e-tailer engaged in competition. Game-theoretic models are developed to model the competition between the retailer and e-tailer and to derive their optimal price, optimal order quantity and optimal profit under (1) equal wholesale price strategy and (2) discriminatory wholesale price strategy. Further, a numerical example was employed to quantify the results and to capture the variation with respect to online channel preference of the product.FindingsIt is beneficial for the manufacturer to adopt a discriminatory wholesale price strategy for products having both high online channel preference and low online channel preference. However, equal wholesale price strategy is beneficial for the e-tailer and the retailer in the case of products having high online channel preference and in the case of products having low online channel preference, respectively.Practical implicationsThe study helps the manufacturers to maximize their profit by adopting the right wholesale price strategy considering the online channel preference of the product when the manufacturers are supplying to heterogeneous retailers.Originality/valueThere is scant literature on the wholesale price strategy of the manufacturer considering the heterogeneous downstream retailers. This paper contributes the literature by bridging this gap. In addition, the study establishes a link between the wholesale price strategy and online channel preference of the product.

scholarly journals Tripartite game models in a dual-channel supply chain: competition and cooperation

2021 ◽  
Vol 55 (2) ◽  
pp. 653-671
Author(s):  
Zhenkai Lou ◽  
Fujun Hou ◽  
Xuming Lou ◽  
Yubing Zhai
Keyword(s):  
Supply Chain ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Revenue Sharing ◽  
Competition And Cooperation ◽  
Dual Channel ◽  
Supply Chain Competition ◽  
Bertrand Game ◽  
Definition Of ◽  
Dual Channel Supply Chain

This paper considers tripartite games in a dual-channel supply chain which involves a manufacturer, an offline retailer and an online retailer. Both competition and cooperation issues are analyzed. In the competition model, a Stackelberg game between the manufacturer and two retailers and a Bertrand game between two retailers occur simultaneously. It is shown that the channel which attracts more consumers’ purchase preference is charged a higher wholesale price and it meanwhile declares a higher sales price. In the presence of revenue sharing, cooperation issues between the three participants are studied and the change of the revenue of each participant is analyzed when partial cooperation exists. Further, the definition of the optimum two-player coalition is proposed. We demonstrate that the channel which attracts more preference of consumers is definitely in the optimum coalition. The structure of the two-player coalition is analyzed. Finally, under revenue sharing and cost apportionments, the change of each participant’s profit is examined.

Quantity Leadership for a Dual-Channel Supply Chain with Retail Service

2020 ◽  
Vol 37 (02) ◽  
pp. 2050005
Author(s):  
Ciwei Dong ◽  
Liu Yang ◽  
Chi To Ng
Keyword(s):  
Supply Chain ◽  
Wholesale Price ◽  
Service Level ◽  
Dominant Strategy ◽  
Optimal Solutions ◽  
Dual Channel ◽  
Numerical Studies ◽  
Retail Service ◽  
Online Channel ◽  
Dual Channel Supply Chain

In a dual-channel supply, the manufacturer sells the products by both a traditional channel via the retailer and an online channel directly. Comparing with the direct channel, the retailer may provide additional services to the traditional channel. This paper studies the quantity leadership for a dual-channel supply chain with retail service. The manufacturer decides the wholesale price of the products and its selling quantity via the online channel, and the retailer decides the service level and its selling quantity via the traditional channel. We consider three Cournot competition games: Manufacturer-as-leader game, retailer-as-leader game, and simultaneous game. Optimal solutions are derived for these games. Based on the optimal solutions, we investigate the quantity leadership/followership decisions for the manufacturer and retailer, associated with the changes of some parameters. We observe that when the service sensitivity parameters are low, being a follower is a dominant strategy for the retailer; otherwise, both strategies of manufacturer-as-leader (retailer as the follower) and retailer-as-leader (manufacturer as the follower) are Nash equilibriums. We further conduct the numerical studies to investigate the impacts of parameters related to the retail service, and discuss the insights of the findings.

scholarly journals Production Decision and Coordination Mechanism of Socially Responsible Closed-Loop Supply Chain

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-10
Author(s):  
Xiaofeng Long ◽  
Jiali Ge ◽  
Tong Shu ◽  
Chunxia Liu
Keyword(s):  
Supply Chain ◽  
Social Responsibility ◽  
Closed Loop ◽  
Wholesale Price ◽  
Consumer Surplus ◽  
Revenue Sharing ◽  
Coordination Mechanism ◽  
Patent Licensing ◽  
Socially Responsible ◽  
Closed Loop Supply Chain

Corporate social responsibility (CSR) has a significant impact on the operation of enterprises. This study analyzes the production and coordination decisions of closed-loop supply chain (CLSC) by establishing two assumptions of endogenous and exogenous CSR. The results reveal that, for ordinary consumers, CSR is quantified as the parameter of consumer surplus, which has an impact on the patent licensing fee, revenue-sharing ratio, and so on, and which not only increases the sales quantity in CLSC but also creates more value for the manufacturer and the retailer. Considering endogenous CSR, the study found that the manufacturer’s CSR level and the manufacturer’s and the retailer’s profits both increase with the proportion of CSR-sensitive consumers. In the endogenous model, the manufacturer sets a higher wholesale price and lower patent licensing fee than in the exogenous model. Perfect coordination in the two models can be achieved by setting a revenue-sharing ratio related to wholesale price and patent licensing fee. In practice, improving the social responsibility consciousness of consumers and raising enterprises’ CSR level can achieve a win-win situation for revenues and social welfare.

The impact of firms’ social ties with customers on dual-channel supply chains

2019 ◽  
Vol 38 (6) ◽  
pp. 777-796
Author(s):  
Wei Wei ◽  
Shue Mei ◽  
Jiameng Yang ◽  
Zhiyong John Liu
Keyword(s):  
Social Media ◽  
Supply Chain ◽  
Social Ties ◽  
Wholesale Price ◽  
Information Service ◽  
Distribution Channel ◽  
Retail Price ◽  
The Other ◽  
Content Type ◽  
Dual Channel

Purpose More and more firms are utilizing social media as a distribution channel to sell products. By establishing business accounts on social media firms provide information service to strengthen their relationship with customers and boost sales. The purpose of this paper is to investigate the pricing, information service provision and channel strategies of firms who sell products through social media. Design/methodology/approach The authors use a game theoretical model to study a dual-channel supply chain consisting of one manufacturer and one retailer. Two scenarios are considered – under one scenario the manufacturer and under the other the retailer, respectively, solely provides information service. Both firms’ pricing decisions and profits are compared. Findings The authors find that in the dual-channel model with either the manufacturer or the retailer providing information service to enhance the demand: a firm that has stronger social ties with customers is willing to provide more information services; when the manufacturer provides information service, it charges a direct price higher than the wholesale price, and whether the direct-channel price exceeds the retail price depends on the strength of the manufacturer’s social ties with customers; when the retailer provides information service, the direct price is equal to the wholesale price, both lower than the retail price; and a firm always prefers itself rather than the other firm to provide information service. However, the whole supply chain is better off if the manufacturer rather than the retailer provides information service. Research limitations/implications Besides the relationship between firms and customers, the peer relationship among customers also impacts the supply chain performance, which might be studied in the future. Originality/value The study is novel in theoretically exploring the influence of firms’ social relationship with customers on firms’ pricing and channel strategies.

scholarly journals The value of information sharing in a dual-channel closed-loop supply chain

2021 ◽  
Author(s):  
Yanting Huang ◽  
Benrong Zheng ◽  
Zongjun Wang
Keyword(s):  
Supply Chain ◽  
Information Sharing ◽  
Private Information ◽  
Value Of Information ◽  
Closed Loop ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Closed Loop Supply Chain ◽  
Dual Channel ◽  
Model C

This paper considers a dual-channel closed-loop supply chain consisting of a manufacturer, a retailer and a collector in which the retailer possesses private demand information and determines whether to share his private information with other chain members. Specifically, we develop four information sharing models, namely no information sharing (Model C-R), the retailer sharing information with the manufacturer (Model C-R-M), the retailer revealing information to the collector (Model C-R-C), and the retailer disclosing information to both the manufacturer and the collector (Model C-R-T). We adopt the Stackelberg game to acquire the equilibrium strategies and examine the value of information sharing on chain members’ decisions. We find that, chain members will set the largest wholesale price, retail prices of direct and indirect channels when the retailer only shares information with the manufacturer and the highest return rate can be obtained in the case of the retailer only revealing information to the collector. We can also find that, information sharing is profitable to the manufacturer and the collector, while is detrimental to the retailer. The manufacturer, the collector and the retailer can reach the largest profits in Model C-R-T, Model C-R-C and Model C-R-M, respectively.

Three-layer supply chain policy under sharing recycling responsibility

2019 ◽  
Vol 16 (5) ◽  
pp. 734-762
Author(s):  
Uttam Kumar Khedlekar ◽  
Priyanka Singh
Keyword(s):  
Supply Chain ◽  
Closed Loop ◽  
Wholesale Price ◽  
Fixed Time ◽  
Optimization Techniques ◽  
Optimal Time ◽  
Selling Price ◽  
Optimal Solutions ◽  
Closed Loop Supply Chain ◽  
Content Type

Purpose For smooth running of business affairs, there needs to be a coordination among manufacturer, collector and retailer in forward and reverse supply chain. This paper handles the problem of making pricing, collecting and percentage sharing decisions in a closed-loop supply chain. The purpose of this paper is to examine the effect of responsibility sharing percentage on the profits of a manufacturer, a retailer and a collector. The paper further aims to understand the mutual interactions among decision variables and profit functions. It also determines the optimal selling price, optimal time, wholesale price, sharing percentage and optimal return rate in such a manner that the profit function is maximized. Design/methodology/approach The authors presented a three-echelon model consisting of a manufacturer, a retailer and a collector in the closed-loop supply chain and optimized the profits of each supply chain member. The authors introduced SRR models for the remanufacturing by providing some percentage of physical and financial support to the collector. Optimization techniques have been applied to obtain optimal solutions. Numerical examples and graphical representations of the optimal solutions are provided to illustrate the model. Findings This study stresses on profitable value retrieval from returned products, and it discusses how responsibility sharing can improve profitability and reduce the workload of an individual. In total, three main results are found. First, sharing and coordination among chain members can improve collector’s profit. Second, supply chain performance may also improve over time. Third, the profit of each member of the supply chain increases with an increase in sharing percentage up to a certain limit. So, the manufacturer can share the responsibility of the collector under a fixed limit. Research limitations/implications The main limitation of this model is that there is no difference between manufactured and remanufactured products. There are many correlated issues that need to be further investigated. The future study in this direction may include multi-retailer, stochastic demand patterns. Practical implications It is directly utilized by supply chain industries in which coordination among chain members is still needed to maximize profits. This information enables the manufacturer to assist the collector financially or physically for the proper management of the three-layer supply chain. The present work will form a guideline to choose the appropriate parameter(s) and mathematical technique(s) in different situations for remanufacturable products. Social implications From the management point of view, this study delivers the strongest result to remanufacturing companies and for whom effective and efficient coordination among chain members is vital to the overall performance of the supply chain. Originality/value There are very few studies that consider the remanufacturing of used products under a fixed time period. The authors considered selling price-sensitive and time-dependent exponentially declining demand. This model is developed by considering all possible help to a collector from manufacturer to collect used products from consumers. This research complements past research by showing coordination among supply chain members within a fixed time horizon.

scholarly journals Optimal contract design for dual-channel supply chains under information asymmetry

2017 ◽  
Vol 32 (8) ◽  
pp. 1087-1097 ◽  
Author(s):  
Honglin Yang ◽  
Erbao Cao ◽  
Kevin Jiang Lu ◽  
Guoqing Zhang
Keyword(s):  
Supply Chain ◽  
Information Asymmetry ◽  
Revenue Sharing ◽  
Information Value ◽  
Cost Information ◽  
Content Type ◽  
Dual Channel ◽  
Asymmetric Cost ◽  
Dual Channel Supply Chain ◽  
Asymmetric Cost Information

Purpose The aim of this paper is to investigate the effect of information asymmetry on revenue sharing contracts and performance in a dual-channel supply chain. First, the authors model the optimum revenue sharing contract in a dual-channel supply chain under both the full information case and the asymmetric information case. Second, they contrast the optimal decisions of a dual-channel supply chain between the full information case and the asymmetric information case. Third, they explore the impact of asymmetric cost information on the performance of a dual-channel supply chain and investigate the information value. Design/methodology/approach The authors present two main issues associated with revenue sharing contracts to alleviate manufacturer–retailer conflicts in a dual-channel supply chain. In the first issue, a revenue sharing contract is designed in a dual-channel supply chain under asymmetric cost information conditions, based on the principal-agent model. In the second issue, an optimal revenue sharing contract under full information conditions, based on the Stackelberg game is discussed. They explore the impact of asymmetric cost information on the performance of a dual-channel supply chain and investigate the information value based on comparative static analysis. Findings First, the direct sale price is unchanged and independent of the retailer’s cost construct, but the wholesale price increases and the retail sale price does not decrease under asymmetric cost information. The information asymmetry leads to higher direct sale demand and lower retail sale demand. Second, information asymmetry is beneficial for the retailer, but imposes inefficiency on the manufacturer and the whole supply chain. Third, the performance of the dual-channel supply chain is improved if the retailer’s cost information is shared and the dual-channel supply chain reaches coordination. The retailer is willing to share its cost information if the lump sum side payment that the manufacturer offers can make up the retailer’s reduced profit due to sharing this information. Originality/value The authors proposed a contract menus design model in a dual-channel supply chain. They examine how information asymmetry affects optimal policies and performance. They compared the optimal policies under symmetric information and asymmetric information. Conditions under which the partners prefer sharing information are identified. They quantified the information value from the points of partners and the whole system.

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