In order to achieve the optimal performance in the centralized system, this research designs a partial buyback contract to coordinate the supply chain.
#CHANGE SHIPPING SETTINGS IN MULTICHANNEL ORDER MANAGER FREE#
This work investigates the effects of two typical behaviors, free riding behavior and consumer switching behavior, on inventory, ordering, and sales effort decisions in decentralized and centralized decision situations with stochastic demand. This study introduces a dual-channel supply chain including a supplier and a retailer with capital constraints, in which the retailer can apply for the trade credit financing from the supplier. In search of practically more appealing coordination mechanisms, we design a novel two-part compensation-commission contract, whose terms depend on the retail channel sales. An exception to this is an appropriately designed penalty contract which can indeed coordinate the supply chain, but is hard to implement. We also investigate coordination mechanisms, and show that most of the well-known, simple contracts fail to achieve coordination in this setting. We find that supply chain losses are least under moderate levels of double-marginalization and or substitution.
Increasing double-marginalization, on the other hand, intensifies the tendency to overstock in the manufacturer's wholly-owned channel, but induces the retail channel to understock. We show that there is an overall tendency for both channels to overstock due to substitution, which intensifies under increasing substitution rates. We explore the channel inefficiencies induced by the presence of simultaneous vertical competition (double-marginalization) and horizontal competition (substitutability). We assume that each channel has a local stochastic demand, but that the products are substitutable, which means there will be spill-over customers in the event that one channel runs out of stock. We focus on the stocking levels of the manufacturer's wholly-owned channel and the retail channel. The manufacturer and the retailer stock the product solely to satisfy the final customer demand of their respective channels. In this paper, we study a multiple-channel distribution system in which a manufacturer sells its product through an independent retailer as well as through his wholly-owned channel.
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