Social Network Effects in Retail Supply Chain Management

Description

The aim of this project is to build an analytical framework to elucidate the effectsof social networks in retail supply chain management. In particular, we will focus ontwo kinds of social network effects, social learning and network externality, and studyhow they affect consumers' purchasing behaviors and retailers' pricing and inventorymanagement decisions.Today, there are over 2 billion people actively using social media worldwide (Kemp2014). In the context of retail supply chain management, social networks have shownsignificant influences on consumer purchasing decisions, especially regarding new product purchases or when an unusual circumstance occurs, such as supply disruption (i.e.,sudden interruption of normal product supply). For example, a study has shown that theinfluence of friends' recommendations and consumption decisions constitutes the primaryfactor behind 20 to 50 percent of all purchase decisions, and such influence is the greatestwhen consumers are buying a product or service for the first time (Bughin et al. 2010).It thus becomes critical for retailers to understand the impacts of social networks onconsumer behaviors, and adapt the operational decisions (such as pricing and inventorypolicies) in the new social network era. In this proposal, we plan to address the followingkey questions: (1) How to characterize the tradeoff of endogenous social learning underdifferent social network structures, and jointly optimize social learning induction andretail pricing decisions? (2) How does social learning influence consumers' panic buyingbehaviors and retailers' inventory management decisions, when there is supply disruptionrisks? (3) How to optimize dynamic pricing and inventory ordering decisions, if the socialnetwork structure or network externality is changing over time?The PI and the Co-I have rich research experience in the proposed research areaand have obtained encouraging preliminary results related to the three key researchquestions. The output of the proposed research will enable a deeper understanding ofthe opportunities and challenges of managing retail supply chains in social network era.?