Product availability in competitive and cooperative dual-channel distribution with stock-out based substitution
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
Original language | English |
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Pages (from-to) | 111-126 |
Journal / Publication | European Journal of Operational Research |
Volume | 200 |
Issue number | 1 |
Publication status | Published - 1 Jan 2010 |
Link(s)
Abstract
This paper investigates the impact of customers' stock-out based substitution on the product availability and the channel efficiency of a dual-channel supply chain, which consists of a supplier distributing a single product to customers through both its wholly owned direct channel and an independent retailer. The supplier and its retailer, with the objective of optimizing their own profit, simultaneously choose their own base-stock level to satisfy the stochastic demand from the customers whose channel preferences are heterogeneous and may be affected by each channel's product availability. The customers dynamically substitute between the two channels in the event of a stock-out. The result shows that the effect of the stock-out based substitution may increase or decrease the efficiency of a decentralized supply chain. It is found that while the integrated supplier-retailer may consolidate the base-stock levels to benefit from stock-out based substitution, the independent supplier and retailer are more inattentive to customers' stock-out based substitution. Thus, the competitive base-stock levels of the decentralized dual-channel supply chain rarely agree with the system optimal levels. Various contracts are examined to shed light on channel coordination mechanisms. In addition, it is shown that the channel efficiency of the dual-channel distribution can be improved by the emergence of Stackelberg leadership from either the supplier or the retailer. © 2008 Elsevier B.V. All rights reserved.
Research Area(s)
- Channels of distribution, Electronic/internet commerce, Inventory game, Product availability, Supply chain coordination
Citation Format(s)
Product availability in competitive and cooperative dual-channel distribution with stock-out based substitution. / Chiang, Wei-yu Kevin.
In: European Journal of Operational Research, Vol. 200, No. 1, 01.01.2010, p. 111-126.
In: European Journal of Operational Research, Vol. 200, No. 1, 01.01.2010, p. 111-126.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review