Retailer or e-tailer? Strategic pricing and economic-lot-size decisions in a competitive supply chain with drop-shipping
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) | 1645-1653 |
Journal / Publication | Journal of the Operational Research Society |
Volume | 61 |
Issue number | 11 |
Publication status | Published - Nov 2010 |
Link(s)
Abstract
Drop-shipping is an arrangement whereby an e-tailer, who does not hold inventories, processes orders and requests a manufacturer to ship products directly to the end customers. To explore the economic benefits of adopting drop-shipping distribution strategy in a competitive environment, we investigate the profitability and the efficiency of the drop-shipping channel as compared to the traditional channel. Specifically, we develop Economic Order Quantity (EOQ) games with pricing and lot-sizing decisions to examine the strategic interactions between a manufacturer and its retailer/e-tailer in the traditional/drop-shipping distribution channels. We identify conditions under which the drop-shipping channel profitably outperforms the traditional one. It is found that the economic interests of adopting drop-shipping distribution for the channel members may not always be consistent. There are cases where only the manufacture would favour drop-shipping. In this study, we also reveal that the inefficiency caused by lack of coordination in the traditional channel can be alleviated in the drop-shipping channel where the lot-sizing decision is made by the manufacturer. © 2010 Operational Research Society Ltd.
Research Area(s)
- conflict analysis, distribution channel, game theory, inventory, supply chain analysis
Citation Format(s)
Retailer or e-tailer? Strategic pricing and economic-lot-size decisions in a competitive supply chain with drop-shipping. / Chiang, W. K.; Feng, Y.
In: Journal of the Operational Research Society, Vol. 61, No. 11, 11.2010, p. 1645-1653.
In: Journal of the Operational Research Society, Vol. 61, No. 11, 11.2010, p. 1645-1653.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review