Dual-channel supply chain competition with channel preference and sales effort under uncertain environment

  • Hua Ke, Jinjin Liu
  • Published 2017 in J. Ambient Intelligence and Humanized Computing

Abstract

Nowadays, a host of suppliers, such as IBM, Apple and Nike, sell products directly online while simultaneously sell via traditional distribution channels. The existence of two channels makes consumers choose purchase channel according to their own preferences and demands, increases suppliers’ potential market demands and improves supply chain efficiency. Furthermore, suppliers can make higher profits by controlling distribution and pricing directly. Spontaneously, studies on dual-channel supply chain have become increasingly prevailing in supply chain management. Customers choose to buy products from a retailer or a direct channel based on price and service quality when suppliers hold two channels (Joseph et al. 1997; Girard et al. 2003). It is well known that customers tend to buy products with high quality and low price. Notably, market demands in the direct channel and retail channel depend on the customers’ choices. Consequently, the managers must pour attention to customers’ channel preference when making decisions. In this paper, channel preference is taken into account to investigate its effect on dual-channel supply chain with multiple retailers. Besides, supply chain members’ sales efforts are crucial for winning market share. For instance, participators can stimulate demand by advertising products’ features, providing attractive shelf space, and adding point-of-sale demonstrations by salespeople. Generally speaking, supply chain members’ own sales efforts have positive influence on their own profits. Therefore, the impact of sales effort on dual-channel supply chain cannot be ignored. Previous studies have examined the influence of sales effort on supply chain (Lau et al. 2012; Hu and Wang 2010; Chernonog et al. 2015). However, only limited literature focuses on sales effort in dual-channel supply Abstract In this paper, we investigate a dual-channel supply chain under uncertain environment. Channel preference and sales effort are taken into account to explore their effects on supply chain members’ profits with uncertain information. Then we analyze the dual-channel supply chain in centralized and decentralized cases, and give closed-form expressions for equilibriums in the two cases. A series of numerical experiments are implemented to examine the impacts of uncertainty distributions of parameters on supply chain profits. We conclude that the total profit of the supply chain in the centralized case is invariably higher than that in the decentralized case under different uncertainty degrees of these parameters. It is shown that the supplier’s profit first decreases then increases as the expected value of customers’ preference to the direct channel increases, and the retailer’s profit decreases with the increase of the expected value of customers’ preference to the direct channel. In addition, the results indicate that the total profits in the centralized and decentralized cases, the supplier’s profit and the retailer’s profit all increase when the expected value of the retailer’s sales effort elasticity increases.

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