Optimization And Coordination Issues Of Two-echelon Dual-channel Supply Chains

With the rapid development of E-Commerce,the Internet as a sales channel has received much attention from both academia and industry.Companies have setup Internet sales channel one after one in order to reduce costs and expand market.Due to the existence of physical retail stores,the introduction of the Internet channel certainly leads to channel competition and conflicts.This is both an opportunity and a challenge for companies.The goal of this dissertation is to understand the operating mechanism of dual-channel supply chains and improve the operating efficiency of such supply chains.The interaction between supply chain members in dual-channel supply chains is investigated through a game model analysis.The inefficiencies of dual channel supply chains are analyzed and measured. Optimization and coordination mechanism are proposed.This dissertation studies two-echelon dual-channel supply chains.Optimization theory,non-cooperative game theory,inventory theory and consumer utility theory are utilized to analyze the operating mechanism and coordination methods of the supply chains.Decision frameworks related are established.This dissertation provides an in-depth study into topics including dual-channel pricing,inventory optimization and coordination,decision and coordination of sales effort and channel choice strategy.This dissertation expands the existing research on dual-channel supply chains,provides useful conclusions to help understanding the relationship of manufacturer and retailer,and provides theoretical basis for decision making of related enterprises.The main research work and achievements of this dissertation include the following:(1) Chapter one provides a comprehensive survey of related research literature on dual-channel supply chain management both of abroad and domestic.The main research questions are analyzed and some drawbacks or shortcomings of existing research are pointed out.It is pointed out that operating mechanism and optimization and coordination of dual-channel supply chain still needs further study,especially optimization of inventory control and coordination of sales effort.Furthermore it is proposed that channel choice strategy of retailers relating to internet channel is worth studying.(2) In chapter two the pricing decisions in a hybrid channel supply chain composed of a direct channel and a physical retailer channel are studied.Through investigating the interaction between the manufacturer and the retailer,the role and impact of direct channel is investigated.Both the purchasing cost and acceptance level of customers in each channel are considered.The demand of both channels is derived from a consumer utility model.The pricing equilibriums are obtained and the manufacturer's pricing strategies are analyzed when wholesale price is exogenous.We find out that the role of direct channel is multifold:(ⅰ) the direct channel can extend the manufacturer's market,satisfying more customers' demand beside the retailer's market segment;(ⅱ) it can pose an underlying threat to the retailer and thus make the retailer lower the market selling price.In addition we analyze the channel structure choice problem when the manufacturer has the right to set wholesale price.(3) Chapter three studies the optimization and coordination of a two-echelon dual-channel supply chain inventory system.The manufacturer at the top echelon sells its product both through a traditional retail channel and a direct online channel. Both channels face independent Poisson demand.One-for-one replenishment policy is assumed.The operational costs considered include inventory holding cost and shortage waiting cost.The relationship between each demand and the inventory unit which satisfies the demand is investigated.An exact evaluation of average costs per unit at the manufacturer and the retailer is obtained.The optimal inventory policy under centralized control is obtained.Moreover,an effective coordination mechanism under decentralized control is proposed.We present a formula for computing the control variable—artificial manufacturer's shortage waiting cost. Numerical analysis is developed to illustrate the effectiveness of our method.(4) In chapter four the interactions between the manufacturer and the retailer in a hybrid channel with respect to sales effort are investigated.Both the manufacturer and the retailer can exert costly sales efforts to stimulate customer demand.Total demands are then allocated between two parties.This paper focuses on manufacturer-retailer interaction in sales efforts.Factors including sales promotion efficiency,material handling efficiency and customer loyalty are considered.Two kinds of demand allocation rules are considered.In the first model demand allocation is independent of sales efforts and in the second model the sales efforts affect where customers purchase.We obtain optimal sales efforts in centralized system and equilibrium results in decentralized system.The effects of the manufacturer's wholesale pricing policy are also studied.(5) In chapter five sales effort competition and coordination in dual-channel supply chains is studied.Two kinds of sales effort are considered:brand promotion and store promotion effort.Brand promotion effort is exerted by the manufacturer to enhance brand acceptance.Store promotion efforts are exerted by both members to improve the customer access to the respective store.Through a game analysis the equilibrium of sales effort is obtained.The in-efficiencies of dual-channel supply chains in decentralized control are identified.Furthermore coordination mechanism is proposed.The in-efficiencies of decentralized system have three sources:(ⅰ) Positive wholesale price leads to lower profit margin of retailer and low sales effort of retailer. On the other hand,the retailer tends to exert more sales effort as he need not worry about the cannibalization effect to direct channel.(ⅱ) The manufacturer underestimates the substitution effect of direct channel and therefore tends to exert more store sales effort than optimal.(ⅲ) The manufacturer cannot internalize his brand promotion effort and tends to invest less when in decentralized system.Further study shows that a channel referral and sales cost sharing mechanism will coordinate the supply chain.(6) Chapter six investigate the retailer's electronic channel choice problem focusing on the geographic difference between the internet channel and the physical retail channel.Specially whether and when the dual-channel retail structure is more beneficial to the retailer is studied.A circular city model is build where the retail stores are located on the circular city with even space.The internet store is located at the center,thus all the customers have equal distance with the internet store.Based on the consumer utility function the demand of the physical store and the internet store are derived.This chapter focuses on the retailer's decision making under the manufacturer's influence.The decision making process is modeled by a Stackelberg game.Three structures the retailer faces are analyzed and compared:pure retail, dual-channel retail,hybrid channel.The optimal choice of the retailer is provided.It is shown that only when the profit margin is large enough or the purchase cost of online shopping is small enough setting up an online retail store is more beneficial to the retailer.However to the manufacturer it is optimal for him to use a hybrid channel structure when these conditions hold.The manufacturer will have a strong motive for setting up a direct channel under such circumstance.The innovations of this dissertation include the following:(1) This dissertation extends the knowledge of academia on dual-channel supply chains,including pricing mechanism,sales effort gaming,inventory control and channel choice strategy and remedy some shortcoming of existing research.(2) For the first time this dissertation proposes a coordination mechanism for the two-echelon dual-channel inventory system under decentralized control.(3) An in-depth characterization of sales effort game in dual-channel supply chains is provided.Moreover a efficient coordination mechanism is proposed.(4) An electronic channel choice strategy is provided for the retailer taking account of the influence of the manufacturer.