After-sales Service Supply Chain Competition Models

With the development of the service industry, it is well known that after-sales service is considered a key revenue generator in certain categories. How to make the highest level of profit and achieve the perfect win-win situation between businessmen and customers are the important issues. For durable consumer products, after-sales services play an important role in customers'purchase decision, but after-sales services of high quality cost firms a substantial amount of money. So, how to get the most effective execution of after-sales service plan are the contents of this paper. A manufacturer offers basic warranty available to all customers who buy the product, while a retailer offers optional after-sales service that is available only to customers who pay for the option. Also, there are two service levels, one is to achieve maximum benefits, and the other is to maximize customer satisfaction. We explore the interaction of these two after-sales services assuming two customer segments. The objective is to analyze whether the two after-sales service levels are equivalent, also considering the balance between a basic after-sales service and an optional after-sales service for a two-stage supply chain of a manufacturer and a retailer.Firstly, we defined the demand functions of Segment 0 and Segment 1, represented the profit functions for both the manufacturer and the retailer, formulated a two-stage supply chain. Secondly, we used the game theory to analyze a Nash game model, a centralized model, a manufacturer-leader Stackelberg model, the model including a negative effect of an additional charge on sales, and a model including a correlation effect, then compared the five different results. We found that the equilibrium after-service levels do not guarantee the optimal ones that can perfectly satisfy customers. Finally, these conclusions were confirmed by numerical examples and show the business implications of this paper's study.