Contract Coordination Of The Retailer-based Dual Channel Supply Chain

The popularity of E-commerce has prompted enterprises to carry out the B2C E-commerce business, which forms the double channel mode. These enterprises can be divided into two groups:the manufacturer-based (Such as DELL and Povos) dual channel supply chain and the retailer-based dual channel supply chain (Such as Wal-Mart and Suning). For a retailer, the mode of dual channel is beneficial to market shares and cost reductions. Nevertheless, it brings in a series of complex problems and challenges.This article selects the well-known domestic retail enterprise (Company S) as the research background, discussing the coordination and optimization of the retailer-based dual channel supply chain.First of all, based on the cellphones of Company S, this article analyzes the operation mode of Company’s dual channel supply chain is:in the dual channel supply chain that consists of Company S and its cellphone provider, the online channel and the offline channel both sell goods at the same price when it is in the first phase (Introduction period+Growth period+Mature period); When it is in the second phase (Declining period), consumers tend to be rational and demand decreases obviously, only the online channel sells the remaining cellphones. As a typical operation mode of the dual channel supply chain, everyone makes decisions for the sake of its own benefits, which unavoidably leads to the Double Marginalization and sub-optimal profit. The best way to solve this problem is to find effective means to coordinate the enterprises in the supply chain, and contracts are supposed to be this effective means.Then, this article establishes the traditional buy-back contract model. It turns out that even though the optimal order quantity has reached the level of the whole supply chain, the cellphone provider’s profit is zero. In other words, the cellphone provider has no motivation to take this contact. At this point, the traditional buy-back contract just plays the role of the wholesale price contract, which cannot coordinate the retailer-based dual channel supply chain. Then this article adds the reward and punishment mechanism to modify the contact. It proves that modified buy-back contract not only effectively coordinates the retailer-based dual channel supply chain but also realizes the Pareto improvement when related parameters satisfy a certain condition.Finally, existing figures from the Company S are used to further demonstrate the effectiveness of the conclusion as well as work out the relevant parameters’ influence to the profit of Company S. And then according to the research conclusion, rational suggestions to the supply chain operations of company S are put forward.