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Channel coordination, pricing and replenishment policies in three-echelon dual-channel supply chain

Modak N. M., Panda S., Sana S. S.

Control and Cybernetics

2015

Vol. 44, no. 4

481--518

This paper addresses pricing, replenishment policies, coordination, and issues of surplus proﬁt division among the members of the dual-channel supply chain for a particular product whose unit cost decreases continuously over product’s life time. In the dual-channel setting, manufacturer, distributor, and retailer with retail channel and the manufacturer’s direct e-channel are considered. When manufacturer is a Stackelberg leader, the paper reveals that the channels are bound to compete with each other on price severely in the centralized as well as decentralized system. It is observed that more preference on the retail channel may lead to non coexistence of proﬁtable retail-e-tail channel which results in a threshold for higher retail price than the online price. The mechanism of all unit quantity discount with agreement of franchise fee coordinates the channel and provides for the win-win outcome. Finally, Nash bargaining over product depicts particular proﬁt division among the channel members. A numerical example is provided in order to test and justify the proposed model.