Pricing Decisions of a Dual-Channel Supply Chain considering Supply Disruption Risk

Discrete Dynamics in Nature and Society, Mar 2018

Supply disruption may cause strong complaints of customers, which is a cost loss for the firms in the supply chain. Obviously, if realizing that there is the disruption risk, the members in a supply chain will adjust their decisions. For analyzing the influence, we consider a popular supply chain mode with dual channels, where one manufacturer has its direct sales channel and one traditional retailer channel. The manufacturer may suffer a supply disruption so that all ordered products by the retailer or the direct retail channel will be lost, and the members in supply chain will bear the corresponding disruption penalty from the customers. By considering four structures with different market power relations, the closed-form optimal price decisions of the four models are given. We found that the disruption factor improves the sales prices for any member structure as compared to the supply chain without the disruption. And the direct retail prices in the different modes are the same as each other, but the price of the traditional channel is influenced by the market share. And the sorts of the sales prices under different structures are given. We also conduct some extensive numerical analysis and compare the results under different structures. We observe that the expected optimal profits of considering the external penalty are smaller than those of no external penalty, and we give a sort of the optimal expected profits. And we also provide the effects of some parameters on the optimal decisions and the optimal expected profits.

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Pricing Decisions of a Dual-Channel Supply Chain considering Supply Disruption Risk

Pricing Decisions of a Dual-Channel Supply Chain considering Supply Disruption Risk Yancong Zhou,1 Jin Feng,2 Jie Wei,3 and Xiaochen Sun2 1School of Information Engineering, Tianjin University of Commerce, Tianjin, China 2School of Mathematics, Tianjin University, Tianjin, China 3School of Economics and Management, Hebei University of Technology, Tianjin, China Correspondence should be addressed to Yancong Zhou; moc.621@87gnocyz Received 28 September 2017; Revised 7 January 2018; Accepted 18 February 2018; Published 21 March 2018 Academic Editor: Yong Zhou Copyright © 2018 Yancong Zhou et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Abstract Supply disruption may cause strong complaints of customers, which is a cost loss for the firms in the supply chain. Obviously, if realizing that there is the disruption risk, the members in a supply chain will adjust their decisions. For analyzing the influence, we consider a popular supply chain mode with dual channels, where one manufacturer has its direct sales channel and one traditional retailer channel. The manufacturer may suffer a supply disruption so that all ordered products by the retailer or the direct retail channel will be lost, and the members in supply chain will bear the corresponding disruption penalty from the customers. By considering four structures with different market power relations, the closed-form optimal price decisions of the four models are given. We found that the disruption factor improves the sales prices for any member structure as compared to the supply chain without the disruption. And the direct retail prices in the different modes are the same as each other, but the price of the traditional channel is influenced by the market share. And the sorts of the sales prices under different structures are given. We also conduct some extensive numerical analysis and compare the results under different structures. We observe that the expected optimal profits of considering the external penalty are smaller than those of no external penalty, and we give a sort of the optimal expected profits. And we also provide the effects of some parameters on the optimal decisions and the optimal expected profits. 1. Introduction With the rapid development of the Internet, customers are becoming more and more accustomed to online shopping. By means of an online channel, firms can deal with customers’ order and get the logistic information timely. Therefore, those firms, such as Amazon, Dell, Jingdong, Alibaba, and Taobao, can be closer to customers and have a better understanding of customers’ preference [1]. Thus, many manufacturers face the decision whether to add one direct channel in addition to the existing traditional channel. In order to improve competitiveness, many traditional manufacturers have begun or are beginning to set up their online direct sales channels. Therefore, the phenomenon that the traditional channel and direct sales channel coexisting is more common. Generally, it is called the dual-channel supply chain, which refers to the fact that the supply chain has the online (direct sales) and off-line (traditional retail) channels. In a dual-channel supply chain, the unreasonable pricing decisions may lead to the conflict between two channels, so one of the key issues in the dual-channel supply chain is the pricing problem. With the help of the Internet, the direct sales channel in the dual-channel supply chain can realize the interaction of one to one between the firm and the customer, which is a good marketing channel. However, the information spread on Internet is faster; any change in supply or demand side may lead to a serious mismatch between supply and demand corresponding to a traditional channel. In 2017, the southern black sesame group (a Chinese company) obtained a lot of market concerns by a new IP (Intellectual Property) marketing and a favorable brand spokesperson, which directly promotes sales growth to exceed the firm’s expectations. However, the firm’s production line did not switch in time, so a serious stock-out happened for two channels [2]. And traditional disruption events, such as machine breakdown, raw material shortage, and workers strike, also can lead to one disruption. At August 16, 2017, all of CR Vanguard, WAL-MART, RT-MART, and other chain supermarkets expressed that Moutai (Chinese spirits brand) of 53 degrees is out of stock, and they do not know when to replenish it. At the same time, Moutai’s own E-commerce platform also announced that there is shortage of products [3]. Similar situations also occurred in the sales process of Apple SE (2016, [4]). Therefore, the pricing problem of the dual-channel supply chain with disruption is important. In this paper, we consider a dual-channel supply chain considering disruption risk, wher (...truncated)


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Yancong Zhou, Jin Feng, Jie Wei, Xiaochen Sun. Pricing Decisions of a Dual-Channel Supply Chain considering Supply Disruption Risk, Discrete Dynamics in Nature and Society, 2018, 2018, DOI: 10.1155/2018/6841519