Analyzing a stochastic dual-channel supply chain under consumers’ low carbon preferences and cap-and-trade regulation

Abstract

Environmental contamination has become a serious issue for the health and survival of living things. Also, how to decide the marketing strategy under low carbon regulation is a significant and realistic problem for enterprises. This paper analyzes a two-echelon dual-channel supply chain model by considering emission sensitive stochastic demand under governments’ mandatory cap-and-trade regulation and consumers’ low carbon preferences. By considering the products’ compatibility, the proposed model illustrates some key channel strategies to gain more managerial insights for the members of the chain. The results show that the arrival pattern of the consumer affects significantly the economic order quantity of the members and profit of the supply chain. The compatibility of the product is proved to be a key factor in determining the optimal channel strategy for the members of the supply chain. The proposed model identifies two regions of the compatibility parameter which is preferable to all the members of the supply chain. When the compatibility of the product in an online channel is extremely high, the addition of the online channel can be accepted by the manufacturer and the whole supply chain with a retailer is disadvantageous. The analytical results assure that under the emission sensitive stochastic demand, the decentralized dual-channel strategy can be coordinated successfully by adopting buyback contracts and reduction task-sharing contract to originate a win–win outcome for all the members of the supply chain. Finally, the numerical results show that the introduction of a dual-channel strategy is profitable when consumers’ low carbon preference is higher and the product has lower initial emissions.