Abstract
This paper studies the complex characteristics caused by the price competition in multichannel household appliance supply chains. We consider a two-level household appliance supply chain system consisting of a manufacturer with an Internet channel and a retailer with a traditional channel and an Internet channel. Each channel’s price-setting follows the bounded rational decision process in order to obtain the optimal profit or more market share. Considering that the price competition often leads to the demand and order fluctuation, we also investigate the bullwhip effect of the multichannel supply chains on the basis of the order-up-to-inventory policy. From the numerical simulation, we find a system in a chaotic state will suffer larger bullwhip effect than a stable system, and the manufacturer’s Internet channel is helpful to mitigate the bullwhip effect. Our results provide some useful managerial inspirations for the household manufacturer and retailers. Firstly, each channel should make their retail price with a suitable price adjustment speed in the stable region, and each time pricing cannot exceed the domain of attraction. Secondly, the manufacturer can adopt a more radical pricing strategy in their Internet channel to mitigate the bullwhip effect. Thirdly, the price adjustment should be reviewed and be appropriately reduced if the price adjustment is too large.
Highlights
With the widespread e-commerce and the increasingly fierce competition all over the world, more and more manufacturers and traditional retail firms open up the Internet supply channel as an important means to expand the market
This paper studies the complex characteristics caused by the price competition in multichannel household appliance supply chains
Our research provides the following: (i) the household appliance manufacturer and its retailer should manage their retail channel with a suitable price adjustment speed in the stable region, and each of their pricing decisions cannot exceed the domain of attraction. (ii) A greater speed adjustment of the manufacturer’s Internet channel is helpful to mitigate the bullwhip effect. (iii) The feedback control on the retailer’s Internet channel is an effective method to control the chaos of price game system and mitigate the bullwhip effect of the supply chain
Summary
With the widespread e-commerce and the increasingly fierce competition all over the world, more and more manufacturers and traditional retail firms open up the Internet supply channel as an important means to expand the market. They established a linear demand model to explore the channel selection and pricing strategy in a multichannel supply chain and found that the gap between the online and offline channels’ operating costs was critical to the retailer’s choice of its channel selection strategy They thought that small product differentiation was more favorable to the manufacturer in a retailer-lead supply chain and the manufacturer could benefit from a rise in the wholesale price and increasing demand in the retail channel. The objective of our research is to investigate the complex dynamics characteristics of the multichannel price game system and the bullwhip effect in the household appliance supply chain management. To the best of our knowledge, we are the first to systematically investigate the complex characteristics of a multichannel household appliance supply chain and the bullwhip effect of the whole supply chain affected by the interaction coming from the channel price adjustment.
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