Abstract
Dual channels have become popular strategies for manufacturers due to the development of innovative selling platforms. Examples in practice also show that the lack of relationship management, such as cooperation and sharing, may cause an unsustainable supply chain performance. However, previous studies on coordination of dual-channel supply chains always focus on the contribution to profits and neglect the sustainability of relationship development between channel members. In this paper, we study the coordination of a dual-channel supply chain including a direct channel and a traditional channel. Under the fact that sustainable economy, instead of profit maximization, is the more appropriate objective in channel members’ decision making, we consider the retailer’s risk exposure and assume the risk degree is also a factor that impacts decision making. We assume the manufacturer is risk-neutral and the retailer is risk-averse, and measure the risk attitude with Conditional Value-at-Risk (CVaR) approach. Two traditional contracts widely used in single-channel supply chains, i.e., revenue-sharing contract and buy-back contract, are analyzed first. Although some researchers have discussed that traditional contracts cannot coordinate the dual-channel supply chain, our results show that traditional contracts can still come into play with restrictions on the risk-averse degree. Then we propose a risk-sharing contract which could distribute profits between two channel members and coordinate the system under varied risk-averse degrees with a fixed risk-sharing degree. Finally, we analyze the sensitivity of different parameters to illustrate the stable coordinating outcomes of this contract, and prove its generalization with more powerful channel members. The results provide important managerial insights.
Highlights
Internet is an area that has experienced tremendous recent development
A growing number of studies have focused on electronic supply chains and the competition between direct channels and traditional channels
Gilland [8] find that the manufacturer, the retailer and consumers can prefer the same equal-pricing strategies when the manufacturer opens up a direct channel with a traditional channel partner
Summary
Internet is an area that has experienced tremendous recent development. It has changed people’s life-style, but has brought about a dramatic alteration among the structure of supply chain. Whether new channels should be established is a crucial question for companies, and literature shows that adding new channels may generally benefit the performance of a company [4,5,6]. Researchers discuss this question through a game theoretical approach, where pricing competition is a main focus in this horizontal channel conflict. Chiang, Chhajed [7] model a price-setting game between a manufacturer and its independent retailer in a dual-channel supply chain and find that direct marketing can improve the manufacturer’s overall profitability. Much research indicates that manufacturers and retailers tend to introduce direct channels as a beneficial strategy
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