Coordination of dual-channel supply chains under demand disruptions management decisions

Abstract

This paper examines optimal decisions and coordination models for a dual-channel supply chain when the two end competition market demands are simultaneously disrupted. Firstly, we developed the pricing and production decisions models without demand disruptions and propose a revenue sharing contract to coordinate the dual-channel supply chain where the manufacturer is a Stackelberg leader and the retailer is a follower. We derived the conditions under which the maximum profit can be achieved in detailed. We compared the profits under normal case and disrupted case and quantified the information value of knowing demand disruptions. We proposed an improved revenue sharing contract to coordinate the dual-channel supply chain with demand disruptions. The results indicate that the adjusting prices and production quantity are the optimal decisions whether the demand disruptions case or normal case. We also find that the original revenue sharing contract is a special case of improved revenue sharing contract and the market scale change, channel substitutability and deviation cost affected the improved revenue sharing contract under demand disruptions. Finally, we further conduct numerical experiments to show how the demand disruption affects the decisions.