Dual-channel supply chain coordination considering credit sales competition

Abstract

Credit sales not only help sellers expand sale size and promote competitiveness, but also relieve the pressure of customers cash flow, but inevitably increases channel conflict and generates capital opportunity cost. This article attempts to consider a dual-channel supply chain operation decision and coordination under credit sales transactions for the first time, in which the supplier and the retailer compete on the credit period provided to the final customers, and the market demand is random and depends on credit period. This paper develops and analyzes the mathematical models of the dual-channel supply chain expected profit maximization under centralized, decentralized and coordinated decision making structures. A decision framework for a dual-channel supply chain considering credit sales competition and random demand is given, in which the supplier decides on wholesale price and online direct sales channel credit period, and the retailer decides on traditional retail channel credit period. This study finds that the fierce credit sales competition is bad for the dual-channel supply chain, and classical coordination contracts such as wholesale price joint trade credit contract have limitations in the dual-channel supply chain coordination considering credit sales competition. To stimulate channel members to make optimal decisions while optimizing their expected profits, a two-part credit contract based on asymmetric Nash bargaining is proposed. The research results reveal that the proposed contract can not only achieve the dual-channel supply chain coordination considering credit sales competition, but also achieve Pareto improvements of all members. Finally, the performance of different models is compared by numerical examples and sensitivity analyses, the effectiveness of the proposed contract is proved, and some managerial insights are given.