Inventory competition in a dual-channel supply chain with delivery lead time consideration

Abstract

Aimed at the inventory competition of perishable products in a dual-channel supply chain with consideration of the delivery lead time in the online direct channel, we extend the Newsvendor model considering stock-out-based consumer switching behavior to include the delivery lead time. We examine the retailer's optimal order quantity decision in the retail channel and the manufacturer's optimal inventory level decision in the online direct channel, explore the manufacturer's optimal delivery lead time decision in the online direct channel, discuss the impact of the product price and consumer switching behavior on the optimal decisions of supply chain members, and compare the optimal decisions between decentralized and centralized scenarios. The results show that, compared with the centralized scenario, at least one of the supply chain members will overstock in the decentralized scenario and that consumers in the online direct channel enjoy a shorter delivery lead time and hence better service in the decentralized scenario. Finally, we present numerical examples to analyze the impact of relevant parameters on the supply chain members’ profits and the supply chain efficiency.